Analyzing Steel Works' Challenges: A Case Study in Business Strategy

This case study examines Steel Works, Inc., a US-based steel manufacturer facing significant business challenges. The company's two divisions, custom and specialty steel, operate differently, with the former catering to specific customer needs and the latter focusing on bulk production. Despite employing over 2500 individuals, Steel Works struggles with high inventory levels and poor customer service, leading to a 30% decline in sales and a 25% increase in expenses. A logistics expert proposed solutions, including eliminating low-selling products, using statistical forecasting for demand estimation, reducing warehouse numbers, and implementing a demand-pull ordering strategy. Addressing these issues is crucial for improving customer service and overall profitability. Desklib provides access to this case study along with a wealth of resources like past papers and solved assignments to aid student learning.

Running head: STEEL WORKS
Case Study: Steel Works
Student Name
Institution Name

STEEL WORKS 2
Case Study: Steel Works
Question One: What Steel Works Do
Steel Works is a United States company that deals in steel manufacturing. As noted
in the case study, the company manufactures custom and specialty use steel. Consequently,
the company has two major divisions based on these two product categories. Interestingly,
these two divisions operate uniquely. The custom division, for instance, develops a
significant portion of its products based on the customers’ desires. Precisely, this division
produces products according to customers’ description. On the other hand, the specialty
division contrasts the operations of the custom division. This division produces steel in bulk
with the intentions of benefiting from economies of scale. The steel produced by the two
divisions are then stocked in warehouses before being distributed to the clients.
Question Two: The Business Problems or Challenges Faced by the Company
Despite its impressive size that accommodates over 2500 employees, Steel Work is
experiencing several business challenges that are adversely affecting its revenue. Firstly, the
company has a serious challenge of extremely high inventory levels. According to Hobbs
(2003), high inventory makes a company to experience inventory management difficulties as
well as high costs. In fact, these detriments of high inventory pointed out by Hobbs (2003)
are confirmed by Steel Works senior management in the case study.
Moreover, the company faces a challenge in its customer service. In the case study,
Steel Works Chief Financial Officer laments that the company has one of the worst customer
service in the industry. This view implies that the firm’s customers are dissatisfied with the
services that they receive from Steel Works. Consequently, this poor quality customer service
has prompted some of the company’s customers to seek services from Steel Works’
competitors. In any business setting, the customers serve as an instrumental factor in

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influencing a company’s profitability (Hussain, Al Nasser, & Hussain, 2015). The failure to
satisfy the needs of the customers results in adversities such as dwindling sales and
profitability. As a result of high inventory and poor customer services, Steel Work’s sales
have declined by 30% while its expenses have increased by 25%.
Question Three: Proposed Solutions to the Problems
The logistics expert consulted by Mr. Lemming proposed several strategies to address
the challenges facing Steel Works. Firstly, the expert suggested that the company should get
rid of products with low annual sales to reduce the inventory levels. Secondly, the logistics
expert recommended that Steel Works should utilize statistical forecasting package to
estimate demand as a way of lowering the inventory levels. Finally, the expert pointed out
that the firm should consider reducing the number of its warehouses. Besides, the company
should consider applying demand-pull ordering strategy in its efforts to regulate inventory
levels. In practice, regulating the inventory levels effectively enhances the quality of service
offered to the customers.

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References
Hobbs, D. P. (2003). Lean Manufacturing Implementation: A Complete Execution Manual
for Any Size Manufacturer. J. Ross Publishing.
Hussain, R., Al Nasser, A., & Hussain, Y. K. (2015). Service quality and customer
satisfaction of a UAE-based airline: An empirical investigation. Journal of Air
Transport Management, 42, 167-175.