Spartan Heat Exchangers

Zach Plichta

SCM 355

Case 2-1 Spartan Heat Exchangers

The original business strategy for Spartan was to provide a customized product for their customers. Up until this point, the clients had been happy with the customization. Now key customers opted out for “standard product design, sacrificing design for lower cost and faster delivery”. The business strategy was to emulate what the customers want which is a standard product that we can get to them way faster and for a lower price.

In terms of the materials department Spartan uses more than 350 vendors for the raw materials with lead times ranging from a few days to six weeks. The company needs a wide range of vendors for the customization aspect because certain vendors might not have the materials needed to give the customer the customized heater that they want. Approximately 35 percent of Spartan’s purchases were for aluminum products. Spartan has $3.5 million worth of inventory in the form of raw and work in process and raw materials is 40% of the total. Rick also estimated that Spartan had inventory turns of four times per year. There was no number given, however Rick explained that shortages and stockouts were a regular occurrence because of staff negligence.

The first step that needs to be take is finding a few reliable vendors rather than 350 different vendors which is costly and inefficient. For instance, finding a company that specializes in aluminum since 35 percent of Spartan purchases are mainly aluminum. A detailed list of the materials needed for our standard heater needs to be made so that we can find a handful of suppliers and if those suppliers are receiving most of our business a 10 percent reduction in price can be negotiated. Not only do we need to find suppliers with the right materials but now our lead time needs to be cut down by 8 weeks so we need to be sure of our supplier’s reliability as well.