UNITED STAINLESS STEEL COMPANY

United Stainless Steel Company (USSC) was experiencing a very slowly expanding market.
Fierce competition existed from other producers battling for steel tonnage and market share.
USSC was barely maintaining profitability.

Over the past two years market share had decreased by one percentage point, down from 10 to 9
percent of the market. Quality rejects had increased 8 per cent and claims were up by 4 percent
within the same period. In addition, delivery performance had decreased from 75 percent on-time
delivery to 58 percent.

At present several major battles are being fought among USSC management. Bob Stark, manager
of sales, has charged that both the production planning and the operations departments are acting
irresponsibly. He claims the loss in market share to be because the quality of steel being produced
is becoming inferior to that of United’s competitors. Also, delivery performance has dropped off
considerably, even as he has been telling his customers that United is working toward 80 per cent
on-time delivery. Stark has maintained that it is the responsibility of operations to reduce costs
and cut down on quality rejects; the Production Planning Department must reduce downtime and
meet delivery schedules.

The operations manager, Ron Macklin, spoke out at the last general meeting. According to
Macklin, unit costs were being reduced because productivity and incentive performance were
constantly increasing in the plant. He said productivity could be even better if there weren’t so
many breakdown-cause delays incurred on the equipment. Some of the old rolling mills couldn’t
withstand the much higher weight and increased hydraulic pressure called for on many of the new
products that Sales was pushing – and for which it was booking sales. Ron said Operations could
not produce many of the new finishes being ordered; the old equipment was inadequate and
inefficient for those applications. In addition, he protested that Production Planning wasn’t using
the most efficient schedules; they were incurring unnecessary delays for setup times because of
the type of products they were scheduling.

Production Planning’s response to the decrease in delivery performance was that not only were
breakdown delays contributing to poor performance, but they had to reschedule orders on many
occasions. The steel that was being prepared for orders often was rejected for quality defects and
had to be remade, thus adding an additional week onto promised delivery dates . They also
defended themselves on the grounds that Sales was quoting unreasonable delivery times on many
products.

Chuck Treeter had recently been hired to replace the suddenly retiring general manager, Joe
Williams. Chuck brought with him a wealth of steelmaking knowledge and industry experience.
He had been relatively softspoken in the several general operating meetings held so far; he
appears to be just absorbing all the comments being made.

Before Williams left, Chuck got to spend one day with him, obtaining background information on
past policies and procedures. Chuck had asked Williams for a copy of the profit plan; Joe replied
that it was in the final stages of completion. His goal for the year is to improve profits by 7
percent without losing market share. He had held each manager (including Sales, Operations and
Production Planning) responsible for this goal. He commented to Chuck that in a formal letter
sent to all managers recently, he told them that they should all contribute to the goal. Because he
hadn’t received any letters back regarding his letter, it was apparent that everybody understood
the situation.

When Chuck asked about the declining market share, Joe replied that he knew it would get better;
he had seen Bob Stark putting in long hours the last few months, although he wasn’t sure what
Bob had accomplished.

On that note, Chick sat back in his chair and wished Williams a good retirement.