Lehigh Steel
Lehigh Steel is a manufacturer of a specialty steels for high strength high use applications.
It was founded in 1913, and since their foundation they were in a premium market. Also,
Lehigh Steel is highly respected company, and due to their reputation and quality the
demand for their products rise as time passed.
During the 1991 the market for steel products was in downturn, thus demand for Lehigh
Steel products dropped. Also, as the consequence of downturn the price of raw materials
for Lehigh Steel raised. That was a hard time to operate for Lehigh Steel Company,
because the price of their raw materials have raised and the demand for their products
dropped. Thus, they ware loosing on the booth ends. Eventually, the downturn has passed,
and the demand for Lehigh Steel products increased in 1992. But, the cost of raw materials
remained the same, which means that operating costs remained the same. Now, the Lehigh
Steel Company more correctly Mark Edwards the director of operations in Lehigh Steel
had to decide which products are most profitable. Jack Clark the CFO of Lehigh Steel
suggested that they should made, but later in 1992 Clark attended seminar on Activity
Based Costing (ABC), and realized that ABC would be better solution for their Company.
So, the company hired Bob Hall, the expert in the field of Activity Based Costing, to help
them to sustain profitability and eventually to increase their profitability. But the ABC
solution did not fulfill the Clark and Edwards expectations, thus ABC theory was not the
best solution for the Lehigh Steel Company. Later in 1992, Edwards was introduced with
Theory of Constraints, which emphasis was to get the products through manufacturing
process and sell them in the last time possible.