STERMON MILLS

The first option consists of upgrading machine#4 with computer control, extra dryer capacity, and better
training in an effort to produce a broader range of basic weights. This option would not only appear to
satisfy the strategic needs of the product lifecycle, but also the two major requirements that the sales force
survey revealed, including having a broader product line and providing customization. The majority of
these changes would be realized by tailoring paper to customers specific requirements and charging an
estimated premium of 7% (before freight).
Second option - One week cycle would allow machine 4 to focus on the 20 lb paper that would reduce the
28% of two-week cycle in which there will be no 20 lb paper produced, as demand for the 20 lb will
increase.
Third option, improving the yield of machine 4 on the less frequently produced grades would satisfy those
customers that value having a broad product line but this is not the top priority for Stermon at the
moment. Marketing projections about the 20 lb paper for next two years simply support to proceed with
Option 2. 3rd option could work along with option 2 but results would be to raise non-20 lb yields only
about 3%. This is not really worth as the amount of investment required for this approach is $5.05million.
The third option focuses on the increasing machine #4s yield for the less frequently produced grades
less than 15 lbs., 18 lbs. and 24 lbs paper. Saugoes forecast that the lack of demand for 20 lbs. paper
would last for at least two more years leads him to think of strategies to use machine #4 more effectively.
With the increased cost of operating Machine #4, designed mainly to manufacture 20lb Xerox paper;
installed in 1976 and produced 49% of the plants total output, Bill Saugoe thought that counter balancing
the 20 lbs. papers soft demand with other grades would be beneficial to Stermon Mills. In order to make
machine #4 more flexible, an expert system for process control as well as an actuator network needed to
be installed at a cost of $5.05 million. This upgrade will result in machine #4s ability to produce the 15
lbs. to 24 lbs. grade papers at a consistent quality while making the machine more flexible to set-up
changes.
This strategy gives Stermon the option to produce multiple grades of paper at high volumes. However,
this option does not improve the changeover costs. Batch sizes will have to be large in order to operate
efficiently. Moreover, raw material and finished goods inventory may increase to support this flexibility.
This option does not allow machine #4 to meet the changing demands of the market because of the nature
of batch sizes. The companys warehouse will have to absorb variances in demand during batch runs. This
strategy does not improve the changeover time of machine #4 but only increases the number of products
that can be produced on the line.
Improving the yield on machine #4 addresses the sales forces recommendation of having customized
paper that their customers can use for varying applications. The upgraded machines ability to convert its
production among the various grade ranges will allow the company to meet its customers Just-in-Time
requirement by producing for the high demand product.
Fourth option would accelerate the current flexibility program with the union. The benefit of this option is
fewer people would be sitting around causing reduction in bottleneck. There is no capital investment
involved.

STEINWAY & SONS

3.Is the adoption of automated technology, like the new CNC shaping equipment, consistent with
Steinways quality image?
Yamaha automated its process where ever possible to improve the cycle time. Steinway should adopt the
new production technology, CNC to improve the cycle time and make more quantity to meet the market
demand and meet economies of scale. In order to counteract Yamahas entrance to the high-end
market,begin a marketing campaign focusing on institutions and private consumers reinforcing the ideas
that a Steinway & Sons grand piano is the piano of legends.
4. Consider Steinways distribution strategy and the introduction of the Boston, Essex, and Heirloom
lines. Are these new offerings consistent with Steinways business and manufacturing strategy?
Steinway has a good brand equity and it should maintain the reputation of its existing brand and focus
more on implementing brand extension strategy.
Different brands may be designed and marketed to the market segment, keeping in mind to design a brand
portfolio thereby aid in maximizing market coverage, by clearly differentiating each brand.
They should focus more on the growing sales by maintaining quality in the niche market segment by
reinforcing mid-priced Boston and introducing new lower-priced piano to Asian market to compete
against low-price competitors.
The Boston piano is a mid-priced instrument made by Kawai in Japan to Steinway specifications.
Although Boston piano line represented a significant break with tradition, this mid-price is for customers
who were not yet ready to acquire a Steinway. To make more money Steinway needs lower price of piano
than Boston. So, Steinway suggest that Steinway should introduce new lower-priced brand through
cooperation with other Asian manufacturer except for Kawai for technology protection.