The new plastic rings, which had only been introduced in April, not only appeared to have a much
longer life than the steel rings, but also apparently were much less expensive to manufacture. Mr.
Kurtz' problem in responding to the new ring was complicated by the fact that he had 25,000 steel
rings in inventory and 26 tons of special alloy steel purchased recently for the sole purpose of making
more rings. He knew that this raw steel could not even be sold as scrap because of the special alloys
in it. He had been required to buy a full year's supply in order to convince a steel mill to make the
special product. Overall, he was holding about $93,000 worth of inventory related to steel rings (see
Exhibit 1).