Halloran Metals and Allied Metals are rivals in the Northeast steel service center industry. They exercised different options in relation to their logistics and operating strategies. One releases supply from a central location while the other works from seven warehouses. This case study allows students to analyze the impact of each of these options, particularly in a fiscal recession.
Roy D. Shapiro
Harvard Business Review (683062-PDF-ENG)
December 10, 1982
Case questions answered:
- What are the differences in the operations/logistics strategies of Halloran Metals and Allied Metals?
- What are the strengths and weaknesses of these strategies?
- Is there any economic risk in Halloran’s stance? What would your recommendations be?
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Halloran Metals Case Answers
Case Objective – Halloran Metals
To analyze whether Halloran Metals is able to defend its position and market share against Allied Metals with its ‘single centralized inventory’ strategy.
The Steel Industry
The steel industry is characterized by intense competition, featuring multiple strong players hailing from both local and international markets.
Integrated steel producers typically yield outputs that can be categorized into two basic categories. These categories are (1) ingots and semi-finished steel products and (2) finished steel products.
Notably, these producers tend not to cater to smaller customers who placed orders for less than 20 tons. Such orders were satisfied by steel service centers.
The advent of economic downturns has prompted people to turn their attention towards these smaller service centers for procurement, thereby diverting their patronage away from larger-scale mills.
The North American Steel Service Center Industry
The North American Steel Service Center Industry took about 27 Million tons of output (about 25%) from the total American steel industry.
Most of the processing done was stage 1 processing, which involved minor conversion from finished steel production to the specification mentioned by the customer. Very little investment was needed for the equipment. Intermediate Processing required considerably larger investments but yielded more returns.
The SSCI predicted an average growth of 3% to 6% per annum for the service industry. In due course, they became a middle layer between the mills and the end consumer.
Halloran Metals
Halloran Metals is one of the major steel service centers in the US, which had an average sales of $170 M. The company was privately owned and relied mainly on its managers.
Halloran incorporated two primary corporate principles. The first one is service to a broad base of customers, while the second one is establishing a market position through specialization.
With 12 product categories, each containing anywhere from 35 line items (pipes) to 1,400 line items(cold-finished bars), Halloran Metals offered over 10,0000 line items in all.
The customers of the company may be categorized into three groups:
- Key – Above $80,000
- Major – $20,000 – $80,000
- Others – Below $20,000
Organizational Chart
Allied Metals
Allied was the largest and oldest independent regional service center in the New England area. Founded in 1945, Allied was a publicly held company that had carved an impressive market position for itself with 2000 revenues of over $180 million.
Their growth was focused on adding volume to its Lowell facility, which was 6 times larger than the largest facility of Halloran Metals. They had approximately 3000 customers and 6000 product lines.
Operational Strategies
Halloran Metals
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