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
- A very competitive industry with multiple strong players from both the local and global markets.
- Typical output from integrated steel producers fell into two basic categories.
- They did not usually sell to smaller customers who ordered below 20 tons, such orders were satisfied by steel service centers.
- The economic downturns pushed the people to look-into smaller service centers for purchase and move away from larger mills.
* Ingots and semi-finished steel products.
* Finished steel products.
The North American Steel Service Center Industry
- It took about 27 Million tons of output (about 25%) from the 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.
- The equipment for this needed very less investment.
- Intermediate Processing required considerably larger investments but yielded more returns.
- SSCI predicted 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.
- 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 majorly on its managers
- Halloran incorporated two primary corporate principles
- Service to a broad base of customers
- 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 ten thousand-line items in all.
- Split the customers into 3 categories
- Key – Above $80,000
- Major – $20,000 – $80,000
- Others – Below $20,000
- 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.
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