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Halloran Metals Case Solution
This case is based on Halloran metals and its differentiation strategy in the metals industry. The company has a logistics strategy that allows it to deliver the order in a single day. Also, the company serves both high as well as low-volume customers. As a result of this, the company has high operating costs. It has to maintain a high level of inventory to complete orders in a day. It also has shuttle services that transport specialized products from one inventory to the other. This further increases operational costs. The debt structure of the company is such that the interest rates are high, and the receivables from customers are high as well as increasing the credit recovery risk. It is recommended that the company amalgamate warehouses that are nearby to a single warehouse and classify customers and offer them services accordingly.
Following questions are answered in this case study solution
What are the differences in logistics/operating strategies and structure between Halloran and Allied? What impact do those differences have on the kind of business they are and the way they operate?
What are the strengths and weaknesses implicit in Allied’s operating stance? What are the strengths and weaknesses implicit in Halloran’s operating stance? A priori, how would you expect an economic downturn to affect the two firms? How would an upturn affect the two firms?
What economic risks are implicit in Halloran’s logistics choices? How has the firm endeavored to reduce these? How successful have they been?
What should Jim Rocheleau recommend to the president?
Case Analysis for Halloran Metals
1. What are the differences in logistics/operating strategies and structure between Halloran and Allied? What impact do those differences have on the kind of business they are and the way they operate?
The major points of difference between Halloran and Allied are the capacity of inventory and the location; Halloran has implemented a strategy of warehouses located near the areas in which the customer orders were high. The unique customer needs were also taken into account, and the warehouses were stalked accordingly. This had made it possible for Halloran to make deliveries within a day of orders. Also, the shuttle service between warehouses allows the transference of steel pertaining to the requirements of that area. This strategic location of warehouses and the shuttle service is what makes Halloran definite on its one-day delivery and enables its operations to be efficient. The delivery is always on time regardless of the volume of the items ordered. This strategy allows it to charge high margins from its customers to develop relationships with them and retain them because of the quality of the service. Customer requirements are the priority for decision making. If a particular type of product is required in an area where the warehouse is not available, Halloran has the strategy of building a warehouse for that special purpose. The company also manages a fleet of trucks specified for each warehouse and manages its delivery. It has trucks of two different sizes, 10 tons and 20 tons to cater to individual requirements be it large orders or small orders.
Allied, unlike Halloran, has a single large warehouse for storage of its inventory and works on a volume basis as opposed to Halloran. It also does not have a large consumer base like Halloran, which means that implementing a strategy like that would be too costly. It also has fewer product lines. The difference is that allied can differentiate on the basis of prices, offering lower than Halloran, but the delivery is not so efficient. The difference, therefore, is that one is price-based, and the other is service-based.
2. What are the strengths and weaknesses implicit in Allied’s operating stance? What are the strengths and weaknesses implicit in Halloran’s operating stance? A priori, how would you expect an economic downturn to affect the two firms? How would an upturn affect the two firms?
Allied had a strategy that was similar to what Halloran is operating in. However, the company’s strategy was changed with the change in top management. The strength of this policy is that the costs are lower because of warehouses and targeting high volume customers. The criterion for delivery is that it has to be a full truckload saving the variable costs per unit of product sold. The high volume purchases can get Allied products at a lower cost (discounts) and can lower its costs for its customers. The high volume policy has gotten Allied greater sales than Halloran. The weakness, however, is a greater risk in terms of inventory. Therefore, the insurance costs and the safety costs for the warehouse would be high and in case of an accident, the company would have disrupted operations. The customer base is narrow, and the company cannot increase its customer base. Also, areas that are far from its warehouse would have a greater waiting time for the delivery of goods. Its strategy might be useful in reducing costs, but it is a limitation for the company as well.
Halloran’s strategy is costly because of the high fixed costs of its warehouses and shuttle service. Also, a higher level of warehouses means a higher level of inventory. The operating expense is mentioned to be $32,886 that is a lot higher than Allied’s expenses.
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