Supply Chain Management

Seminar 1

Authors: Group (19)

Paniz Zegordi
Varney Alieu Folly
 Compute the Gross Margin (%), ROA, APT, ART, and INVT for Halloran and Allied, in 2000 and 2001
respectively.
Company Year Gross Margin ROA APT ART INVT
2000 24.35 2.29 4.84 8.77 4.20
Halloran
2001 22.75 0.68 4.73 8.38 4.22

2000 14.90 5.55 8.62 7.64 8.05

Allies
2001 10.30 0.06 7.87 7.01 8.18

1. What are the differences in supply chain strategy and structure between Halloran and Allied? What
impact do these differences have on the kind of business they are and the way they operate? How is this
reflected in the metrics you computed?

Different Halloran Allied

Location of ▪ Many warehouses at different Transportation ▪ Very large single warehouse
inventory locations /areas cost, operating
cost
Inventory ▪ Each branch Specialized in Variety of ▪ Various product line
characteristic different products orders ▪ Pull (upon customer request)
▪ Push (before the request)
Inventory ▪ Excess items: Cost, ▪ Fewer items (40% less):
size Smaller INVT supplier deals, Bigger INVT
▪ better deals from suppliers: inventory ▪ Bigger APT
Smaller APT turnover,

Number of ▪ Large (10,000) The ▪ small (3,000)

Customer ▪ 40% (<20000) bargaining ▪ big scale
ART (6 weeks) power of ART (7 weeks)
customers
Speed ▪ Over night Cost, ▪ 3 to 5 days
flexibility
Transfer ▪ From Steel mill (or different Cost, ▪ Steel mill warehouse then to
order warehouses) to Cost center inventory customers
and then to other warehouse
as per requirements
Trucks ▪ 20 tones and 10 tones trucks. Planning, cost ▪ 20 tones are used
10 of the trucks are used for
products deliver to customer
 while 20 tones are used for
steel mills orders
Processing ▪ Mostly in cost center and Cost, market ▪ Huge investment
machines limited investment share, price
▪ As we see, the gross margin of Halloran is higher, the reason for a higher ROA for Allied in 2000 is the higher
asset turn over, which shows that Allied is using its assets more efficiently.

2. What are the strengths and weaknesses implicit in Halloran’ operating stance? In Allied’s? A priori, how
would you expect an economic downturn to affect the two firms? An upturn?

Allied Halloran
Strength Strength
• Low transportation cost • Customization
• Cost intensive (price advantage) • One day delivery due to the speed,
• More processing machines (resources flexibility and dependability in it
and capabilities) supply chain
• Large customer base and deepens
very good customer relationship
Weakness Weaknesses
• Inventory risk • High inventory, operation and logistic
• Not flexible (regarding delivery time, cost
and variety of products) • Less processing machine (resources
• Longer delivery and capabilities)

Before 2000, a downturn resulted in an overall decrease in consumption of steel, but an increase of
sale for steel service centers with customers who couldn’t order in Bulk. Therefore, Halloran would
benefit. An upturn may benefit Allied more (bulk orders and big accounts)
After 2000, As a result of change in Business environment and the trend that pushes the service centers
to become processors, it seems that Allied’s business model works better. In this case an upturn would
still be mostly beneficial to Allied.

3. What economic risks are implicit in Halloran’s logistics choices? How has the firm endeavoured to
reduce these? How successful have they been?
- Not cost efficient and therefore less power in bidding.
- Not investing enough in processing machines to follow the market trend.
- Huge Inventory and therefor, operation cost.
- Unnecessary transportation and increased cost as a result.
- Having a responsive supply chain in an industry which is mostly cost efficient. (New England
example)

4. What should Jim Rochleau recommend to the president?

- Choose a target customer: either customized products with longer delivery time, or standard products
with short delivery time. In order to have a clear competitive strategy.
- studying the market and data in scientific ways (their expansion plans)
- The dominant group of their customers which make the profit (40% of the business is <20000$
orders), should be provided premium service.
- Train or outsource managers