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    Halloran Metals

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    Dibyanshu Kumar
    The document contains a group project report for Halloran Metals that makes recommendations to the company's president. It recommends that Halloran divide its customers into groups based on profitability and growth potential, rather than revenue, and focus on the most profitable customers. It also recommends reducing inventory by transporting goods directly between closer locations using trucks instead of passing through Worcester, and establishing local processing facilities. Consolidating warehouses for nearby locations could also reduce costs.

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    Halloran Metals

    Uploaded by

    Dibyanshu Kumar
    300 views3 pages
    The document contains a group project report for Halloran Metals that makes recommendations to the company's president. It recommends that Halloran divide its customers into groups based on profitability and growth potential, rather than revenue, and focus on the most profitable customers. It also recommends reducing inventory by transporting goods directly between closer locations using trucks instead of passing through Worcester, and establishing local processing facilities. Consolidating warehouses for nearby locations could also reduce costs.

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    Halloran Case Solution

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    The document contains a group project report for Halloran Metals that makes recommendations to the company's president. It recommends that Halloran divide its customers into groups based on profitability and growth potential, rather than revenue, and focus on the most profitable customers. It also recommends reducing inventory by transporting goods directly between closer locations using trucks instead of passing through Worcester, and establishing local processing facilities. Consolidating warehouses for nearby locations could also reduce costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    300 views3 pages

    Halloran Metals

    Uploaded by

    Dibyanshu Kumar
    The document contains a group project report for Halloran Metals that makes recommendations to the company's president. It recommends that Halloran divide its customers into groups based on profitability and growth potential, rather than revenue, and focus on the most profitable customers. It also recommends reducing inventory by transporting goods directly between closer locations using trucks instead of passing through Worcester, and establishing local processing facilities. Consolidating warehouses for nearby locations could also reduce costs.

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    Halloran Metals

    Group – 11
    Nikhil Gupta PGP/22/149
    Manish Meghnath PGP/22/274
    Dibyanshu Kumar PGP/22/348
    Ashwini PGP/22/269
    Nishant Yadav PGP/22/090
    What should Jim Rochleau recommend to the president?

    Following Operating Strategy changes should be proposed to the president:


    • The Previous strategy of serving all the customers, regardless of their profitability and growth potential is not
    sustainable. For instance, a customer placing a very small order may not be viable for a truck load economy, and
    neither purchasing economy, but supplying them in one day can increase operating cost by huge margin.
    • So first of all they need to divide their customers based on customer profitability and customer’s “potential”
    profitability. A matrix like Appendix 3 will come up. So as we can see that customers in Group C are the ones that are
    causing the most problems. Providing them with urgent logistics increases trucking costs as they usually do not order
    full truck loads, which are about 17%. So now the groups that are important are A, B and D

    Group A Group B

    LOW Profitability HIGH Profitability

    HIGH Potential profitability HIGH Potential Profitability

    Group C Group D

    LOW Profitability HIGH Profitability

    LOW Potential Profitability LOW Potential Profitability

    2
    Halloran
    2000 2001
    Gp margin 24.35% 22.76%
    Operating profit margin 4.39% 3.55%

    Warehousing as %age of Total operating cost 25.98% 27.05%


    Trucking as %age of Total operating cost 17.32% 17.42%
    Selling as %age of Total operating cost 22.41% 23.86%
    Occupancy as %age of Total operating cost 8.15% 9.17%
    G&A as %age of Total operating cost 26.14% 22.50%
    100.00% 100.00%
    Total operating cost 30934 32886

    • Currently Halloran has split its 10000 customers into three categories based on revenue. But this should be changed to profitability, and
    customers with the largest profitability and growth potential should be provided premium service. This change should be done because as
    it is mentioned in the case that large orders are not usually profitable as the margins are very low on then, so a small order might be more
    profitable than a large one
    • Looking at the quick ratio of Halloran (.69) and inventory as percentage of total assets (44%) it clearly reflects that they are keeping
    inventory and a lot of cash is tied in that inventory which could have been put to better use. Further interest is also being paid on this
    cash. So what Jim needs to do is that places that are nearer should not necessarily have to pass through Worcester if transporting on a
    truck directly would be more cost effective. Newburgh, Binghamton and Wilkes-Barre are closer so they can use trucking more often, and
    the rest catered through Worcester. This is substantially reduce there in-transit inventory. (For flat rolled steel bar, shuttle can be used)
    • In the long-run they should create a processing facility at Newburgh, Binghamton or Wikes-Barre. This will help them in geographical
    expansion as well. Also what we can see at the map is that the 4 locations (Concord, Lynn, Worcester and Woonsockett are very near to
    each other. So rather than each having its own warehouse, we can have one single warehouse for them, this will reduce the total inventory
    and the warehousing cost

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