1) What are the differences in logistics/operating strategy and structure between Halloran and Allied? What impact do those differences have on the kind of businesses they are and the way they operate? Difference Location of Inventory Halloran many strategically located warehouses in different areas. Allied Very large single warehouse. Quantity of Inventory special and distinct product lines Various product line Customer base Large (10,000) Small (3,000) Order Size Speed of Customer order Delivery (in Days) Small Single day Large 3 to 5 days Transfer of Parts and Steel Products Within Different warehouse as per requirement Steel mills to Customers. Trucks 20 tons and 10 tons trucks. 10 ton trucks are used for product delivery to customers. 20 tons are used for steel mill orders. 20 tons trucks are used. Inventory Excess items Fewer items i.e., (40% less than Halloran) This study source was downloaded by 100000808138453 from CourseHero.com on 11-02-2022 20:37:05 GMT -05:00 1) What are the differences in logistics/operating strategy and structure between Halloran and Allied? What impact do those differences have on the kind of businesses they are and the way they operate? Difference Operation strategy Backbone of operation Prices Focus Logistic strategy Discounts Risk, Insurance and Safety Cost of Inventory Unique Customer Demand Reach of company Cost of operations Halloran Delivering the order to the customer every time, irrespective of the volume ordered by the customer Shuttle service High as compare to Allied Customer service intensive Carter small orders in minimum amount of time. No Less as warehouse are distributed. Can Serve Very High High as distributed warehouse This study source was downloaded by 100000808138453 from CourseHero.com on 11-02-2022 20:37:05 GMT -05:00 Allied To serve just high volume customers Single large warehouse Low as compared to Halloran Price intensive company Serving only high volume customers. Get and Give. Very high as inventory is placed in single warehouse. Cannot Serve. Low Low as single warehouse 1) What are the differences in logistics/operating strategy and structure between Halloran and Allied? What impact do those differences have on the kind of businesses they are and the way they operate? Halloran Single day Delivery - increase customer goodwill, it extends credit terms to their loyal customers beyond the usual 30 days period and results increasing the risk of recovering accounts receivable. Referring to Exhibit 1, the income statement section shows high operating expenses i.e., cost of warehousing limits operating profit. Under liabilities section, it shows that the company is highly leveraged and is showing high accounts payable figures depicting high default and liquidity risks. Quick Ratio = (Current assets-Inventories)/Current liabilities Halloran (2001) = (51,438-30,980)/29,75 = 0.68 Due to lower quick ratio, Halloran faces problems in bidding for bulk-buying and making large investments in equipment. It also faces certain difficulties in expanding its operations due to its highly leveraged and inventory-intensive nature. Halloran tried to reduce its risks by exploiting small investment opportunities buying a small depot, strengthens its customer base, and builds a warehouse in that location to fulfill the demand of that area. It reduces both default and liquidity risk. It keeps Halloran in a position to make debt repayments and leaves it with ample cash to meet its short-term obligations. It has developed in-house equipment but with time, the replacement cost is increasing which will be critical to meet the changes in industry. This study source was downloaded by 100000808138453 from CourseHero.com on 11-02-2022 20:37:05 GMT -05:00 1) What are the differences in logistics/operating strategy and structure between Halloran and Allied? What impact do those differences have on the kind of businesses they are and the way they operate? The cost of operating different warehouses and the shuttle that links them is very high also has to keep a much larger inventory in total to service the needs of its customers. In fact in 2001, the inventory to total asset % is 44% as compared to 26% for Allied in 2001 Halloran has an operating expense of $ 32,886, meaning that running this system is very high. Also, the logistical cost for Halloran is very high. It does not operate at a full truckload policy, hence every delivery it makes is very high as compared to that of Allied. Due to keeping different product lines, Halloran can’t compete with its competitors in terms of pricing Allied a cost intensive policy (Single warehouse) - Allied has been able to cut down on the high costs needed to support and maintain different warehouses A full truck policy - serves those customers that order truck load quantities focus on high volumes - get and give discounts from its own suppliers and its customers a cost intensive policy (Single warehouse) - cannot reduce its delivery time. It needs 4 to 5 days to deliver the goods to areas that are far away. A full truck policy - it won’t be feasible for Allied to deliver low volume products to its customers focus on high volumes - cannot increase its customer base This study source was downloaded by 100000808138453 from CourseHero.com on 11-02-2022 20:37:05 GMT -05:00 1) What are the differences in logistics/operating strategy and structure between Halloran and Allied? What impact do those differences have on the kind of businesses they are and the way they operate? high volume policy - In both the year 2000 and 2001, Sales of Allied are higher than those of Halloran’s. The cost of operations for Allied is also much less than Halloran’s. Cost cutting by Allied’s - operating expense is $ 17,032 as opposed to Halloran’s which is $ 32,886 in 2001. inventory is placed in a single warehouse - very high risk and insurance and safety costs. limited product lines, customers specific products can never be served by Allied. Allied strategy is a very limited one, which reduces the costs but also reduces the reach of the company Quick Ratio = (Current assets-Inventories)/Current liabilities. Allied (2001) = (45,518-19,364)/22,710 (Figures from Exhibit 6) =1.15 High quick ratio means that a company is more capable of meeting its short-term obligations and has strong financial condition. Quick ratio analysis shows that Allied is in a better position to cater to increased customer demand in future and to bring operational efficiency. This study source was downloaded by 100000808138453 from CourseHero.com on 11-02-2022 20:37:05 GMT -05:00 (2) What are the strengths and weakness implicit in Allied's operating stance? in Halloran's? A priori, how would you expect an economic downturn to affect the two firms? an upturn? Allied’s Strength Serving only high volume customers. Weakness 2-5 days delivery time (longer delivery time). Single large warehouse very high risk and insurance and safety costs Large space required for single warehouse. Doesn’t carter small orders. Can serve unique customer demand Can’t reach more customers. Low Prices and offers discount Large order size. Low transportation Cost. Low cost of operations. This study source was downloaded by 100000808138453 from CourseHero.com on 11-02-2022 20:37:05 GMT -05:00 (2) What are the strengths and weakness implicit in Allied's operating stance? in Halloran's? A priori, how would you expect an economic downturn to affect the two firms? an upturn? Hallorans will be affected by economic downturn 1. High Inventory 2. High Operating Cost. 3. No proper utilization of transportation and will triggered underutilization of resources because of One day delivery. Allied will be affected more than Halloran as 1. Allied strategy depends on high volume 2. Productivity will decrease 3. Operating Cost will rise. This study source was downloaded by 100000808138453 from CourseHero.com on 11-02-2022 20:37:05 GMT -05:00 (2) What are the strengths and weakness implicit in Allied's operating stance? in Halloran's? A priori, how would you expect an economic downturn to affect the two firms? an upturn? Hallorans will be affected by economic upturn 1. Very High operating Cost 2. Expansion of warehouses needed in order to fulfill customer demand. 3. More investment in resources . 4. Inventory Cost will increase more. 5. More competition in market. Allied will be affected by economic upturn 1. Allied strategy depends on high volume 2. Productivity will increase 3. Will be difficult to match with steel mills speed hence increase in delivery time. 4. More competition in market. This study source was downloaded by 100000808138453 from CourseHero.com on 11-02-2022 20:37:05 GMT -05:00 Powered by TCPDF (www.tcpdf.org)
