Quality Metal

Topics: Inventory, Balance sheet, Depreciation Pages: 8 (2934 words) Published: March 16, 2013
Quality Metal Service Center Industry Analysis Quality Metal Service Center is a service center that purchases metal from a mill to sell to their customers. The company was established 100 years ago as a local metals distributor. Now it has become a national distributor of metals and has seen sales of $750 million. The current metal industry is a mature, highly competitive and fragmented industry. However, a number of key trends in the industry have allowed metal service centers to grow. One of these trends was the retrenchment of Steel Mill’s in which they decided to increase productivity by cutting back on product lines that used low-volume specialty products. This trend helped metal service centers thrive through the production of specialty products. Customers have few options, and must go to metal service centers if they want specialty products. The second trend of the metal industry is the high cost of ownership and maintenance of inventory. The high cost of inventory and maintenance created a high barrier to entry for metal service centers. Most metal service centers decided to use the “just-in-time” inventory management system to try to reduce their inventory costs. This resulted in smaller order quantities and more frequent deliveries. This gave metal service centers the advantage over the mills because customers were able to maintain low inventories which led to lower costs. Quality and productivity had become the major issues with metal users. Many programs were created in attempt to improve the quality and productivity of their processes which would result in an overall increase in profitability. Metal users found that having fewer suppliers led to higher quality and they were able to benefit from the long term relationship with the suppliers. 1

Quality Metal Service Center Strategy Quality Metal’s strategy provided a guide to achieve their goals and objectives. Edward Brown, the president and chief executive officer, created three objectives for Quality Metal to follow. The first objective was to focus their sales efforts on targeted markets of specialty metal users. This was done by eliminating the commodity market from their product lines. This allowed them to redeploy their assets into highertechnology metals which offered much higher returns and had less competition. Their second objective was to identify the industries and geographic markets where the higher-technology metals were consumed. They were now committed to providing to customers who were high-technology metal users. To be able to accurately identify the areas and industries that use the products, they developed a data base system that allowed them to project potential sales on a location by location basis. They were also able to project demand on a nationwide basis which allowed them to determine where it would be most beneficial to open a new service location. The last objective was to develop techniques and marketing programs that would increase market share. They were able to do this by offering the customers programs that assisted them in implementing a just-in-time inventory management control system. They also offered their customers various processing services that were much less expensive for Quality to perform than for their customers. They used their assets to increase market share and to provide better customer service. Organization Structure The organizational structure of Quality Metal Service Center consisted of four regions each with about 6 districts each. Each district had a district manager who


managed a warehouse manager, sales manager, credit manager, purchasing manager, and administration manager. The finance, marketing, operations, and human resources were managed at the corporate level. Each manager was able to make decisions regarding their departments. The warehouse manager was responsible for transportation, loading and unloading, storage, and preproduction processing. The sales manager was responsible for...
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