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Quality Metal

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Quality Metal Service Center
Case Analysis
Company History Quality Metal Service Center was established in the late 1800s as a local metals distribution center. By 1992, it had grown into a national metal distribution company operating in four geographic regions-each of which contained about six districts. The company had experienced rapid sales growth along with the geographic expansion since the 1920s. In 1991, Quality Metal posted sales in excess of $750 million. In March, 1992, the president and CEO, Edward Brown, questioned the effectiveness of the company’s controls. He stated, “I don’t know if our controls have inhibited managers from pursuing our goals of aggressive growth and above-average return on assets, as compared to the industry…” (Anthony & Govindarajan, 2007, p. 300). Anthony and Govindarajan (2007) indicated in the years leading up to the 1990s, the metal distribution industry was “regarded as a mature, highly competitive, and fragmented industry.” There were, however, within the metal industry some important indicators that could enhance the growth potential of the metal service center sector. Anthony and Govindarajan (2007) identified three trends within the industry. One was the steel mill’s retrenchment. Product lines had been dropped, customer service staff had been reduced and specialty products were eliminated. The second trend included the implementation of a “just-in-time” inventory management system. Metal users reduced costs by restricting inventory levels of raw materials. As a result, order quantities were smaller which necessitated more frequent deliveries. The third trend combined improvement in productivity with quality enhancement. Placing a priority on the “branding” of their products, metal users increased profitability. As such, they selected only a few suppliers who could meet their quality,...

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