ONeal Steel Inc. will close four warehouses that are
outside its core geography over the next 18 months, citing
rising freight costs and the difficulty of making next-day
deliveries from each location.
Ala.-based company will seek acquisitions and organic growth
within its main geography in the Southeast, Midwest and
Southwest, however, ONeal Steel president and chief
executive officer Holman Head told AMM Sept. 24.
facilities that will close are located in Clifton, N.J., part
of its 2010 acquisition of Denman & Davis Inc.; Commerce
City, Colo., and Farmington, N.M., part of its 2006 acquisition
of Timberline Steel Inc.; and Tampa, Fla., which ONeal
opened in the 1960s. Each stocks carbon and stainless steels
and aluminum products.
After the recession,
ONeal Industries Inc. divided its businesses into steel
and manufacturing services. "We focused on distribution under
steel and processing and parts production under manufacturing,"
acquired the locations, each was doing both distribution and
processing. With steel focused on distribution, the division
developed a hub-and-spoke system to stock its 22 branches.
facilities are on the outskirts, so far out beyond the hub that
it has been difficult to replenish (inventory) from the hub. It
is a lot of miles from Dallas to Commerce City," Head said.
"Thats a lot of freight."
arent busy enough to become hubs, and since "the market
is still really tough in terms of demand and material costs, it
was hard to make each facility reach the profit expectations we
hoped for," Head said. "We plan to grow back into these
geographies over time."
Three of the branches
are leased and one is owned. Head couldnt predict what
will happen to them. ONeal is looking for anyone wishing
to lease or purchase the facilities or acquire the operations
as an ongoing business.
The closures will
affect 50 ONeal employees. Warehouse workers will be most
affected, because its difficult to relocate them to
distant ONeal sites, Head said.
three branches in Atlanta, Chattanooga, Tenn., and Roanoke,
Va., in 2009 and 2010. The latest closures highlight the
importance of next-day deliveries. "If we can improve the
speed, it will give us an advantage in the marketplace. In the
core geography we have, we provide all products and services
next day," said Head.
The company will
invest in inventory and equipment at its remaining 18 branches
while continuing to seek strategically located companies to
buy, according to Head.