Profile
For a national hardware distributor, acquisition of construction and industrial sector businesses simply added cost with no integration or synergy benefits. Operating at a loss, the business needed to turnaround financial performance within 12 months.
Goal
Reset the business on a sound operational footing to:
- Deliver sustainable profits in a highly competitive market.
- Reduce working capital and inventory holding.
- Rationalise the distribution network and potentially release freehold sites for sale.
Approach
We developed and implemented a major change programme for the business, drawing on some critical elements of our methodology. Particular highlights included:
- Complexity – creating a data-driven understanding of product and customer profitability, supported not only a product range rationalisation, but also the crafting of a customer service offer that enabled greater standardisation whilst still delivering customer requirements.
- Supply - applying a total supply chain cost approach allowed the inherent trade-offs between service, cost, and capital to be identified, supporting a tightened supply base with category management established.
- Logistics Management– current operations were reviewed to determine service and cost performance. Re-structuring of the distribution network from 3 regional warehouses to one re-configured central fulfilment centre, transformed operating costs.
Having confirmed the business case with our diagnostic analysis; due to the scale of the programme of change for the business, we supported implementation by leading the cross-functional client project team through all critical stages.
Result
Successful turnaround returning the business to profit by:
- Rationalising the product range.
- Consolidating the distribution network.
- Reducing average inventory by 32%
- Cutting distribution cost by 15%
- Returning £7.5m to shareholders from property sales.
Takeaways
- Re-gearing the supply chain sometimes means tough decisions are needed.
- The ‘art of the possible’, once demonstrated, creates belief and momentum.
