Clients Brief
This Heating and Plumbing Merchants business had gone through a significant period of growth through an acquisition plan with targeted benefits from consolidation, rationalisation and economies of scale. The level of benefits targeted was not being achieved so the brief was to identify and quantify the shortfalls and recommend the changed needed to achieve the desired return on investment.
Findings
The acquired businesses continued to trade and marketed under their original name. There had been no rationalisation of the warehousing, trade and retail outlets. The potential benefits from central procurement and distribution could not make the potential impact due to inventory holding and distribution practices.
Recommendations
An integrated strategic direction for the business was recommended covering routes to market, plus information systems for procurement and distribution.
The recommended route to market launched the company with a single corporate identity - initially through an online shop. The new branding was rolled out to the other business outlets over time.
The information system recommended to enable the online shop would be integrated providing a single catalogue, a view of the stocks and profitability of each product line and customer account.
Procurement would be centralised and a hub and spoke distribution strategy was recommended to replace the intercompany transfer strategy.
Outcome
The recommended approach provided the product line and customer profitability measuring the performance of the many outlets. Non-value added costs in procurement, distribution and counter sales were quantified.
The centralised online shop was an immediate success with trade and retail customers able to order and have materials delivered direct to site - reducing their costs.
Quantifiable Benefits
Over the 18 months implementation the cost base was reduced by 25% and sales increased by 33% primarily through the online shop.
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