Reaping the rewards

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Just two years ago washroom and cleaning consumables distributor Cannon Disposables barely recognised it was in the logistics business. In the minds of most of its staff it merely supplied goods like toilet rolls, hand towels and floor cleaners to the nation’s Small and Medium Sized Enterprises (SMEs). But now all of Cannon Disposables’ internal structures – business, IT, management and financial – are being overhauled so the business can start adding the big brand names and the big nationwide accounts to its customer portfolio.

It is a challenge big enough to have attracted the attention of divisional managing director Steve Cotter, former managing director of Hays Logistics. Cotter says: “I’ll be honest. One of the things that drew to me to Cannon Disposables was the mismatch between how the firm was and how it could be. The potential to change to a logistics based operation was enormous, but so were the challenges. It was like pulling up the old carpet in a big, solid house to find that the floorboards needed replacing, and then pulling those up to find a serious case of flooding in the basement.

“We quickly realised that we would have to dig right down to the business’s foundations and put things right at basement level before we could consider building in the other changes needed to convert the division to a logistics company.”

The most visible of the big recent changes at the £16.5M company has been the unveiling of a new computerised warehouse management system (WMS) installed by LIS. The LIS Dispatcher-WMS has been introduced at Cannon Disposable’s warehouses in Harlow, Manchester and Glasgow, and will be rolled out to its sites at Mansfield, Birmingham, Swanley, Southampton and Exeter by the end of the year.

Dispatcher-WMS is a flexible system that allows Radio Data Terminals (RDTs) to direct operators in real-time. Urgent tasks are automatically prioritised and all work is carried out in the most efficient sequence. Benefits of the system include improvements in control, efficiency and decision-making.

Cannon Disposables believes the scale of potential savings from having installed Dispatcher-WMS is so great that the £500,000 spent on the system will be recouped within two years, allowing for further reinvestment in the business. This is on top of a predicted stock accuracy of 99.99% and a rationalisation in stockholding of 40%.

Operations manager Mark Williams says: “We’ll have more capacity for the regularly requested stock and no unnecessary stockpiling of old and returned stock. We anticipate that the accuracy and electronic tracking of this new system will reduce customer returns by at least 70%. Each product will be monitored at every stage in the storage and distribution process so we will know when it has arrived at our depot, where it is stored in the warehouse, when it will exceed its shelf life, where it is destined for, and on what date it leaves.

“The customer benefits by knowing instantly what stock levels are like and by getting exactly what they ordered. Now we can give enquiring customers an instant answer to their questions

and inform them of a time their order will leave the warehouse and arrive at their premises. The new system not only means speed but flexibility. If we don’t have the requested products in stock, we can search instantly for an alternative to offer.”

The Dispatcher-WMS system is being introduced in two stages. Phase One sees the use of electronic, computer-linked scanners to monitor receipt and despatch of goods from the warehouse. Phase Two will focus on the electronic monitoring of goods delivered to customers’ premises to ensure correct receipt on time.

Cotter argues that, although the new IT system is a revolutionary step for Cannon’s business, its real importance is that it allows Cannon to make more fundamental changes in its business and management structures.

This new business strategy has not arisen in isolation: Cannon Disposables is division of Morecambe-based Cannon Hygiene, whose scope of activities ranges from washroom management and pest control to interior landscaping and laundry. Each arm of the group, ultimately owned by facilities management giant OCS, is under going its own business restructuring.

Cotter has risen to the challenge of the restructure. “Previously Cannon Disposables did not really function as one business: rather itwas eight separate units dotted around the country. The different units all had individual specialities and staff and managers were multi-skilled in logistics, sales and customer care. This meant each unit was very much run as a small-scale business attracting small, local business in return, which will remain an important part of Cannon Disposables’ customer portfolio.

“However with the lack of centralisation came a lack of control on profit margins. Customers were becoming increasingly better informed of logistics, while suppliers were beginning to eat into our profits as they too became increasingly savvy to the system. Cannon Disposables was in the middle, having to absorb cuts by both sides butwondering how it could respond.”

It was 11 months ago when managing director of the Cannon Hygiene group of companies, Oliver Weisflog, saw the potential of the division and brought Cotter to the company, recognising the benefits that his logistics skills would be to the huge restructure.

Weisflog comments: “Steve began by applying his knowledge of the market to change the division. This was at a time when the logistics market was becoming increasingly polarised between the big and niche players, with the real squeeze on medium-sized firms. Steve introduced measures of best business practice, profitability and logistics systems. The lack of these in the past were not any one person’s fault – they were long-term and had come about largely because the business had grown by acquisition rather than organically. We decided we needed an expert to take a look at how the business should be structured to meet the problems it faced.”

He continues: “The national arena is where Cannon Disposables wants to be – so we have focused our marketing strategy on gaining even more large national accounts. We realised that if we were to get work for the likes these companies, while retaining our existing customers, we needed to build on our expertise and change the business’s entire strategy.”

With the IT system coming on stream, Cotter and a growing team of headhunted managers have been overhauling Cannon Disposables’ management structure. The eight business silos, based around the eight regional operations, are being abolished. Functions like sales, operations, transport, finance and HR – previously handled locally – are becoming increasingly centralised.

Surprisingly the team has not used the new IT and management systems to reduce the 3,500 lines of stock that Cannon Disposables holds. While the business’s core lines, such as soap and toilet paper, have been simplified and reduced, the spaces made available are being used as an opportunity to introduce fresh lines. Says Cotter: “We’ve kept the number of lines static but increased the number of categories. We’re now starting to ‘in-fill’ – for example if we provide a customer’s cups and spoons then we might as well start providing coffee and sugar. At the same time we are expanding into completely new ranges like work clothing.”

The group is also looking at working with far bigger distribution organisations to break into those sought after national accounts. The idea is to become a first-tier supplier to larger logistics firms supplying these accounts. Cannon Disposables will hold goods like toilet rolls, soap and cleaning equipment for what will now be its partners, supplying the goods to their distribution centres. The end-user wins by having to handle fewer deliveries, tackle less paperwork and negotiate with fewer logistics firms.

“This is a massive opportunity to be involved in a business as it goes through a radical change. We’re attracting a new fresh layer of management that wants to be here because it can make a real difference at the formative stage,” says Cotter. “In an industry that’s undergoing such rapid consolidation, it’s a challenge that is unlikely to come up very often.”

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