Wholesale Changes at Stapletons

For the last 18 months Stapletons has kept pretty quiet about its plans for the UK market and consequently rumours have abounded about the strength of the company’s position. Now, chief executive officer, Kenji Murai has broken silence, announcing efficiency cuts and $25 million of investment designed to set “Stapletons apart from its competitors…into 2006 and beyond.”

On the 11 October Stapletons announced that it plans to close its Dereham tyre distribution centre (TDC), cut around 50 jobs and introduce new stock distribution methods at its Bristol, Coatbridge and Warrington TDCs. Delving deeper, Tyres & Accessories learnt that the cutbacks are the first step in a programme that will see the company’s Japanese backers invest a minimum of $25 million over the next three to five years.

At first glance words like restructuring, redundancies and consultation can paint quite a negative image, but Stapletons representatives insist that the moves are growth driven. While CEO Kenji Murai concedes that cutting jobs and closing sites is a response to the “challenging trading environment that the whole industry is widely acknowledged to be facing,” he also believes it is a positive move.

Taking this into account, it is clear that the events of the last 18 months, and the number of recent top-level personnel changes that have taken place at the company, signal a tide change in the direction of the wholesaler.

Take the recent appointment of Andrew Long as head of marketing. Mr Long comes from a non-tyre background and will have been selected for his knowledge of marketing rather than his in-depth understanding of sizes and fitments. Likewise the appointments of Kenji Murai as CEO and Taro Ikeba as chief financial officer – both moving from previous roles with the Itochu Corporation – also signals how the Stapletons’ Japanese backer is stepping up its involvement in the company. The fact that Mr Murai’s previous role saw him direct formation of Pit100, Itochu’s Japanese tyre retailer, is particularly telling.

However, according to Stapletons executives, Alan Denton’s recent departure had nothing to do with the ongoing plans.

For Stapletons, it’s a question of first things first. And at the moment that means overseeing the closure of the Dereham TDC. One might think that the closure of a distribution centre might make distribution more difficult, but according to Stapletons it has actually been more a question of increasing efficiency. In the future customers that were previous served by the Dereham TDC will now be served by the company’s Letchworth hub.

Confused? You have to understand Kaizen philosophy – the principle of perpetual improvement, Mr Murai explains. For Stapletons, one example of this is reducing the number of stock keeping units (SKUs) the company holds from 3500 to 2500 in order to move with more agility in an oversupplied market. Consequently less physical space is needed. This move will be coupled with “a smarter form of distribution” at the Bristol, Coatbridge and Warrington TDCs.

According to company representatives, all of Stapletons’ retail outlets will continue to operate independently of any changes to the wholesaler operations.

‘Exciting and innovative changes’

However, as Andrew Long emphasised, this is only of the first step. The next step will see Stapletons introduce a series of what company representatives say are “exciting and innovative” changes at the beginning of 2006. Mr Murai declined to give any specific details.

Nevertheless, the inference is that these changes will be related to, and reliant upon, the international strength of Stapletons’ parent company. It may surprise you to know that the Itochu Corporation is of a comparable size to another well-known Japanese conglomerate, the Sumitomo group. Itochu also has its corporate finger in numerous pies – Tommy Hilfiger jeans, web portal Excite Japan and oil production in Azerbaijan are just a few examples.

As far as tyres are concerned, the Itochu Corporation also owns wholesale businesses in Germany (Reifen Gundlach) and the United States (Am-Pac). Company representatives describe these as the three sides of the company’s international tyre wholesaling triangle. And to this end the each of the international branches of the company has sent key personnel to visit the other. At this stage, these fact-finding missions are said to be about cross-fertilisation – learning what can be learnt from the similar but different distribution markets.

So are there plans for any kind of international unification of marketing strategy? “Just look at the number of manufacturers. A few years ago there was 150 now there are 75, globally it’s a continuous process of aggregation,” Mr Murai offered.

“Whilst there are similarities between the way the companies operate, there are differences as well. There must also be a fair degree of localisation,” Keith Pringle, general manager of Stapletons retail operations, added.

Although Stapletons representatives refused to elaborate on exactly what the “formidable” plans entailed, they did reveal that they are currently at a very advanced stage of development and the company could even have “gone live with some of them this year.”

Currently the Itochu owned businesses collectively sell 12 million tyres. The next target is 20 million and as far as the UK is concerned, Mr Murai is “determined that Stapletons will set the pace for the tyre industry.” At the moment the wholesaler holds a 16 – 17 per cent market share, company representatives revealed.

Big ideas are all very well, but isn’t there a danger that morale can be damaged when sweeping changes are implemented? “Although redundancies are always difficult for everyone involved, Stapletons is taking its position as a responsible employer seriously,” company representatives explained.

In fact employee response to the news is said to have been surprisingly positive. The day the news broke executives conducted 20 staff briefings where some employees were said to have “applauded the company’s swift reaction to difficult market conditions.”
For the last few months of 2005 Stapletons is concentrating on putting its own house in order. But it will only be a matter of time before the company has more to tell.