MoDo Merchants is the UK sales and distribution subsidiary of one of the leading Swedish paper companies, with a group turnover of £1.7m. It serves about 4,500 active customers nationwide from a 120,000 sq ft central distribution centre and nine strategically located warehouses throughout the country.
In a fragmented market with more than 150 competing merchants, MoDo has a market share of 7% and technology has been given a lead role in achieving the strategic target of 10% of the market.
Price and product have become less important differentiators than quality of service and satisfying customer requirements. Typical customers, which may be printers, office supply dealers or corporate end-users, tend to buy as a result of specific demands rather than for stock, and they look to their merchant to provide warehousing, a wide range of products and fast delivery.
Existing bespoke computer systems were not giving MoDo an edge in the market, and needed to be replaced to ensure Year 2000 compliance. So the decision was made to follow the packaged software route for implementing a replacement, which would also accommodate future technology developments.
An integrated financial and logistics system was chosen from Oracle and Industrie-Matematik International, partly because of the availability of the System ESS economic value analysis module, EVA.
‘We have more than 70 product categories and a stock line of more than 3,500 products,’ says Hugh Sturges, MoDo financial director. ‘Used alongside the Oracle systems, with EVA we can analyse our business in great detail, for example by product category or product line for frequency of sale, stock turn or cost of storage. EVA enables us to cut and slice the way we look at almost any aspect of our operation. It’s a great pre- and post-sales tool.’
The system supports a decentralised distribution and management structure by helping the company to move a range of decision-making processes closer to the customer.
‘Because they already have access to the information they need, our local managers can control their customer relationships and make their own tactical decisions in key areas such as margins,’ says Sturges. ‘We are making fewer errors in picking and distribution, and more efficient loading has led to reduced costs of overnight working.’
Top priority was given to resolving issues related to customer service and by the summer of 1997 MoDo was able to look at the first clear productivity gains from the system.
The company expects to see the full benefits in productivity and profitability by the end of 1998.