'Get Fit for the Future - or Fail' Cautions WHS Halo's Duguid

The recent spate of business failures is a warning to us all', cautions Winston Duguid, Managing Director of WHS Halo. Speaking in the wake of one of the most nervous starts to a year the industry has ever experienced, he warns that, 'while the industry is not going to hell in a handcart, it is time for all parts of the supply chain to re-appraise and re-evaluate their business models'. For those that do, he claims, 'there are some real opportunities to reap higher margins and more profitable business'.

Against a backdrop of a shrinking window market - 13.5m units per annum dropping to possibly 10m units pa over the next three years - Duguid argues that, 'the ramifications of this drop will be fewer players in all parts of the supply chain as capacity is taken out'. He predicts it will mean that, instead of 12 serious extruders, there will only be six or seven; instead of 2100 PVC fabricators there will probably be nearer to 1750; and it will mean that something like 13000 installers will become closer to 11000.

'What we will see is more competition for market share, prompting price, service and promotional warfare; fewer new installers coming into the market and industry profits falling either temporarily or permanently. The important thing is how individual firms react to this very much changed environment, so that they are not falling at the first fence', he advises.

'Firstly and most obviously, you need to recognise that things have changed and your organisation needs to change', he says.

Referring to his own company's experience, Duguid recalls that WHS Halo 'would never have prospered, let alone be one of probably only three British extruders making an adequate financial return now, unless it had introduced its Total Productive Mindset culture in 1999. This was our version of lean manufacturing - it's British, it's holistic in that it tackles administration as well as manufacturing; and it's transferable to customers and/or suppliers either in its entirety or parts thereof.'

He argues that first thing to do is to look at your strategy and decide then who and how to implement it. Borrowing from business guru Michael Porter, he points out that the three generic strategies of cost leadership, product/service differentiation and focus still hold good.

'It's interesting but not surprising that the current batch of company failures in our industry are those that are stuck in the middle of these generic strategies. In extrusion it is the smaller players, but in fabrication it has been large, small and medium players. Too many fabricators, and some extruders, have been prepared to put out low prices fooling themselves that they have a cost advantage over their competitors', claims Duguid. 'The reality is that they have no such advantage, and all they have done is marginally costed the product. Very few businesses can afford to marginally cost more than 10% of their turnover. And in today's market some fabricators and some extruders are marginally costing over 50% of their production - it simply isn'tsustainable as a business model'.

In Duguid's view, for many fabricators, real cost leadership is not an option. Therefore, by definition, today's modern fabricator has to go for a focus strategy or a product differentiation strategy. Focus can be on one particular market sector and being 'best' in that sector or it can mean focus on a particular product or range of products. Product differentiation can be a service, including lead times or the product itself.

Duguid believes that the next eighteen months to two years will be tough in comparison to other periods in industry history. Some players have not invested, don't understand their costs and don't understand how the needs of the consumer, public sector client or housebuilder are changing.

The start point is this understanding, devising a sustainable strategy to meet those needs and gather the people together to implement it successfully. Some may be new faces, some will be the same faces with a different attitude and some will be temporary employees or consultants brought in to add short term extra resource or emphasis. 'Whatever you do, doing nothing is not an option', he warns.

Tel: 0121 749 3000
Web: http://www.whs-halo.co.uk