Tag Archive | "Factor Chains"

SUKHPAL AND LKQ: ‘SIGNIFICANT INVESTMENT’ IN HGV FACTOR CHAIN

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SUKHPAL AND LKQ: ‘SIGNIFICANT INVESTMENT’ IN HGV FACTOR CHAIN


Truck part supplier Digraph Transport Supplies has been acquired in a joint deal between LKQ Corporation and Sukhpal Singh Ahluwalia. Terms of the deal have not been disclosed.

The move is significant as it marks the first time that both the founder of Euro Car Parts and the corporation that now own it have embarked on a deal as joint investors.

14-branch Digraph will retain all current employees and James Rawson will remain as MD. Rawson has also made an investment in the business.

CAT spoke briefly to Sukhpal to confirm the deal had taken place. He said that the ‘fragmented’ state of the HGV parts market lead it to being an area considered for expansion into for some time and that Digraph was the best fit in terms of matching ECPs ‘sales and customer service ethic’.

In a statement to his team, James Rawson said: “This investment will enable Digraph to access to the resources we need to grow the business and implement our expansion plans. We will work closely with ECP to enhance customer service levels. I am thrilled to be working with Sukhpal and taking up the challenge of extending the Digraph service to customers throughout the UK.”

In related news, Sukhpal has extended his three-year contract with ECP, retaining his position as Executive Chairman.

 

 

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GROWTH IN SPARTAN TIMES

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GROWTH IN SPARTAN TIMES


Spartan Motor Factors explain how expanding an independent factor chain in an age of consolidation is a bold move.

Inside the stockroom

It’s a busy morning in an industrial unit in Bridgend. Pickers run between almost-completed racks of car parts while phones ring and a printer spews out orders. Somewhere, a huge and noisy vacuum cleaner and a hammer drill wail intermittently like some industrial banshee.

We’re in the latest branch of Spartan Motor Factors on opening day, and it’s fair to say that the building, which was once home to a Partco, has not seen this level of activity for many years.

Not that getting the branch ready has been anything like glamour. “We were here all weekend putting up the racking” Director Lee Gratton says balefully, adding that there was still some work to do, but the factor was now ready to the phone lines and the roller doors for the garages of Bridgend.

Spartan is a relatively recent name on the factor scene. Started in 2012 by Lee Gratton, Jason Farrugia and Daniel Webb the company used the Motaquip scheme of supplying a stockpack of parts and consumables to the firm’s first branch in Newport. Both Gratton and Webb had a background of working in factors, while Farrugia was experienced in accountancy.

A branch in Cardiff followed a year later, which became the Head Office. It was, to be polite, a challenging time for an independent factor to go on an expansion drive. Private equity fuelled the growth of the main players, with the Parts Alliance and Groupauto making acquisitions, while Euro Car Parts famously opened a dozen branches in a single day in early 2013, leading to a war of attrition between the big players, which the newcomers had to find an answer. “Yes, it was not easy” laughed Gratton.

SOURCING STOCK
One of the problems related to sourcing stock. “With suppliers, their involvement with other motor factors can prevent you from opening an account” explained Gratton. “When we first opened in Newport, a supplier put in its range of stock – and a month later they came back and took it all out saying ‘sorry, we’ll give you a refund, but there is a conf lict of supply here. We are going to lose one of our biggest customers if we continue to supply you”. This was a reoccurring theme of the early days. “I had to ask why we can’t still have an account, but have our own separate deals?” Gratton pondered.

Spartan staff

There was a logical solution to getting hands on brands from a range of suppliers, and that was to join a buying group. Initially, the choice was the PDP, but just over a year later Spartan left and joined the IFA. There are always issues in swapping buying groups, but Jason Farrugia says the biggest problem was removing and replacing stock. “One of the main difficulties was cleansing the old stock out of the five branches” he recalled. “In terms of the brands themselves, it was not too much of a problem with customers as they were familiar with most of them, such asKYBandFAI–itisn’tas though we are trying to sell anything unknown.

On the subject of brands, buying group membership has helped Spartan move some offerings upmarket, “We’ve moved over to Wix and Mahle on filtration and it has improved our filter business no end” Farrugia said. “Before, we had a mix of brands. A quality product is something customers don’t mind paying a small amount extra for, and they don’t try to push you down on the price of filters”.

Apart from access to brands, the knowledge base of the IFA has proven to be useful. “The IFA were really strong in the area and the brands were very strong. My co-Directors knew them from their Welsh Autoparts days, and I must say they have been brilliant” says Farrugia. “In the nine months since we have been members, I have learnt more about MAM, stockholdings and purchasing than I did for the whole five years that we have been in business before”.

Going back to opening day here in Bridgend, it will come as no surprise that the building is well suited to be a motor factor considering the previous occupant. Easy access to allow goods in and out is supported by a large stock room, with potential for a mezzanine. The building has an upstairs area with a meeting room and an office, while downstairs the original counter has been extended backwards to incorporate a small showroom area. This is still the subject of much drilling, hammering and Hoovering on our visit, although we manage to clear the area long enough to get a group photo.

Starting a factor chain in an era of consolidation might not be for the faint hearted, but Spartan hasn’t ruled out further expansion. “We have always been a little off the cuff… If the right opportunity presents itself” concluded Gratton.

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THE NORTH AND SOUTH DIVIDE

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THE NORTH AND SOUTH DIVIDE


Simon McMullen takes us around GSF’s new Bristol North branch.

A number of factor chains have expanded their networks recently. One in particular was GSF’s Bristol North branch, which opened three months ago. We decided to drop by the firm’s latest addition to see how business has taken off since the launch.

The first thing you need to know about Bristol North is that it is the third branch in that city, with the other two known as South and Central respectively. However, these branches are not a house divided, but that the three branches function effectively as one location and with a single manager, but are able to put in to reach wider across the city than would be possible from one location.

In terms of logistics, Bristol South is the regional hub, supplying North and Central as well as various branches across West England and South Wales with stock. Area Manager Mark Donovan notes that the system has been designed so stock is quickly replenished across the business. “Bristol North is supported by the two other locations so they can keep what we can’t keep. We have an hourly van going backwards and forwards to bring stock to and from other sites”.

Inside, the reception looks like a modern car accessory shop, rather than a trade factor’s satellite store with a variety of car care products for retail customers. The sales and front-of-house team appeared polite and busy while they dealt with customer queries both face-to-face and over the phone. “Both the independent motor trade and national accounts business proved very successful within the first six to seven Weeks of opening” explained Simon McMullen, Regional Sales Director, who also joined us on our visit. “We mainly opened this branch for logistical purposes as we found there was a big avenue of customers we could service in the area” he said, adding that the M5 motorway access has helped facilitate this.

DELIVERIES
The store delivers within a 15-mile radius across its network of delivery vans and is looking to add motorcycles to the fleet.

WAREHOUSE LAYOUT
Situated at the Aztec Business Park, the new 9,000sq ft. branch employs 14 staff and includes a mezzanine floor, stocking a range of fast selling lines. Braking and service items are a few of many wares occupying the upstairs space, supplied by reputable brands including Valeo, Bosch and braking brand TRW. The ground floor is home to LuK clutches, Banner Batteries as well as exhaust silencers hanging up neatly in single file.

With bulks of stock being delivered to and from its neighbouring sites, we were keen to find out how the firm keeps track of purchases and customer orders. “We have our in-house system called EDP, a tool for stock management and sales,” McMullen replied. “This allows us to go back to our stock hubs in Birmingham. If you have an item that doesn’t sell in a recognised period of time, EDP recognises it and withdraws the product from the branch in question, bringing it back to the central branch where it is distributed nationally”. Staff working the night shift can expect an overnight delivery from GSF’s Birmingham hub, followed by three more deliveries via its regional distribution centre throughout the day. To take on this task, the team receive enrolment and ongoing training to control stock entering and leaving the premises.

SERVICES AND TRAINING
Similar to the Snap-on tool van concept, McMullen highlights that GSF’s kitted out tool vans have proved a hit in this area where staff will travel to local businesses and demonstrate their latest offerings to garages, while picking up leads for MOT bays, four post lifts and diagnostic equipment. “We treat all our customers as people and not account numbers”, said McMullen. “It is important that we always try to build positive and long-term relationships with them”.

Reflecting on his employees progress so far, McMullen, said. “I’m very proud of the guys and what we have achieved here. We spent countless hours painting, decorating and putting stock away before the launch of this store. It’s been a general team effort and I can’t thank everyone enough”. Both McMullen and Donovan are now aiming to bring Bristol North up to the same success of its brother and sister sites and is considering to acquire a fourth store in the city. The branch will continue rolling out new product lines as it continues to grow within the GSF group. We look forward to catching up with the team and potentially visiting another Bristol store in the near future.

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AUTOSTORES GROUP ACQUIRES BARUM AUTOPARTS

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AUTOSTORES GROUP ACQUIRES BARUM AUTOPARTS


Barum barnstableSouth-West based factor chain Barum Autoparts has been acquired by the Autostores Group. Terms of the deal have not been disclosed.

The six-branch chain was started in Barnstable in 1990 by David Payne and David Knight. A previous nominee for the Factor of the Year CAT Award, the group also includes  Mike Best Auto Components in St. Austell.

Confirming the acquisition, Autostores MD Alastair Whatmore  said: “This will be a positive addition to our own company and we are looking forward to working with the Barum team, customers and suppliers in the future”.

Whatmore also noted that the acquisition would be a ‘welcome addition’ to the Parts Distribution Partnership (PDP) buying group, which he also chairs. The PDP had been seeking new members since the departure of Pat Williams, Partservice and others earlier in the year.

 

 

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ECONOMIES OF SCALE


Neil Pattemore The giant factors are beginning to specialise – are there any business lessons from this?

Neil Pattemore

NEIL PATTEMORE
Business analyst at XEN Consultancy for the aftermarket

You may have noticed in last month’s magazine that there has been a spate of acquisitions in the parts distribution sector recently.

Andrew Page has acquired Solid Auto, whose reputation for sourcing hard to find parts and expertise in Japanese and Korean vehicles is well renowned and provides an obvious expansion to the range and expertise of Andrew Page’s portfolio. Page also added 21 sites from the collapsed Unipart Automotive in July 2014.

Elsewhere, The Parts Alliance has bought SAS Autoparts, who have several branches in the Leeds area as another of the parts groups expands still further.

There are several ‘levels’ in terms of the size and of the international trading profile of the various companies, including the U.S. car parts giant LKQ Corp (owners of ECP) acquiring Italy’s Rhiag Group from private equity firm Apax Partners LLP, through to Equistone Partners Europe SAS (a private investment company) acquiring control of French car parts maker Mecaplast Group, all the way up to the German giant ZF acquiring the international TRW Automotive Holdings Corporation. So why this rash of recent take –overs? What’s the big attraction and what’s in it for the smaller parts distributors?

SCALE
Perhaps the obvious answer is the economies of scale which occur not only for the enlarged organisation being able to benefit from the synergies of reduced internal costs, but also to their suppliers who can benefit from reduced customer numbers whilst maintaining, or even increasing their supply volumes. All this should lead to the enlarged organisation benefiting from increased profits, increased competitiveness or lower prices to their customers.

It can also create brand differentiations, as is the case with the acquisition of Solid Auto. Being able to expand the range of products available, especially when there is a niche or high level of
knowledge and expertise involved, can create added value to the wider product range on offer. This can in turn help protect a product or service from the competition and encourage loyalty.

As companies grow in size, they can become more difficult to challenge as they acquire even greater abilities to fight their competitors on a variety of issues, such as price or choice of products. However, conversely, big is not always best and smaller, more ‘nimble’ businesses can often provide an excellent local service tailored to the needs of their specific customers.

Equally, with the increased buying and distribution volumes, larger organisations can defend their market share more aggressively against not only existing competitors, but also as a barrier to new entrants to the market. This becomes especially important in the international arena where global competitors serving a global market are using acquisition and consolidation to gain a competitive advantage.

As distributors get larger, they can also start to exert increased pressure on suppliers to achieve better control of distribution channels to achieve some form of ‘exclusivity’ of product or ‘preferred supplier’ status – either way gaining an advantage over their competitors.

However, as companies consolidate and get ever larger, there comes a point where the legislator or regulator becomes interested to ensure that a monopoly situation is not created. In the parts
distribution sector, this may be a difficult issue to address, as there are both high-level supplier agreement elements, as well as the highly fragmented local issue of competition at the point of delivery to a workshop.

COMPETITION
This is where the real day-to-day competition exists, as workshops are interested in the key elements of parts distribution – the right part at the right price at the right time. Local distributors certainly understand their local market requirements and can deliver in every sense of the word, but unless they belong to a larger buying group, they may struggle to compete on price. Perhaps this is where the key issue comes to light – not just having the right stock on the shelf, but being able to buy this stock at the right price.

This leads into another developing part of the sector – on-line selling of replacement parts. This appears to be an attractive proposal to some parts suppliers, but has the fundamental risk of alienating their own trade customer base, whilst creating the problem of consumers buying products at lower prices, but still needing a workshop to fit them – creating conflicts of interest and potential liability issues for both the parts supplier and workshop. Not exactly a win- win situation.

That isn’t to say that smaller businesses should not have a consumer-facing an internet presence, but remember that the ‘net these days means far more than just having an erratically updated web page.
Instead, forming an all- encompassing social media outlook is the way to do it – just remember that it takes resource to keep it going.

So at the higher level, it makes sense to look at acquisitions or mergers and the advantages this will bring, but at the level of supporting the local workshop, small may well remain a distinct advantage for some time to come – discuss!

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NEXUS DISCUSSES UK AFTERMARKET


Around 200 aftermarket suppliers met buyersNexusUK at the Nexus Business Forum held in Montreux, Switzerland in February.

The Nexus organisation was founded a couple of years ago by 14 European car part distributors, including the UK’s Parts Alliance. Describing itself as a ‘value focussed alliance of aftermarket leaders’ it has already achieved a total consolidated turnover of €7.25 billion in 2015 and has plans to extend this to €9 billon by the end of the next accounting period.

With sums of money this large floating about, it is perhaps no wonder that suppliers were only to keen to get a plane to the magnificent Montreux Palace hotel to engage in complex ‘speed-dating’-style sessions with the buyers. The event left plenty of time for less pressured networking and discussions as well.

In addition to the business meetings a plenary session was held to discuss the nature of the aftermarket including threats and opportunities that would likely happen over the coming months.

The event was well attended by many well-known aftermarket faces. We spotted Peter Sephton and Stan West of The Parts Alliance and GSF respectively, while on the supply side we met Laurence Bleasdale of TMD Friction, Nigel Cole from Denso and Andreas Habeck from Hella among many others.

We were particularly interested to note that an Iranian company, Alborz Yadak Trading, were among the companies competing for the attention of the buying groups. Iran has had a large manufacturing base for decades, but has been unable to trade with Western companies for years due to sanctions. Now diplomatic relations are open again, it will be interesting to see how products from the country are received into the aftermarket over the coming years.

There was also a panel discussion on the threats and opportunities that the connected car can bring.

Gael Escribe, Chief Exec at Nexus described how the reach of the organisation was to cover parts trading over the whole world. “Our vision is for one aftermarket and for Nexus to be a leader and not just a challenger” he said, reminding the audience that since foundation the organisation had achieved 59 supplier contracts and that places such as China that have traditionally been thought of as simply places where parts are made are now starting to consume components from around the world for their domestic parc.

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