Operational Resources Ltd
Biography > Other Organisations
Operational Resources Ltd 2003-2006
As the Hills Group of companies grew the amount of materials we were purchasing also increased, but we were gaining little strategic advantage due to the increase in purchasing power.
One of the areas where I knew that wholesalers were making large margins was in fixings and accessories. So we approached several companies to see if we could improve our buying prices.
One of the companies we approached had a rep, who we will call Paul Redmond. He came to me and said that we should hire him to set up a company which could then buy the fixings and supply them to the main company. So, in 2003 we agreed to set up the company called Operational Resources (Op Res) and Paul Redmond would head it up. We looked around for some premises and found a couple of industrial units for sale in Vigo Place in Aldridge.
It all started with high hopes and the shelves were stocked with the items that we were using on a day to day basis across the UK. We told our people that they should now buy the goods they wanted from Op Res.
The problem was that they had no incentive to buy from Op Res. The other suppliers were supplying on a more regular basis and were more local. Paul Redmond tried to find products that they would take but no matter what we did we struggled to get any sales. Clearly Paul couldn’t sell to other electrical contractors and so the company was in a hard place.
The route to profitability was hard. The business was seen by everyone as a separate business from the main contracting company. It was nothing to do with them.
The main board agreed to use Op Res to train semi skilled operatives to carry out first fix on sites and hence save money. The training went well and we turned out operatives who would work at lower cost than the other people. The contracting company management treated them appallingly and they left. So we threw money down the drain.
Another function was to prefabricate items off site for on site assembly but that required the contracting company engineers to look ahead and again they didn’t want to do this.
We did manage to get one engineer to place a substantial prefabrication order and that made a lot of money all round. But even this could not persuade others of the wisdom of the cause.
One key feature of a wholesaling business is the stock take , when you go around and count the value of the stock held. The value is then a key component in the profitability or loss of the business. The management worked hard to massage these figures, for instance including a fork lift truck in the stock. However even this was not sufficient to get us any where near profitability.
Since Op Res was a group company the usual cash flow checks weren’t carried out and Paul figured that he could raise invoices that would improve his profitability. The engineer would then not pass the invoice for payment and we had an internal cash flow problem to boot.
I knew a director who had once worked for the UK’s largest electrical wholesaler and I asked him to become a non executive director to help with the company. This did not seem to improve the situation.
I can’t remember the exact incident that lead me to conclude that Paul had to leave. However on the day that I chose the non exec and I invited Paul in to the office and we told him the bad news.
Paul refused point blank to leave and went back to his desk and carried on working. Eventually after a lot of tense discussion he agreed that he would leave that night, which he did.
After Paul left we appointed his deputy, who we shall call Mike, to carry on the business. Despite Mike’s best efforts we just couldn’t get the business anywhere near profitable. We eventually concluded that we had to close which we did in an orderly manner.
Our turnover had hovered around the £1m mark with a 20% margin. Unfortunately the overheads ate all of this up and more. When we shut up shop we had lost about a quarter of a million, which was offset somewhat by the £100k profit we made on selling the properties in Vigo place