Bibby Distribution's 18-month transformation strategy is finally coming to fruition, as the MT Top 100 operator turned a profit for the first time in two years. A complete review of the operation, from warehouse to board structure, has taken place, with the company aiming to go "back to basics".
This has seen the disposal of non-logistics divisions from the Bibby Supply Chain portfolio - training arm Systems Training in 2015, and agency business Direct Workforce at the end of 2016.
"From a cash point of view and an operational point of view it was a nice idea to have a complementary portfolio of businesses, but in practice, it didn't really work because to run a recruitment business is a completely different beast to running a transport and logistics business," explains Bibby Distribution chief finance officer Richard Morson. "So what we've really focused on in the past 18 months is going back to basics; doing what we do and doing it really well."
The refined Bibby Supply Chain Services group now consists of UK transport and warehousing operation Bibby Distribution; freight forwarder Bibby International Logistics; and pallet pooling and packaging business PLS.
Bibby Distribution has its own board team that have worked together a number of years, headed up by CFO Morson, MD Duncan Eyre and commercial director Nigel Tullett.
"It's a senior team that gets on with each other really well, with no airs and graces," says Morson. "It's the same people sat round the table that have been leading the turnaround over the past 18 months."
Tullett agrees: "We're very much aligned in our decision making and the direction of travel the business is going."
Profit improvement
Towards the end of 2015, Bibby Distribution launched its profit improvement plan, which focused on four key areas: organisational 'rightsizing'; procurement; commercial review; and transport optimisation.
Rightsizing, in a nutshell, was ensuring Bibby's fixed cost base was able to keep pace with fluctuations in revenue - one of the key factors that led to the company's poor performance in 2015.
"If you look back at the business in 2015, the challenge was we'd lost quite a large chunk of our revenue from both a reduction in customer volumes and non renewal of some customers," says Morson (below).
He adds that the non-renewing customers were mainly attributed to acquisitions made in 2011/12 that all came up for renewal during the 2015 period.
"We were too slow in 2015 to react to the decline in revenue with our cost base. We didn't flex our cost base and reduce our fixed overheads quickly enough to compensate, which is one of the main factors why 2015 was a pretty horrendous year," says Morson. "The improvement plan has been about reducing the fixed cost base of the business and making it more variable to revenue, so we don't get these huge peaks and troughs in performance.
"We're working in a low margin industry, and it only takes a slight change in your top line, if you've not got your overheads under control, to turn you from a profit to a loss."
The first stage involved some "tough decisions" over reducing headcount in back office functions, as well as a full review of the company’s depot network.
Location, location, location
Bibby has been assessing each of its sites to see if they are cost viable and strategically located near key road links. Some of the smaller, legacy sites have been closed and the business moved to new, modern facilities to accommodate growth plans and make them more cost-effective for Bibby and its customers alike.
"As far as tough decisions go, we assessed every site and we deemed some as not cost viable," says Tullett, who has been leading the project. "Now we're moving to more strategically located, modern, larger properties - with lower cost per slot for our customers."
For example, Bibby's Yeadon, north Leeds site was located in an old aircraft factory from World War II, and while it had been used by the company for many years, was not close to the motorway network and did not offer enough storage capacity.
The decision was made to relocate the site, and Bibby opened its flagship 280,000ft2 G-Park facility at Wakefield on the M62, with all the customers and majority of staff moving across to the new hub.
Bibby also closed another smaller site in 2015 and relocated it to its Fusion warehouse at Bury in 2015, as well as opening a Max Park 2 facility in Corby last year, located next to Max Park 1 to provide a 425,000ft2 combined capacity.
Reduced cost
The property strategy has already started to pay off for Bibby, with the company able to offer a reduced cost per pallet for customers at these sites, which has given it an edge when pitching for new business.
"This has really helped our contract wins. If you look at some of the wins at the beginning of 2017, such as Tangerine, which has gone straight into G-Park - a fantastic story for us. Not only have we won the warehousing, but also the transport that goes with that," says Morson. "Sorting out the fundamental cost base of the business not only made us more sustainable, but made us much more competitive when we are selling."
Part and parcel of the network shake-up has been the ability to bring all sites together under one transport management system. The company's 90 depots have now been brought together under one management system, whereas prior to this, with a number of acquisitions having taken place in 2011/12, multiple systems were used at local level. They have slowly been brought together so that, by the end of 2016, they were all visible on a central platform, with a dedicated team created at G-Park to optimise transport capacity and fill empty legs with new third-party customers.
“This means we can see what every one of our depots is doing and where they are routing transport,” says Morson. “We looked at all the individual legs and are now filling spare capacity.”
Bibby said it has also seen a 3% boost to projected turnover in Q1 this year thanks to this activity.
“Which is great for us, because the trucks and drivers are already paid for, apart from the incremental mileage, so we can offer very competitive rates,” says Morson.
Telematics
A single telematics system, Microlise, has also been rolled out across the firm's 2,300 trucks and trailers, which the company sees as a key tool for improving driver safety and efficiency.
"Drivers now know what 'good' looks like and exactly what the situation is for their assessment," says Tullett. "We see it as real key driver in terms of improving health and safety."
Driver training has also been a successful investment for Bibby, as in tandem with the advanced telematics data on their driving performance, the company has also doubled the team of driver trainers it employs.
Information about drivers' performance now goes straight to driver trainers, who can organise individual or depot-wide training as appropriate. Driver league tables have also provided friendly competition among drivers in depots, who all want to be in the top league, while the company is also bringing back its Driver of the Year competition this year.
Buying power
The company has also carried out a full review of its buying strategy to ensure it harnesses bulk buying power for the entire operation rather than at a depot level, which was previously the case.
"It's all about being wiser on how we spend our money. We've looked at our main areas of spend and been out to tender on these, “says Tullett.
Bibby has also been examining its payment and collection terms with suppliers for more efficient cash flow purposes, as well as looking at the contracts on its trucks and trailers to provide additional flexibility.
Then, of course, there is the profitably of its contracts with customers.
As part of its commercial review, key contracts were examined to ensure rate increases were secured if needed, or business exited if in a loss-making position.
“There are customers we've had to strategically say ‘we need a tough conversation with you’, as this relationship isn't particularly working,” says Morson “Which is why you can see some of the turnover has dipped down. You have to make some tough decisions.”
Tullett agrees: “It's about the quality of earnings now, which are much better than 18 months ago. Some of them were legacy and not challenged; they had provided a service but no one had really got down to the nuts and bolts of it.”
Looking ahead
Bibby Distribution’s focus in the next few years is to build on its core capabilities, rather than try to diversify into multiple areas.
The company expects 2017’s full year outlook to realise the impact of the past 18 month’s work, as well as see an upturn in revenue from continuing to leverage the spare capacity in its network now identified.
Tullett says: “It's being wise about what we do and not just going helter-skelter after high turnover no matter what cost. It’s being strategic about how we grow the turnover in a sensible and profitable way, which gives longevity for Bibby, but also longevity with our customers.”
Morson reiterates the focus on going back to basics: “It's using tech, focused investment in people, quality management information, sensible contracts and tough decisions on the cost base.”
Safety and efficiency focus
The results of the driver leagure tables have already helped contribute towards Bibby Distribution's Road to Zero Strategy - aiming for a zero-harm, zero-waste, and zero-emission business. Improvements were last year seen across all of Bibby's safety functions, leading to a 39% reaction in Riddor incidents, while both fuel usage and associated emissions have also benefited.
"Fuel efficiency is my favourite graph in terms of the last three years of performance," says Morson. "Because the line just goes up and up each year. This approach of joining up good systems and investing in driver trainers - makes you think - why have we not been doing this all the way along?"
Tullett agrees: "It was one of our best decisions, not just in terms of business performance, but also in terms of driver engagement and the culture of improved health and safety."
Driver recruitment, however, is still a challenge for Bibby as it is for the whole industry, with the company still exploring the impact of the apprenticeship levy and how it can maximise its benefit from that.
Driver retention
It therefore places great emphasis on retaining drivers and keeping them happy.
"One of the hardest challenges in our organisation is communicating with the drivers and the warehouse staff. It's not like a big office where you can just send an email. These guys are working through the night and on the roads," says Morson.
To combat this, the company has invested in a new communications app to enable drivers to receive latest news on their smartphones.
Bibby also makes sure to engage with them directly and listen to their feedback about the operation.
"Drivers are your front line communication with your customers on most days," says Morson. "We've done a lot of work this year and last on driver engagement, listening to our drivers and warehouse colleagues, as they know ways to improve the business. It's about getting information flowing back up. "
Bibby still relies on agency labour for peak periods, however, so in 2015 it embarked on an agency procurement process to streamline the amount of agencies it uses. This means it can be sure that drivers coming through these selected agencies will be fully trained for Bibby's requirements.
