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Punctuality guaranteed

Digger Blogger | 19:48, Tue May 07 2013

Hewden is offering money back for late deliveries. Chief executive Kevin Parkes tells us all about it.

Back in the 1980s Hewden Stuart was the daddy in the plant hire game, culminating in a knighthood for co-founder Matthew Goodwin – plant hire’s first, and so far only, knight. Growth continued under Sandy Findlay in the 1990s. Things started to change however, after Finning, the Canadian company with the UK Caterpillar dealership, decided to diversify from distribution into rental. Finning paid £322m cash for Hewden Stuart in 2001, seeing the hire company as a conduit for putting more Cat machines into the UK market place. Many of the old guard who had helped to build up Hewden moved on, or were moved on, and the inventory began to change too.

Nine years later, after more tinkering than Claudio Ranieri ever did at Chelsea, and worn down by losses, Finning decided to get out. It sold Hewden to venture capitalists Sun European Partners for £110m, booking a £70m loss on the deal. Sir Matthew Goodwin died last year, in October, aged 83. In his retirement, he had observed from a distance Hewden’s decline and had been angry (so it has been written) about what he saw as its mismanagement in later years.

He is likely to have had strong views, too, on the relocation of its head office from Scotland to Manchester. When Finning took over in 2001, Hewden Stuart had more than 4,000 staff across 370 locations. It had annual revenues of £135m and was making pre-tax profits in the region of £15m to £20m.

By 2010, Hewden (as it now was) had 1,300 employees across 63 locations. Turnover was around £120m and it had lost £40m in the previous two years. The reduction in size was a combination of the ferocity of the recession and the disposal of significant elements of the business by Finning.

The tower crane and construction hoist operations were sold to PC Harrington in 2002 and 2008 respectively; and the tool hire business was sold to Speedy in 2007 for £115m.

Efficiency improvements may have also contributed to the headcount reduction, since a new enterprise resource planning (ERP) system was implemented in 2005 at a cost of £14m.

Three years after Finning’s exit, with little or no improvement in market conditions, Hewden today has 1,050 employees and 35 operational depots.

The man at the helm is Kevin Parkes, who had already been with Finning 12 years when he was put into Hewden as operations manager in 2008. He was given the top job at Hewden a year later and is now CEO and chairman.

Like a state in permanent revolution, moves to transform the business continue. Parkes has introduced a new ERP system – Microsoft Dynamics AX – at a cost of £4.5m.  He says it has made the business “more transparent” and will save £2m a year.

Hewden is now structured around three regions rather than along product lines, but the five core product areas remain:

• general plant (excavators, dumpers, telehandlers etc)

• powered access

• mobile cranes

• site accommodation

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generators.

There is also an industrial business unit. Under Finning ownership, 30% of the fleet (by value) was Caterpillar. Since then, the inventory has been rationalised, down from 35,000 items to 25,000. More than this, there was a lot of “inappropriate” kit, Parkes says. “We used to have 24 different-sized excavators between 1.5-tonnes and 20 tonnes. Now there are six,” he says.

Product purchasing was distribution-led under Finning, he now admits. “We bought 150 skid steers one day because Cat started making them,” he says.

He says that hire companies have traditionally competed for who can have the fattest catalogue or the most depots. Parkes wants to approach things a little more rationally, and his new ERP system helps that.

Hewden now has what it calls its “core fleet” of the most common  required sizes of excavators, telehandlers, dumpers  rollers, scissor lifts and boom lifts – 30 different machines in total.

Utilisation of these core machines ranges from 64% for eight-tonne excavators to 75% for 20-tonners, with telehandlers and dumpers around to 70% mark. Smaller excavators and seasonal hires drag the overall rate down, however, to below 60% for the plant division as a whole.

Over the past 18 months more than 100,000 transactions have been analysed and Parkes is now in a position to offer customers the promise of next-day delivery on any of these 30 machines, absolutely on time.

Any orders from the Core Fleet placed before 12pm are guaranteed to be delivered the following morning, anywhere in the UK. Orders placed between 12pm and 5pm will be delivered before 5pm the next day. If Hewden fails to deliver within the guaranteed times, customers will automatically receive £100 credit.

 “We’ve been doing next day delivery for a long time. The difference now is that it’s guaranteed,” Parkes says. “This is a cast iron, no quibble guarantee, even if we’re five minutes late. We have invested heavily in these 30 product lines to ensure there are over 5,000 items covered by our core fleet guarantee throughout the UK.”

Perhaps surprisingly, Hewden never kept a count of how often it let customers down in the past, so had no idea how much this guarantee might cost it.

February was the first month of operations with the guarantee; there were 1,900 transactions that month, of which 15 were delivered late – a 0.7% failure rate and £1500 to pay out. Of these 15 failures, four were down to lack of machine availability; 11 were attributed to logistical difficulties, such as bad traffic or lorries not starting.

After three years at the table, Sun Capital Partners will no doubt be eyeing its exit options. These are likely to include a management buyout, a trade sale to a competitor or a sale to a new entrant, perhaps from overseas. No move is likely to be made until the numbers improve. Parkes says that no strategy has been defined yet. He is still positioning the business in preparation for market recovery, he says. Until then, Parkes’ best chance for improving the business lies in gaining market share from competitors and the core fleet guarantee is central to his strategy of having equipment available and on time.

“We are not saying we are going to be perfect but we are going to get better, measure it, and front up when we let the customer down,” Parkes says. And that is not a bad place to start.

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