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Background
SCA Hygiene Products is a global company, head quartered
in Sweden, involved in the development, manufacture
and marketing of hygiene products. The customer base
of SCA Hygiene include large international retailers
as well as institutions, industries, hotels, restaurants
and catering operations.
The site of SCA's UK HQ in Dunstable covered 100,00sqft
and included production and office facilities. All
production facilities were eventually sold and a 5-year
sale and lease back on the offices was agreed. This
left a further distribution depot in Dunstable that
was rapidly approaching a lease end, with the landlord
pushing for a long lease term.
The Group were therefore faced with a critical business
issue - what should they do about distribution in
the UK? If a new lease was negotiated and then had
to be broken, should the distribution strategy change,
the termination costs would have been extensive.
Time was running out and a decision had to be made
soon. Enable
were asked to assess the options ahead of the termination
date and to formulate a strategy for the most appropriate
approach which would meet the needs of the business.
What we did
We provided a cost benefit analysis of the various
options and worked with the business team to ensure
complete integration of the distribution facility
with SCA's business objectives in the UK.
We understood that should market conditions change
and SCA need to relocate the distribution centre,
the costs involved could prove very high, as SCA were
on the verge of being obligated to a fixed contract
with limited flexibility. We identified that outsourcing
the distribution operation would create efficiency
advantages whilst also providing maximum business
flexibility. However, this would take time to organise
and time was limited.
We opened negotiations with the landlord immediately
to extend the time available to SCA whilst also providing
the landlord sufficient time to re-let the space.
Result
The result was the surrender of a potentially expensive
lease obligation, which would have proved a drain
on SCA's (UK) profit and limited the overall business
flexibility. The cost savings associated with our
analysis and final negotiation with the landlord amounted
to £250,000. SCA now have a flexible distribution
centre, which may easily be re-aligned to any changes
in the ongoing business plan |
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