17 March 2005

The stairlifts manufacturer has increased sales and profits in recent years. Steve Smethurst discovers how procurement has made the difference

You could be forgiven for expecting things to move slowly at Stannah Stairlifts. It seems appropriate somehow that there should be little change - just a gentle progress to greater heights. After all, the company founded by Joseph Stannah in the 1860s is still going strong and, with demographics the way they are, its future looks rosy - or at least blue-rinsed.

However, the famous stairlifts manufacturer got rather stuck a few years ago. Tim Eagles, the company's supply chain director, explains: "Stannah had grown rapidly in the 1990s on the back of a strong pound, growing exports and TV advertising in the UK [not the Thora Hird ads - she promoted Churchill stairlifts]. The main challenge at that time was actually making enough stairlifts to support sales."

Because of this, he says, not enough attention was paid to the fundamentals of cost, quality, delivery and people development. Furthermore, competitors became more aggressive and when exchange rates fell, it effectively created price reductions in its export markets. So, by 1999, profits were low and declining, quality was poor and delivery inconsistent.

It was roughly at this point that Eagles joined Stannah as supply chain manager. An engineering graduate, he had previously worked for Mars, where he had re-engineered a factory in Basingstoke for kanban (a signal to trigger specific quantities of supplies in a just-in-time system). This was what took him into purchasing - a move he hadn't really expected. "I don't think anyone ever leaves school thinking, 'I want to go into purchasing,'" he says. "It's something you fall into."

Eagles, now fully at home in the profession, is responsible for purchasing, planning and distribution, and the company is far stronger than at the turn of the century. Among the changes have been a "back-to-basics" drive in which individual objectives have been linked to those of the business and the key company performance measures have been drummed into everyone by means of team briefings and "management by walking about". Staff have also been trained in problem-solving tools and techniques, while customer feedback (both internal and external) has been used to drive improvements.

"The Stannah turnaround has been driven by blood, sweat and tears rather than a 'eureka' moment," says Eagles. But dig a little and several pivotal moments emerge.

"In terms of innovation, the one thing that we can always point to is webcams," he says. "We've gone through the process of faxban [in which staff use fax machines on the production floor to order fresh supplies under a kanban system] and vendor-managed inventory and now we have four webcams around the premises that look at stock locations. Suppliers can log into a secure website to see how much stock we hold."

Two of the cameras are fixed on specific locations and two others can tilt, pan and zoom - suppliers can direct their gaze through the website.

"It has raised one or two privacy issues on the shop floor," Eagles concedes. "It isn't easy to resolve them, so it's a case of communication and working through it."

But it is a system that works well for Stannah Stairlifts' biggest supplier, a motor-gear box supplier based in Berlin. The webcam has helped to transform operations because the supplier can see how much inventory Stannah holds.

"It is carrying out vendor management for us, delivering via third-party logistics, and I achieve 30 turns of stock [the cycle from stock arriving to being used up] a year with it on one delivery a week, and it's the highest value item. It's fantastic - the only time we have to discuss anything with them is if someone's unplugged the webcam."

Was it easy to sell the merits of webcams to the suppliers? "It's like with any faxban, kanban or vendor-managed system," Eagles says, "they just need to be convinced that it's going to work.

"We're not the biggest player in the world and we can't say to them, this is our system, use it if you want to work with us. We have to tailor our supply systems to the supplier." The supply chain director is adamant that people in his position have to innovate to stay ahead. He argues that times have changed in terms of the purchasing skills set: "With commodity prices increasing, the really good people are going to come to the fore. It's going to be about relationships with the supplier."

Stannah has put a lot of effort into this area. The first step was the introduction of a more collaborative relationship management style - "buyers" became "supplier account managers" and were supported to achieve CIPS membership.

"'Buyer' is such a lousy title," he says. "A lot of the skill set is strategic purchasing and relationship management."

Other innovations were an annual supplier conference to discuss Stannah's performance and introduce future plans; a purchasing brochure to market Stannah and condition current and prospective suppliers; and supplier performance measurement was improved with the introduction of a vendor scorecard.

The scorecard provides a view of delivery, quality, commercial and product-development performance, and even allows the relative performance of single-source suppliers to be compared and publicised.

"Not surprisingly, no supplier wants to be bottom of the league," Eagles says. But "no expense spared" is not an allegation that could be thrown at the supplier conference. "We do them quite cost-effectively. We hire the conference facility of the local agricultural college."

The reasoning for this is clear: "You can't beat up suppliers all year on cost, then go and lavish a fortune on them."

Nor are all of the presentations related strictly to purchasing. The managing and marketing directors both speak to give suppliers a greater understanding of the company's plans for the next year. Eagles adds: "For many of our suppliers we represent a fair proportion of their turnover, so it's important for them."

The collaborative approach extends to involving suppliers in its internal training. It runs a continuous improvement programme with suppliers, where possible, and has begun to involve their representatives in "5Ss" (sorting, storing, shining, standardising and sticking to rules) and mistake-proofing training - half a day each week over six-eight weeks. The training is free.

"To a certain extent," says Eagles, "I've sold all of these things as a leap of faith - we should be doing these things and you can see the benefits in the working relationships we have with our suppliers."

The results speak for themselves. Since 1999, Stannah Stairlift's profitability has trebled, sales volumes have increased by 57 per cent, productivity is up by 40 per cent, defects reduced by more than 85 per cent and more than 99.8 per cent of deliveries have been on time in the past 12 months.

As Eagles says: "Anyone can attempt to achieve cost reductions by playing tough with the supplier, but now it's about relationships and the need to go down the value-engineering route."

COMPANY FACTFILE Going up with Stannah

The Stannah group, which has a turnover of around £120 million and 1,500 employees, is among the market leaders in everything it sells - hydraulic passenger lifts, service lifts (or "dumb waiters"), access platform lifts, goods-only lifts and, of course, stairlifts.

The Stannah Stairlifts division, which is based in Andover, Hampshire, has a turnover of around £60 million and employs 620 people. Andover hosts manufacturing and distribution operations. Another factory is located in Blaydon, Tyne and Wear.

The company produces two types of stairlift - one for straight staircases and one for curved. They are also complex: there are more than 440,000 variants of each product in terms of everything from colour to control systems to type of seatbelt.

Steve Smethurst is a freelance business journalist

SMmar2005