OPI-Dick Gochnauer Interview - Ussco.com

More documents

Recommendations

Info

the big interview you want a different brand, you buy your own. So that kind of thinking towards office products will keep the lid on until staff numbers grow. But I’m hopeful that as times get better and companies are more confident, they’ll take a broader view and a more realistic view of their office supply purchases, and recognise that actually this is an area where we can add value. OPI: Do you feel the economy has bottomed out? DG: We’re not anticipating it turning the industry around, so we’ve got to take control of our own destiny and do what we need to do to make things happen. And if things do work out as a lot of people are forecasting and predicting, then that’s great. I hope it does, obviously. “The best endorsement is manufacturers sourcing in China and putting their brand there. You wouldn’t do that if you didn’t have confidence in the quality” OPI: You don’t feel bullish? DG: I do, but over the long term - it’s just a question of when. The concern that we have is that although things are starting to bounce back, companies have learned how to operate more efficiently with fewer people, and they’ve also been forced to outsource more things from overseas particularly. OPI: Your share price is looking good. What would you attribute that to? DG: Part of it is an expectation that the economy is going to improve and that we will benefit from that. Wall Street knows how high a fixed cost wholesalers face, and so it’s witnessed the impact of lower sales in 2002 on profitability and the expectation is that as sales start turning around, earnings will follow suit. We’ve been doing a lot of talking about how we improve efficiencies and how we drive waste out for the whole supply chain and Wall Street has seen some good signs coming out of some of the other public companies in our industry. OPI: You seem to be holistic in your approach to business. How do you stand on issues like CSR? DG: All companies must be good community citizens. We’ve an obligation beyond just making a profit for our shareholders, or providing employment for our associates. It’s not just right from a moral point of view, but also from a company view. Staff want to know their company cares, and there are lots of ways to show that. Research shows companies with a very strong value system outperform those without it. And, clearly, companies who have drifted off purely in the pursuit of greed, have got into big trouble, reinforcing the position that it’s dangerous territory. OPI: Is that something McDonald’s embodied? DG: McDonald’s did, very strongly. They run Ronald McDonald houses and they are really quite phenomenal. I’d hold them up as an outstanding example of understanding the importance of being more than just a company that makes a profit. OPI: Have you got links with China? DG: We have an office there and links with sources there. These days Asia Pacific is increasingly the manufacturing location of choice for office products, for the obvious reasons. We’re struggling with how to deliver consumers greater value, and obviously keeping the quality up and lowering the cost. Second is that we’re importing more. I can’t imagine why we wouldn’t continue to have an office there. OPI: Is the quality of goods out of China up to scratch? DG: As long as the manufacturers have clear quality specs and that process is managed right, there is good quality product. The best endorsement is manufacturers sourcing there and putting their brand there - you wouldn’t do that if you didn’t have confidence in the quality. OPI: You talked of trust (see OPI November 2003, ‘food for thought’, page 68) as a culture within the business. How do you manage the inevitable conflicts between dealers, resellers and manufacturers? DG: You’ve got to keep the end goal in mind, which is how to best serve our customers. The independent dealers have the wholesaler relationship, the relationship with a provider of systems - IT, back office systems - and they may or may not have a relationship with a buying group and most do. A dealer said to me: “I depend on these three groups, and what scares me is that they don’t work well together, and view each other to some extent as competition. And yet I need to depend on all three of them and collaborate with them, and integrate what they do into my business.” Office Products International • December 2003
the big interview He’s absolutely right of course. We’ve got to focus on how to service dealers and make them successful so that the end user sees that there is a seamless integration of all these groups behind the scenes so the customer has a very pleasant and a low cost experience. OPI: In other words classic compromise and negotiation - give a little, take a little. DG: Yes, and focusing on if your customer is healthy and successful - contribute to that and you’ll be healthy. OPI: Last year, I attended the OPMA meeting where Jim Fahey (SVP merchandising) and John Kreidel spoke from is.group and there was some friendly banter in terms of their relationships with the dealers. How are your relations with the dealer groups? DG: Well, they’re not where they should be and we’re trying to reach out and say “let’s see if we can’t put the past behind us”. And so I would say we’re at the very start of trying to build trust with dealer groups, and it doesn’t happen without a lot of effort - it’s going to take a lot of willingness on both sides. I really don’t know the history of how we got to this point and I actually don’t spend a whole lot of time trying to figure it out. I’d rather spend time focusing on where we could help each other. “We’re at the very start of trying to build trust with dealer groups, and it doesn’t happen without a lot of effort - it’s going to take a lot of will on both sides” OPI: You said quite recently, since Daisytek went, that a lot of the business you picked up is low margin computer consumables. Why exactly is it low margin? DG: Partly because there are fewer manufacturers to choose from and it’s treated more like a commodity product. And it’s sold less on service and more on price differentiation. It’s just a very competitive side of the business. It’s not too dissimilar from paper products. OPI: Can it be changed or is it a fundamental mind shift? DG: I don’t know. I think it could if the manufacturers worked to support a change. Such low margins on some of these products are actually not healthy for the manufacturers either, because they’ve got a salesforce out there selling their products and the more they sell, the more trouble they are in financially. OPI: You also said product mix is a challenging issue. Why is that? DG: When the economy is tight, people cut discretionary spends. Instead of buying the more expensive pen or pencil we’ll buy a cheaper pencil. And so the industry shifts to lower margin products and away from some of the higher margin more discretionary items. Our industry lives on selling a mix and you have to have the right mix. The challenge is that the higher margin products and the discretionary products haven’t been purchased as they have in the past. The second trend is that computer products are driving a higher percentage of sales, and I don’t see that trend changing. You’ve got those two trends. So obviously a healthier economy in tandem with the hope that offices begin to purchase more discretionary items again will benefit everyone in our industry. OPI: When it comes to cost-cutting, how do you do it? DG: I purposefully labelled ours a war on waste, because the first thing people think is, “OK, we’re going to cut people”. In reality, our industry has a great deal of waste. That would probably be one of the deltas between this industry and food. It has been much more cost conscious for a much longer period of time, and so a lot of the waste has already been removed. For example, we put over $20 million a year of product on distress trailers. That doesn’t include the cost of shipping, picking the order, wrapping it, shipping it to a dealer, shipping it to the customer, the paperwork of getting it back from the customer and back to us. We lose a lot of money on that. OPI: What scope is there for you or SP Richards to expand the international network? DG: Well, United is in both Mexico and Canada. For us, it’s via the Azerty businesses. But in Canada for example, we are now offering office supplies as well as the computer product lines that Azerty has. So North America makes some sense. We haven’t been able to determine the value we could create by going to Europe or Asia. OPI: Would you pick up Daisytek’s Australia baton? DG: We’re not sure. Logistics and marketing skill sets are unique to some extent by market. You have to learn those. If we don’t think we can come with any unique business proposition or anything that we could do that will benefit the industry, then it doesn’t make sense for us to go. OPI: Dick, on that note, thank you. Your time has been much appreciated. Office Products International • December 2003 Reprinted with kind permission from OPI
Page 1 and 2: the big interview Dick Gochnauer by
Page 3: the big interview that is our expec

OPI-Dick Gochnauer Interview - Ussco.com

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?