CASE STUDY THE EXPERTS' ADVICE:This week's experts are Garrett Cronin, partner in Advisory Consulting PwC , Elaine Carey, sales and marketing director with 3 and Greg O'Brien, founder, Knights Cleaning Services; area director, Initial Facilities Services Ireland...

IN ADVANCE of investing in new products and markets, Sean needs to re-evaluate the fully loaded profitability of each product, customer and channel. In relation to customers, the assessment should be made by individual customers and customer groups, and should include the expected impact on profitability of recent customer demands for more frequent deliveries.

Loss-making products and customers should be dropped if price increases are not possible to improve profitability. In relation to market channels, Sean needs to reassess his organisational structure and, where appropriate, merge existing operations in the UK and Ireland to achieve synergies.

With different distribution approaches for perishable and non-perishable goods; increased distribution frequencies and mixed profitability by customer routes, Sean needs to evaluate the optimal distribution model for both the UK and Ireland. Without the appropriate software, Sean should engage specialist advisers to assist in re-evaluating route scheduling.

The cost/benefit of combined distribution of perishable and non-perishable products should be modelled. This may require a multi-purpose fleet which, if not available internally, should be outsourced. With outsourced distribution well established in the UK and Ireland, Sean's concern with outsourcing should be focused on negotiating a robust agreement, monitored daily or weekly for performance quality.

His own fleet should be considered as part of any integrated distribution solution, but should be dropped if the return on an outsourced solution is more favourable. The number and location of existing warehouses and/or cross-docking locations should also be evaluated and the use of outsourced warehouse solutions should not be ignored.

As Sean's business has grown through acquisition, it is likely certain customers, products, routes, etc, are unprofitable and in defining the optimum service solution, Sean should not ignore the option of scaling down his business to a more robust core to improve profitability and form the basis for future growth.

In developing new revenue streams, increasing the sale of profitable product ranges to existing customers is recommended. In the current economic climate, a conservative approach should be taken to new customers to evaluate their credit status.

Entering the European gastro pub market should be on a pilot basis, leveraging the flexibility of an outsourced model as much as possible, considering the distribution challenges and fully loaded profitability of the proposed product range.

If Sean plans on expanding his business further, he needs to leverage recent advances in technology.

Other options worth considering include centralised order taking; supplier contract renegotiation; revised sales commission systems; aligning small local customers to appointed regional wholesalers; etc.

THE FIRST thing Sean should do is to join a network of food wholesalers. This will give him access to a wealth of knowledge from business owners facing similar challenges to his own. The support and encouragement provided by these networks will aid Sean in navigating through these choppy economic waters.

During a recession there is huge opportunity for companies focusing on value and service to be successful. Sean should conduct a thorough audit of his costs and in particular look at telecoms costs. There are significant opportunities for companies to save money on their mobile and broadband bills by switching companies particularly a company that needs to travel to the UK and mainland Europe.

Sean should look to source financial advice on how to best manage the change in the euro/sterling exchange rate, so he maximise the benefits of operating in both the UK and Irish markets.

The next step for Sean is to focus on downsizing his own distribution and to outsource as much of it as possible. If he sub-contracts this aspect of his business it will immediately reduce his overheads. Sean can ensure that quality is kept at the highest level by being very selective in his choice of distribution company.

By selecting a company that employs a monitoring tracking service (MTS), he can ensure he implements a system of proactive management on his deliveries. MTS will allow him to get up-to-the minute reports on all deliveries. In addition to this, Sean can implement a strict Service Level Agreement (SLA) based contract, and include performance-related clauses such as a reduced fee for every delivery time that is missed.

The savings and capital gained from making a decision to outsource his distribution can be channelled into the acquisition of new customers and additional lines. Sean should conduct an audit of his current product range to explore any opportunity to introduce higher margin products through new channels, especially any online channels as they are relatively low cost.

He should look at opportunities to expand or to buy another business, particularly in the UK which has already been identified as a growth market for the business. He should also look at making the most of any low-cost ways to promote his business through digital media and social networking.

Sean must remember that there are no fool-proof strategies for growth in a recession. The customer is king and by putting the customer first and lowering his prices where necessary, he will retain not only his base but customer loyalty as well.

THE FUNDAMENTAL question here is whether Sean should outsource the distribution side of his business. While outsourcing has matured rapidly in the last few years, many companies still look upon outsourcing with cost savings in mind. There is also the real possibility that outsourcing can lead to improved service delivery.

Sean should embark on a number of different plans which should include the following.

Identify the current distribution costs, both internal and outsourced.Seek a suitable company to prepare a complete outsourced distribution solution/proposal and costing model. The specialist logistics operations now operating can add value to Sean's products by the way they are distributed. This should reduce costs and improve efficiencies, and meet customers changing buying patterns.

Explore alternative marketing/distribution lines utilising some of the very large distribution companies which could stock some or all of Sean's products.This in turn will indirectly open up new customers or regain old ones lost to this form of purchasing.

Expanding the product offering has always got to be a goal.This should be researched with existing customers and identify where and in what areas of products could be added to the current range. Developing a European ingredients business would be something to hold off for the time being, but perhaps looking to Europe to increase the product offering is something which should be considered.

Identify what level of business is being carried out between Ireland and the UK.What impact has the weakness in sterling against euro had and will continue to have on the business? The answer to this will influence decisions.

This is a sizeable business operation which needs close scrutiny to ensure its continued success. To do this it will need to keep ahead of the game in relation to products, sales techniques, customer service and above all monitoring the continuous pressure on the costing model. Sean has done well but you can't afford to take your eye off the ball, not for a second. Above all, remember the cliche, "turnover is vanity, profit is sanity, and cash is reality".