INTERVIEW: Hexstone on increased capacity, brand power, lead times & supporting trade counters

We grill Hexstone CEO Ian Doherty, the head of the UK and Ireland’s largest fastener wholesaler, on a wide ranging list of subjects including lead times, supporting trade counters and brand power to Brexit, reliability, people power and his ambitions for the business…

How’s business for Hexstone in 2018 so far?
We’ve had a very good start to the year. Like everyone else in the industry there were weeks which were less successful because of the weather. But overall we are in growth and are having a very positive start to the year.

2017 was a good growth year too. It was a transition year for Hexstone with the changes in senior staff (see below) and like everyone in the industry we are seeing the pressures on price from the Far East, but we believe we are seeing real share growth in the market, which is continuing into this year.

We’ve heard a lot about extended lead times from the Far East at the moment…
I think we’re seeing capacity constraint in the Far East. The environmental pressures put on factories by new regulations, particularly on things like plating and finishing, have closed many smaller factories, which has reduced capacity and we’re seeing lead times go up.

I’ve seen a lot of evidence of quite heavy investment in China on environmental improvements in factories and that feeds through in terms of price pressure. We’ve seen 60 day lead times become 90, 90 days have become 120, and I don’t think we’ve necessarily seen the impact of that in the UK market yet, so I wouldn’t be surprised if later in the year we saw some tightness in availability here. We have good levels of stock, so we’ll be less affected than those with less stock, but it’s an industry-wide phenomenon affecting Europe as well as the UK. Some categories we are ordering now for January.

That will be a challenge for everyone…
It will be. But possibly factories in the Far East will see that demand has increased and may invest to increase capacity which will improve availability, which is the kind of natural progression you’d expect to see.

When you go and see the reality of the pollution, it is unsurprising that they had to react. Factories are openly talking about how much money they’ve invested in water treatment plants and air extraction systems. That’s likely to impact on price so I don’t see those pressures going away any time soon.

Speaking of stock, you’ve had a significant investment with new modules in the Hexstone warehouse this year. Can you tell us about those?
The new modules have a number of benefits. It’s a much more efficient use of space – we took out racking that held about 500 product lines and with the modules we put in 6,500 product lines into the same space. It facilitates range extension without us having to build new buildings.

Secondly, it’s a much more efficient picking system. We can pick faster, which improves our reliability in meeting our customers’ wishes. Customers order up to 5.30pm for next day delivery, which leaves us a narrow window to finish picking, and having something like a modular system where we get a much higher picking rate improves our reliability, enabling us to serve our customers better.

You’ve invested in people too, including new Sales Executives…
We are stepping up investment in the team on the ground and have three new Sales Executives so far – we are looking for more.

It’s a reversal of a trend over recent years. Of course digital is important, but we must be out there connecting with customers face-to-face. They support customers that have a retail presence, be it a trade counter of full blown retail, and we’re expanding our range to support those trade counter operations.

We need people on the ground to make connections with people. People are happy to place orders over the phone, but they value that interaction. I am a great believer in actually going and seeing what’s happening, if you don’t then you might miss things and I don’t want us to miss anything.

Is the Irish market a focus for Hexstone?
We have a team dedicated to providing service and support to our Irish customers. While the Irish market clearly has different characteristics to the UK, we had looked at the UK and Ireland as integrated distribution and service, rather than an export market. There’s lots of cross border trade, and historically Irish standards have been closely aligned with those in the UK.

Brexit has clearly challenged that, particularly with the uncertainty around the border, but we are working hard to ensure we’ll continue to be in a position to serve those customers.

Because of the EU, we didn’t really view our European business as ‘fully blown export’. We’re not sure to what extent our European business will have to look like full blown exports after Brexit, but we are doing a number of things internally to enable us to continue to service our European customers, even if things don’t go quite as smoothly as we all hope. We’re primarily a UK and Ireland-focused business, so our European business only makes up a small proportion, but that does mean it is an opportunity!

That piece of water separating us from Europe has always been an expensive piece of water. You have to consider, are we able to get it to a customer cheaper in Germany than a local distributor could? The answer is probably not. That is where it comes back to the importance of brands and  providing a level of added value that makes it possible.

You have a number of product launches this year, including Blind Bolt Fixings, Channel Bracketry and Duck Foot. What was the thinking in taking those brands on?
Our overall strategic thinking is to remain the number one wholesaler in the UK and Ireland. Early in my career I heard a quote that has stayed with me: “businesses do one of two things, they grow or they decline – they never stand still.” We are in this business for the long term and I believe this business has to grow. We’re not publicly listed so we don’t feel that pressure to grow turnover for the sake of it, but I do believe the business has to grow.

So part of that is taking on new ranges. Things like Blind Bolt fixings, Duck Foot, Channel Bracketry – these are the type of items our customers had been buying somewhere else, and now we can give them a better service as a one-stop-shop. We can provide a master distributor service to
brands which may not have the scale to service the market as we can.

We also believe in our own brands and continue to invest in them –UNIFIX is probably the best example of that. We will continue to expand the ranges. We are primarily a fastener and fixing wholesaler, but that’s not to say we won’t wholesale complementary products. We don’t see ourselves becoming a PPE distributor, for instance. Will we hold some PPE? Yes, if it helps our customers, but are we going to be their primary PPE wholesaler? I really doubt it. That’s not where we are at. Our driver is fastener and fixings.

While markets consolidate, a new startup seems to move in, so there is a huge range of opportunity for the independent. I don’t think independents will ever go away. It’s the role of the wholesalers to help the distributor in the marketplace.

How do you feel your customers, like the merchants, are doing at the moment?
Generally things are pretty robust for merchants. We aren’t seeing massive market growth but all the indications seem to say that the market is in reasonably good health. We are not very exposed to the DIY retailers and I think some of them are having a harder time. But in terms of the genuine merchants in building and engineering, they all seem to be in pretty robust health.

Good to hear in view of the uncertainties with Brexit…
I suspect that for many of our customers they are quite UK and Ireland-focused. We’re not involved in a pan-European supply chain like say Mini or Airbus, where I imagine they have got real challenges. We tend to deal with local customers so we haven’t seen quite the same level of disruption at this point.

There is uncertainty, and we’ve had to invest time and money working on Brexit, so there is definitely an effect, but there are lots of other things affecting the market too, like government policy on diesel cars. In spite of all that, the market is performing robustly. Hopefully after the uncertainty goes away we will see an even better performance.

Going back to brands, you are looking to take more on?
Yes. I come from a brand background in fast moving consumer goods and Hexstone has invested heavily in brands. If you look at our
JCP brand in terms of fixings, then we have Thunderbolt and Vortex and now the work we are doing with UNIFIX – there is value in brands, and in the reliability that they offer to the customer and the consumer in knowing what they are getting, rather than just a brown box full of bolts.

There are undoubtedly more manufacturers or brands out there which have a product which we would look at. We have declined some where they aren’t the right fit, or the commercials don’t work, but we’re open for business!

UNIFIX has clearly been a key focus for Hexstone over recent months. How do you rate its progress so far?
We are very pleased with it and it fits into the evolution of the marketplace. Customers’ needs have changed as more have improved and opened up their trade counters to become more of a retail environment.

Having the right product offering with the right format and merchandising has been our aim with UNIFIX. It’s a well-recognised and established brand and we want to help customers sell more, to make it easier for them to price and manage it. And to make it easy for the person buying the product to find what they want.

I think it looks great! The team has done a brilliant job in designing the packaging. It’s a comprehensive range that enables a distributor to go to the market in a way that’s top class.

As a business, where do you want Hexstone to be in three years’ time?
Bigger and better! I want us to continue to be the number one wholesaler in the UK and Ireland and to be recognised in the market as the go-to people for service, for product knowledge and for range. We aim to be boringly reliable!

As a wholesaler, from a service point of view, I want us to be the product experts and I want us to be an innovator in the market place, whether in terms of product or doing business. It is about service and knowledge.

We’ll continue to invest. We upgraded our ISO 9001: 2015 this year and while we’ve largely talked about the Owlett-Jaton side of the business, STF has continued to increase its stainless steel ranges. Both that and our Icon Fasteners high end fastener business have grown extremely quickly. We will continue to build those ranges going forward.

We are only as successful as our customers are. That’s inevitable as a wholesaler. We have to provide the right support to all of our customers. That enables us to grow. I am determined we are growing.

Any final thoughts?
On a general note, I’ll bang the drum for BIAFD. I think trade associations are extremely important, particularly in an industry like ours with standards. Through BIAFD we have good representation and I think it’s been very successful recently. I think the more support the trade associations
have, the more chance we have of doing the right thing for the industry and creating an environment where we can all prosper.

www.hexstone.co.uk

PERSONNEL

CEO Ian Doherty takes us through the recent senior personnel changes at Hexstone: “Largely the changes have been driven by retirement. Obviously Keith Harrison retired at the end of 2016 after 40-plus years and I came along as Chief Executive. I don’t claim to be a fastener and fixing expert, but I’ve spent an awful lot of time running supply chain businesses. I’m a quick study and one thing this business has in spades is product knowledge and expertise.

Nick Horton joined as Purchasing Director following the retirement of John Barker – another long serving staff member. Nick started his career here so he has come back home, bringing tremendous experience in purchasing, fasteners and fixings.

“We also have Dave Cunnah as Operations Director, who became permanent in 2017. He has huge experience, having worked at companies like Anixter, and has done a great job in moving the warehouse forward. The place has transformed in the last 18 months and we have a very motivated and efficient warehouse operation now. 

“Steve Davis retired as Finance Director and was replaced by Mark Evans, he brings a wider range of experience, including in distribution.

“So there has been quite a lot of  change in the senior team. I like to think the new team has gelled, we have a clear direction and drive to continue to be the number one wholesaler in UK and Ireland of fasteners and fixings, and we are trying to drive that forward in terms of scale, service and reputation.”

This article first appeared in the June edition of Torque Magazine.

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