Magazine article Management Today

Feast Famine and Flexibility

Magazine article Management Today

Feast Famine and Flexibility

Article excerpt

Christmas happens every year. And though it is a time of unusual stress for most people, with shopping and who is coming to dinner, we might spare a thought for those for whom the Christmas period means survival itself - commercially, that is - for the rest of the year. They are the purveyors of hampers, chocolate selections, decorations, diaries and toys, who are in a frenzy of activity. If anything goes wrong - if deliveries are not met or the computer system goes down, it can spell disaster for the whole of the year. At the other end of the cycle, meanwhile, for companies in fertilisers, say, or ice-lollies or lawn mowers, this is seriously off-season time. There are few, if any, sales and the key is to keep costs to a minimum and to start preparing for the summer season.

Seasonality brings with it a host of problems far beyond what most ordinary businesses have to cope with. Activities more usually spread over 12 months are concentrated into three or four, compounding the importance of decisions made or problems faced; predictions about market trends may have to be made many months in advance in order to have sufficient stock for the busy period; finances must be arranged to cope with potentially wildly fluctuating capital requirements. Labour and skills, meanwhile, must be organised so as to be available when needed, while minimising their cost during the off-season. In short, it's a giant juggling act. So how do businesses cope?

The first point which emerges is that there are as many solutions as there are seasonal businesses. The manage, ment decisions each makes are as much dependent on the nature of the business and its particular circumstances as on seasonality. How Yorkshire-based Standard Fireworks organises its production, for example, is governed as much by regulations about the handling of explosives as it is by working to the all-important 5th November deadline. Similarly, for Christmas hamper company the Hamper People - nine months of the year it has spare warehouse capacity that ideally would be subcontracted to other businesses. But because of the company's Norfolk village location, there is very little demand for the space and the warehouse remains largely underutilised. Such differences notwithstanding, there are a number of universal problems.

First and foremost, perhaps, do you try to counterbalance seasonality by diversifying into non- or counter-seasonal products or do you simply accept seasonality? Size plays an important role in deciding this issue. If you are Cadbury Schweppes it is easy to have separate management teams running the different sides of the business. But if you are a small or medium-sized seasonal venture, there are the problems of overstretching yourself both financially and in management terms.

Bill Gore, managing director of diary manufacturer Charles Letts - turnover 23 million [pounds] - has clear views on the subject. In his business 75% of deliveries occur in the period July to November. Retail sales are concentrated between November and January and by the end of January any leftover stock is effectively dead. Despite this rigid cycle, Gore is totally opposed to diversification - a strategy that was tried by Letts in the 1970s and '80s with disastrous results. The company moved into contract printing and a number of other quite unrelated activities which have since been disposed of. Now, says Gore, who led a management buy-in of the company in 1993 after acting as company doctor on behalf of Hambros bank: `We have to turn a vice into a virtue. Let's manage every aspect of the seasonality. If you counterbalance you lose sight of what's there, this viper that's the seasonal business.'

Although others are less strident, most agree with the underlying sentiment. As John Higgins, managing director of the Hamper People, illustrates: `It's very high-pressure. You have a finite delivery date. It's not like Littlewoods or Grattan, where you can say "Oh, that item is out of stock, we'll deliver in two weeks". …

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