Laurence Olins, chairman of Poupart Ltd, a leading international supplier of fruit and vegetables to supermarkets and the non-retail sector, tells Will Stirling why the right ERP system has been critical to its fast moving, low margin business model where information control is everything.
Sales growth at a consistent 15% year-on-year, with 19% growth to date in 2010. Annual turnover up from £30m to £260m in 22 years. A network of long standing international supplier relationships in a growth market fuelled by healthier diets and consumer habits that seem recession-resilient. And with no expensive assets or debts to service, Poupart, the international volume fruit and vegetable supplier, is experiencing deserved success.
But the business has vulnerabilities. Poupart’s model is the quintessential middle man, says chairman Laurence Olins. “We make no bones about this, we are not growers or retailers,” he says. “We represent and buy from UK and overseas growers and exporters and we supply the UK marketplace with high volume, fresh produce, supplying to all eight major supermarket chains.” It’s whole product class – fruit, vegetables and salad – is perishable. With berries, for example, the shelf life is just three to four days, and stone fruit is similar.
Timing and information visibility is everything.
The company has five UK businesses, supplying soft fruit (berries), stone fruit, citrus fruit, apples and pears, and an import business that handles everything including vegetable and salads from around the world, plus a business in Holland serving European supermarkets. Global fresh fruit distribution is a very fast moving, high turnover, low margin business. “Because of these characteristics we must have control,” says Olins. “It has all the ingredients for success or failure – if you get it wrong, you get it very wrong. Our gross margins run at around seven per cent, that’s small. We can easily lose margin through poor stock control. We have to know what we’ve got, where we’ve got it, and we have to meet big orders on a daily basis.” Despite the risks of this delicate balancing act, Poupart, now part of the Argent Group Europe, is a market leader. In 1987, when the Olins family – Laurence, his two brothers and cousin – bought a share of the business in a management buy-in from the owners, food group Hillsdown Holdings, the business structure was back-to-front for a progressive fruit trader looking to the future. Then, only 10% of the business – worth £3m – supplied supermarkets, the main business was based in various wholesale markets, when supermarkets probably accounted for 50%-60% of UK retail.
Today supermarkets represent over 85% of the UK retail fruit market. By the end of December 2009, turnover had risen to £260m. Under the Olins’ stewardship, Poupart’s supermarket business grew from £3m to £228m. The balance, over £32m, is directed at the wholesale and non-retail businesses, where Poupart is not an active player; whereas it used to own premises and pack houses, it now purely supplies to this sector.
The secret of such stellar growth, and of the company restructuring to better represent the composition of the UK fruit and veg retail market, is partly down to good management and the reliable supply of a very sustainable, perennially popular product. “There are no seasons now, we don’t want seasons,” says Olins. “People are eating more fruit, they’re more aware of the health benefits, of antioxidants etc. People are currently eating more at home than in restaurants now, which feeds retail. A lot of the products we’re in, like berries, are seeing growth rates of 40%, even 50%.” But Poupart’s transformation and the greater visibility of its operations that oiled the wheels of growth, is in large part thanks to the company’s IT system.
Peach of an IT solution
By the late 1990s, the management realised its legacy business software was not being developed in real-time with the business, and it would need a more sophisticated solution. “We’re not just traders in produce, but in crucial information,” says Olins. “We are right in the middle, so our growers give us information – what they have exported and supplied on to us on a daily basis – and we have to supply information to our customers about what we’ve delivered. The more this is done electronically the better, on this growth path.
We knew that without robust systems we would employ too many people and never get the growth or financial return that we anticipated.” The company looked at software providers SAP and Oracle but decided they were too large for its needs. After a thorough research exercise involving the IT manager and exterior consultants, it finally landed on Navision, a Microsoft-based system supplied and implemented by Microsoft Gold partner Tectura in 2004. “We had it tailored, with Tectura’s excellent support, to meet our needs.
The platform has been continuously developed and upgraded since the installation six years ago,” Olins says. Microsoft changed the name to Dynamics Nav in 2006.
Poupart committed to a big investment, over £1m on the system and associated hardware. There were two key points to this expenditure: top level commitment and universal staff approval. “It was a high-level decision led by the Board and our IT manager at the time. At all times the directors were 100% behind the project, which is one reason why it succeeded.” Staff appreciation was a key factor in the decision. “A recent survey showed that high in the top 10 things that upset people about their employer was the IT system – you must get it right.
Every one of our recent recruits has been impressed with the system. Clearly it is a key factor now in keeping happy staff.”
Olins says staff levels have not increased as fast as they would have without the new system. Having a Microsoft platform has reduced training time. Robert Hamilton, Poupart’s infrastructure manager, says: “The standard Microsoft interface means that no extensive user training is required. And a Microsoft ERP system has other benefits. Dynamics Nav runs on MS SQL 2008 database which has allowed for an increased level of integration and real-time reporting via Microsoft products.” “The introduction of Web Services into Dynamics Nav 2009 has allowed Poupart to increase and simplify integration,” says Hamilton. “Applications and web pages are now easier to program and allow the use of the Dynamics Nav logic, meaning that no complicated error checking routines are required.
The technical set-up has also been simplified as the application/web page communicates directly with Dynamics Nav eliminating the need for any additional software or services.” Growers can enter their data directly on the system, and there is no duplication. “We can pick up their export details, their consignments, their dispatch notes – everything is done in a paperless way. They have full access to this,” adds Olins. This visibility is crucial. “Absolutely crucially, our margins have increased, so our profits have increased, because the system has given us control and information without which we would not be able to forecast demand and supply changes – so crucial for on-time delivery of perishable goods.” All orders are handled on an electronic data interchange. Because of the robustness of the IT system, the company has no need of a third party to manage this.
Control is the single biggest advantage, says Olins. “The system has given us much better business control and development, and this supplydemand information can be manipulated very easily to suit our needs.” It has improved reporting in both directions, to customers and growers. The system is being continuously upgraded with the backing of Microsoft, and Poupart is included in the Microsoft TAP programme, “so we can influence the future development of the software,” he adds.
Poupart’s ERP journey has helped to grow its nocompromise supermarket business by a factor of 76, while it became a trailblazer for this IT solution in its industry. “We identified Navision, were the first in the industry to use it, which has now been adopted by many others in fresh produce. It’s probably the mostly widely software system in the sector.” For buying, collecting and delivering several hundred thousand tonnes of fresh produce from all over the world to UK markets, within multiple sell-by dates, it is clear that a transparent, collaborative and regularly upgraded modern ERP system is vital.