There’s a short case study that we use on the supply chain strategy module, based upon a piece that appeared in Logistics Manager back in December 2007. You can read it on their website…
The article describes MFI’s selection of a 750,000 sq ft warehouse at Thorne, near Doncaster. The classic ‘centre of gravity’ location for a warehouse (ie the Midlands) was considered, and evaluated with the assistance of LCP consulting, but ultimately Thorne was selected, with the intention of making use of the Humber ports.
That’s not a bad idea – although hardly revolutionary. Immingham is a fine, deep sea port, and already the largest in the UK by tonnage (mostly oil and coal). To land goods there and then move them to Thorne would probably be a lot easier than coming ashore at Dover, and having to navigate the road network of the crowded southeast. Even if Immingham poses problems for some reason, Felixtowe (Britain’s largest container port) remains an option.
So: Thorne, near Doncaster isn’t a bad choice… but there’s something you probably won’t pick up on a first read-through of the MFI article – especially if you’re studying the original print version, where it’s buried in a sidebar that provides a biography of the interviewee, Chris Pavlosky; chief operating officer of MFI:
“Chris Pavlosky was born and brought up in the village of Thorne in South Yorkshire and worked at Markham Main Colliery after leaving school…”
It appears, then, that Thorne doesn’t just offer a point on the map that happens to fit a set of financial and logistic criteria: it’s also a homecoming for the chief operating officer. Did Pavlosky make a decision with his heart, rather than his head, perhaps, or does local knowledge confer an advantage? We’ll never know, because the new MFI warehouse never got a chance to shine. What few people knew in December 2007 was that the ‘Credit Crunch’ was already underway, and what we in the West describe as the “Global Financial Crisis” (my Malaysian students remind me that their economy continued to grow strongly) was just around the corner. 2008 was a time when people in Britain saw their investments decline in value, they feared for their jobs, and they struggled to get mortgages… so they tended not to move house, and not to spend money on their homes. They weren’t in the market for fitted kitchens and bedroom furniture, in other words.
You could just put this down to bad luck, therefore… but that’s not quite right. The MFI brand had been with us for a long time – since 1964 – but its pedigree was also a part of the problem: virtually every household had already bought some MFI furniture, some of it proving not to be as durable as might have been hoped. Jokes about poor quality were commonplace. For example, a partnership with supermarket chain Asda in 1985 prompted this one…
“Have you heard that Asda and MFI are forming a partnership?”
“Yeah; I bought a chicken this morning, and its leg fell off!”
During my studies, I worked for a different furniture manufacturer as a machine tool programmer, and my boss always maintained that MFI meant “made for idiots.” Now, I don’t know: this dismissal of the company as offering products of poor quality might have become inaccurate by 2007; the article claims that MFI were sourcing components of higher quality… but I can’t help feeling that perhaps the damage was already done. Few, in the 21st century, would have proudly boasted that their kitchen was created by MFI.
Swedish retailer IKEA had operated in the UK since 1987, and was steadily making inroads into the market. That’s not to say that everything they sold was marvellous, but there was a bit less chipboard and a bit more hardwood. Customers who had previously been disappointed with an MFI purchase were prepared to give the newcomers a chance. The Swedish shops were exotic, and quirky. IKEA products had silly names; and they sold hotdogs by the exit. (We can talk about IKEA’s part in the horsemeat scandal of 2013 in a future article, if anybody’s interested…)
To be honest, there are jokes about IKEA as well (of which this is my favourite) but IKEA humour is generally centred upon the difficulty of assembly, rather than the quality of the product itself.
I can’t help wondering if what MFI really needed to do was rebrand. They’d had a golden opportunity to do so when in October 2006 the parent company had sold off the loss-making MFI retail business, and changed its own name to Galiform plc. If the MFI retail brand had been done away with at the same time, perhaps the new product ranges described in the Logistics Manager article might have been more readily considered by the public.
Instead of building quality into the product in the eyes of the customer, they focused on “building quality into the supply chain”, as the article says. They committed an astonishing amount of money to leasing, fitting out and stocking a large warehouse. They pursued a technical solution to address the problem of incomplete deliveries; nothing revolutionary, but it was necessary. They reduced the number of SKUs as well. Fair enough… but it’s nothing that the customer cares about. The customer assumes that when their order is processed, they can expect on-time in full delivery. Previously, a full delivery might have been a minor miracle, but simply doing what you promised to do doesn’t delight the customer: it merely satisfies.
Were they solving the wrong problem, perhaps? The article leaves me with the feeling that Chris Pavlosky and his interviewer, Mallory Davis, enthuse about the supply network without really considering the risk that the company is exposed to. Am I the only person who read this and thought the supply network was constructed the way you might build a model railway: with flourishes and interesting features, rather than to serve the more conventional function of getting things from A to B at the lowest cost? Where is the strategic alignment? Are we once again thinking with our hearts, rather than our heads, perhaps?
In a sense, we’ll never know: along came the Credit Crunch and MFI was wiped out. They closed just one year later, on December 19th 2008. Students on our supply chain programme have suggested there are some significant non-sequiturs within the text of the Logistics Manager article, though. Do you see clues that there was trouble ahead?