The UK's biggest IT distributor, Frontline Distribution, let 29 staff go last week, including two directors. Competitors are adamant that this shows the unstoppable rise of Frontline is over but its management insists the company's momentum is unchecked and the job cuts make it more streamlined.
Frontline joint managing directors Allan Mack and Graeme Watt said the company has had record months with many large vendors, and that the changes allow them to manage the company as they see fit.
They have merged divisions, laid off a raft of middle managers and will cut the number of vendor franchises held to 100, just 40 per cent of last year's figure.
Watt said a more focused business model will enable Frontline to improve efficiency and productivity, capitalising on its traditional strength in selling low-margin commodity products in volume. It claims to offer specialist expertise in some areas, including the Apple and Digital markets, although it no longer has a division dedicated to Digital and its failed advanced technical products division proved that Frontline is better suited to mainstream kit. Last week's focus on efficiency and fewer vendors shows Mack and Watt have decided to revert to what Frontline knows best. As one competitor put it: 'They have based their success on piling them high and selling them cheap. All the failed ideas about niche distribution within a broadliner have proved expensive and are gone.' But Frontline will incur a cost by cutting out marginal vendors because those are often the lines that offer higher returns. Wafer-thin margins in commodity products, particularly in printers and PCs, have proved fatal to many smaller dealers and nearly wiped out wholesalers as big as Qudis Bytech, so Frontline must cut its costs to maintain its balances. Twenty-nine fewer staff and 150 fewer vendors will help a slimmer Frontline continue to make a profit.
Although Mack and Watt say the moves will help Frontline continue to lead UK distribution, they have taken a calculated risk that the remaining vendors will endure the loss of some of the Frontline managers they knew well. One vendor said that although the cuts allowed Frontline to shed some of its flab, the company was somewhat heavy-handed in some areas. 'Some of the people that are leaving had personal contact with us and other suppliers. I'm sure they are losing staff with some important skills and knowledge.' Watt defended the decision to jettison staff. He said: 'Our aim is to focus and we need the right resources in the right place. The first thing to sort out is the organisational structure, the next is the people in the organisation.' Becoming a broadline distributor with fewer vendors should address the problems Frontline has had in the past. Suppliers have accused Front-line staff of poor product knowledge, no desire to sell their product over any other manufacturer's and no personal product management. Mack said the slimmer divisions and fewer franchises allow the company to devote more staff to franchise management and improve their product knowledge. But competitors said fewer franchises suggest the mighty Frontline cannot afford to be as broad a broadliner as it once hoped.
As usual, money is the most important consideration. Watt said the vendors Frontline will cut constitute only three per cent of its revenue, but a source said the vendor and staff purge simply highlights an inability to expand. 'To make a pun from it, I'd call it wholesale consolidation. They must be saving hundreds of thousands of pounds by doing this, but by selling only the big suppliers they are constricting the markets they deal in and limiting their growth,' said the source.
Whether the departures show Frontline has stopped growing, or is better prepared to continue its progress, they definitely show the intention of Mack and Watt to introduce their own team and style to Frontline. Company insiders say it is still difficult for them to bury the ghost of their predecessor, Mark Mulford, whose authoritarian management accompanied Frontline's ascent to become the biggest IT wholesaler in the UK, before he moved to Ameriquest. Having changed the Frontline vendors, divisions and the majority of its board in just 12 months, Mack and Watt are looking for replacement staff, including a sales director and a general manager for the networking division, to form the final pieces in their flatter management structure.
Watt said: 'This is not a shot in the dark - we have worked hard to get this right. The type of management model we want is a traditional board, and we believe we are showing strong leadership in distribution. If we were turning in poor results then there would be good grounds to assume that there are problems, but we are not.' Competitors disagree, saying the moves are the first signs that margin pressure has halted Frontline's rise.
If Mack and Watt are making the right moves to ensure Frontline grows profitably, the fact that some staff have been removed is proof that management is not happy with some parts of the business. But even competitors would agree that if it is not making as much money or expanding as fast as it has in recent years, it has a long way to fall. Frontline, even with extra ballast, has risen to the top.
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