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Harmonizing operations in many locations

the story of

Euran Rakennustarvike Hardware Store

By Marikka Heikkilä

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Euran rakennustarvike is a family-owned hardware retail company owned by the Helin family. In 1993, the family purchased the hardware store at a time when it was on the brink of bankruptcy. Located in the small city of Eura, Finland, its target customers are local contractors, decorators, DIYers, farmers, and homeowners. The company stocks and sells building materials, timber, decorating goods, painting supplies, tools, gardening products and much more.

Leentje 171After running the shop for 15 years, the Helin family expanded their business by acquiring two other hardware retail stores located in neighboring cities. Each store has its own managing director who is responsible for running the shop, managing the store’s inventory, and carrying-out deliveries to customers as needed. Three years after expanding their business, the company was confronted with economic difficulties, primarily due to low sales volumes and the overall economic recession taking place in Finland.

The owners asked for help from Jorma Sieviläinen, a Commercial Advisor and a Ph.D. Student from the Turku School of Economics. Accepting the task, Sieviläinen began investigating how the profitability of the company could be improved. His discussions with the store managers revealed that the key processes of sales varied from store to store and each had their own product and supplier databases.

There was clearly a need to integrate the IT-systems and to harmonize the customer data, product pricing and assortment strategies. These tasks took several months to complete.

Further financial analysis showed three other company weaknesses: customer discount levels compared to competitors were high; product purchase prices did not necessarily affect the sales prices; and staff costs were high, especially during the inactive season (October – March). These issues were tackled by introducing new customer discounts politics, product pricing methods, and negotiating with the staff to move their holidays to the inactive season thereby increasing the amount of holiday they take.

Another important change that took place was the innovation of their management model. Before the family delegated the operations to each stores’ directing managers. This caused disintegration in the company and was overall a weak management model. The company changed this by employing an approach more suitable for a retail chain. In doing this, CEO Tapani Helin (pictured above) took direct responsibility of the business and cooperation between stores. The key performance indicators were reported on a monthly basis and discussed between the CEO and the store managers, which led to increased business knowledge and more fact-based decision-making. After the above changes, in 2014 the yearly turnover remained at the same level, but the company was showing profit again.

In summary, this is the story of a company that sought outside help and carefully analyzed its operations. Relying on that analysis, they discovered a need to harmonize its operations and processes, increase coordination and knowledge exchange between stores, and adopt key performance indicators to aid in decision-making. These changes turned the profit-plummeting fragmented store-based Business Model into a profitable Business Model for a chain of stores.

As a result Tapani Helin is taking the next step in business model innovation by attempting to cut the number of suppliers. Currently the company has 336 suppliers, mainly offering similar products. By concentrating on the number of suppliers, he is looking for a better negotiation position, increased savings, and more efficient supplier chain management.

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ENVISION project is boosting European competitiveness and job creation

In the current tough economic environment, business model innovation can be the key to becoming or staying competitive. To boost European competitiveness and job creation, the ENVISION, Empowering SME business model Innovation, project will activate small and medium enterprises (SMEs) across Europe to re-think and transform their business models with the help of an easy-to-use, open-access, self-service web platform. The project gathers nine partners and their wide networks across Europe to build the tools, study the impact of such tools and activate the SMEs for using the tools. The project is funded under the Horizon 2020 funding frame.

Why SMEs are vital for Europe?

Europe has more than 20 million SMEs representing over 99% of all European businesses. Moreover, 85% of net new jobs created in the EU between 2002 and 2010 were in fact created by SMEs. As such, SMEs clearly represent the backbone of the European economy driving economic growth and employment. “All small businesses should now really think what they could do in order to grow their business and hire new people. ENVISION is an excellent effort to bring in the necessary tools for this business makeover”, says the ENVISION project coordinator, Professor Harry Bouwman from the Delft University of Technology.

A committed team with a vision

One of the project’s concrete objectives is to increase awareness of business model innovation and reach out to at least 15% of European SMEs (that is a whopping 3 million SMEs) while ensuring that the most prominent companies for new job creation are involved. The ambitious goal of the ENVISION project is pursued by a consortium of nine partners from seven countries. In addition, there are over 20 SME stakeholder networks participating across Europe. “There is a lot of talk about business model innovation in small businesses. Our aim is to find out how significant the impact is for the European economy. One of the most important aims of the project is that we’ll build and make easy-to-use tools available for small companies looking for improving their business”, continues Professor Bouwman.

First release of the ENVISION platform in late 2015

The kick-off meeting of the ENVISION project took place from 18th to 20th February 2015 in Delft, The Netherlands. It was agreed in the kick-off meeting that the first version of the ENVISION platform will be made available at the end of 2015. However, as we have already started working on it, new content will be appearing at the project’s website and updates will be frequently posted on our Facebook and Twitter profiles over the next months.

Stay tuned, as we’d love to have you on-board in this exciting journey!

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