Cellnet has made sweeping changes to its inventory model, slashing vendors from its partner list and dropping the value of held stock by $7.8 million.
The restructuring was outlined by managing director, Adam Davenport, during the Queensland-based distributor's annual general meeting earlier this month. It also follows the release of its full-year financial results, which showed falling profit margins.
Cellnet had already culled seven manufacturers in the past six months, and was continuing to review its product lines. Davenport would not be drawn on which companies had been dropped, stating only that the choices were across its broad range of telco and IT components and that none had been significant partners.
The cuts were designed to reduce operating costs and drop older stock that was no longer performing well, he said. Overall, the distributor had managed to reduce the volume of stock keeping units by 5000 since July, dropping value by $7.8 million, he said.
"Our problem was that we had too much invested in working capital," Davenport told ARN. "We needed to speed up inventory through our warehouse. So we identified what doesn't work, and have discontinued those for the moment. The aim was to not have too many of the same category."
He did not rule out Cellnet taking on new vendors. The distributor had already been approached by several parties.
"The key part of the review was to identify vendors that are growing, and who we have a strong relationship with," he said. "We want to invest our time and energy into them."
The distributor had been forced to evaluate its operational efficiencies after experiencing falling profit margins. In its most recent annual financial report, Cellnet reported profits had dropped from $9.1 million in the 2003/04 financial year to $6.1 million in the current year to June 30. This was despite revenue increasing from $441 million to $586 million over the same period.
As a result of the stock cuts, Cellnet had closed its secondary warehouses in Pinkenba and Brisbane, Queensland, with its main distribution centre in Eagle Farm, becoming the only Queensland warehouse.
Davenport said the restructure program was expected to continue through to the end of the next financial year.