Ingram Micro Australia has been forced to retrench two of its senior management team and is looking to cut 5 per cent of all staff. The changes are part of an "organisational restructure" forced on the distributor by a price war, which managing director Steve Rust described as the "fiercest" he has ever seen.
An executive reshuffle has seen the distributor retrench its director of product management (systems division), Roger Bushell, and its national marketing communication manager, Tanya Koens. Meanwhile, Rust is this week overseeing a further review, which he says will eventually result in a total of "about 5 per cent" of the distributor's 240 staff being made redundant.
"The changes are not performance-related," Rust said. "We have been looking at the cost structure and organisational efficiency of the business over time and this latest review comes as the result of market conditions, which are the fiercest I have ever seen."
Rust said that while his revenues are "up by 27 per cent on last year", they are "lower than they need to be" to sustain the current cost structure of the business. As a result, changes were needed and one of the ways to achieve that was to combine Ingram's product marketing and marketing communications teams.
"In a diminished margin climate such as we are experiencing at the moment, cost of operation becomes a strategic advantage in this industry," Rust said. "At the moment the market is totally price driven which, drives all margin out of the business. We monitor prices daily and need to meet the market to stay in the game.
"Some product portfolios are currently being sold at cost. It is not a sustainable picture but it is a reality at the moment. Our policy has always been to match the market on price so we need to take this action [retrenchments] to be fiscally responsible."
Rust said it could be a case of "who has the deepest pockets" when it comes to survival in the current environment and he is confident Ingram Micro can withstand the storm.
"Different organisations have different abilities to cope with the type of market conditions we are seeing at the moment," according to Rust. "Fixed costs are no problem for Ingram Micro. The next biggest cost is people."
Rust said the infrastructure changes would be completed this week and would not affect customer-facing sections of the company. Instead, it will mainly be around creating cost savings by re-engineering back-end systems and processes. Cuts will be affected "right across the board" in terms of the company's different divisions, he said.
Rust named HP printers and imaging products as well as some parts of the components business as being the prime culprits in the no-margin price war.
"I am not sure why the price cutting has become so fierce all of a sudden," Rust said. "Vendors don't encourage it and it is not in their interests. This is a distribution phenomenon and it is affecting all businesses.
"In the context of what has happened at other distributors over the last 18 months, this is a relatively small restructure so it is by no means the end of Ingram Micro."