Pain-in-the-assLESS or “Three in a boat: men, poverty and dogs”*
«I have known a Russian learn Chinese within six months. English! they learn it while you are talking to them. The children play at chess and study the violin for their own amusement.
The world will be glad of Russia when she has put her house in order»
Jerome K. Jerome
The soviet film «Three Men in a Boat» perfectly captures the spirit of Jerome’s novel, although there’s a little that’s been left from the original masterpiece. The road sets a special mood and genre of ironic travel writing is very close to my working mood. The irony is the best way to survive the road adventures both for a traveling person and for the host country. There’s no such thing as perfect road, car, gas station, caf? in this world. Instead there are cozy and clean, minimalistic and heaped up, making part of a chain or solitary places. You want to go at one gas station, the other one you want to pass.
“When we got to Datchet we took out the hamper, the two bags, and the rugs and coats, and such like things, and started off to look for diggings. We passed a very pretty little hotel, with clematis and creeper over the porch; but there was no honeysuckle about it, and, for some reason or other, I had got my mind fixed on honeysuckle, and I said: “Oh, don’t let’s go in there! Let’s go on a bit further, and see if there isn’t one with honeysuckle over it”.
History repeats itself several times, and the characters of Jerome were nearly left on the street without an overnight stay. Do you think that drivers choose gas station somehow differently? I can talk about the «rational» choice of the people for hours.
Contemporaries did not accept Jerome’s prose as the «real literature», and yet hundred years later readers are still smiling over the adventures of his characters: they have the charm of spontaneity. It would seem that the Russian people should feel closer to «Journey from St. Petersburg to Moscow.» By the way, I can describe the exact location, range and volume of fuel sales, call the management and staff by their names, remember caf?’s menu in almost all of gas stations located alongside the road which once was traveled by Mr. Radishchev. What Thames and adventure of the George, Jim and Harris trio mean to me? But it seems that the irony is closer to my heart and soul than social satire. I smile once again, re-reading the description of the process of packing the road basket, comparing it to the formation of commodity matrix of a store in gas station and «heroes» of economic reports are no longer extras in a sad play staged day after day, not understanding the overall meaning or their own role.
A business cannot be treated with a stubborn seriousness. It is now I am a Vice President of one of the largest Russian energy companies, running nearly two thousand gas stations in several countries, and it all got started with a very small chain, bought from one oligarch 20 years ago. It was modest not so much because of its size as it was for «the quality of the gas station».
«The world will be glad of Russia when she has put her house in order». I do not know whether to laugh or to be proud of this phrase, which Jerome said after visiting Russia. I have traveled extensively in Europe and the Americas, it is possible to compare the details infinitely, what’s better and where. Russia can put her house in order, but only in some parts of it. It may be looking that you have in your hands all the beautiful original elements to put together a fantastic pattern and get the whole picture, for example, the chain of premium gas stations, but one wrong movement and all of it crumbles to dust. To put in order all the complex is an impossible dream.
Imagine a crowd of recruits in plain clothes and a formation of soldiers. So, the chain of gas stations is different from a random «set» of gas stations on the road by the very fact that each station is a «soldier».
And they usually judge the entire network by one station, regardless of where it is — in Moscow or Irkutsk. Premium chain of gas stations in this respect is not a new recruit, but the guardsmen, the beauty and the pride of any self-respecting oil company.
The chain with which we started at first was terrible. In several sales divisions out of a hundred stations you could hardly find 5 or 6 which were built on the base of some project, all the rest were at sixes and sevens.
The core business process — the sale of fuel – got properly managed and was put back on track fairly quickly, but when the turn came to caf?s and shops at gas stations – that’s where the real pain in the ass started.
Visiting gas stations anywhere abroad I always paid attention to the fact that the main difference between them and what we had in Russia could be expressed in two words — «brighter and cleaner». Over time has come the understanding of the need for product’s range uniformity and its layout. On the first day of taking office, I demanded one single thing to be done – so the gas stations didn’t have on their shelves goods that no self-respecting buyer would buy under any circumstances — in other words, any sort of junk.
I had a big meeting and called for uniformity of product range, pricing, logic placement of goods in the sales area – all of that should be agreed with me. Who would argue with the fact that at the gas station there has to be not just coffee, but great coffee? Who does not want the goods on the shelves to correspond to the European concept of quality? Who would oppose that during joint visits to the stations with the leaders of the highest rank you can give away any of the goods which the guest noticed, and not be ashamed of such a proposal? Everybody agreed … and that’s all! One season followed another, but on the shelves of my gas stations there was no change for the better …
I demanded simple things, but all I got in return was lies of my subordinates and lies of partner companies’ management, as well as lies from my own marketing department and even electronic accounting systems. If I could form the stuff of my subordinates according to my ideas, the surrounding of suppliers was much more difficult to influence. All these countless «logistics», «distributors», «providers» were someone’s prot?g?, each of them was hiding someone’s selfish interest or even “tribal” resource …
From the very first day of my inauguration lines of people were walking to my office who wanted to attach their products or services, and six months later I was able to accurately determine right on the spot which was the proposal this or that particular visitor had and how the next item is bound to «make me happy». After one such meeting I was literally struck by a wave of hostility to such «walkers», resulting in my decision to end such meetings with any of the suppliers.
From the very old times of Soviet-era there are still a category of people who believe that all business issues can be resolved in “face-to-face” mode with senior management. The most important thing to do is to get an appointment with a DMP — decision-making person. I hate this abbreviation as well as all its derivatives.
One such character sought a personal meeting, trying to find ways through my surroundings.
Perseverance of any person should be rewarded, so I received him and regretted it as soon as i saw him. He came to the talks in a sable fur coat and walked into the room without hanging it. Overweight middle-aged man in a full-height luxurious furs introduced himself as a «chief of car accessories in Russia». What kind of business can be talked with a visitor who comes to you in the armor of the medieval knight or in a costume of Louis XIV court aristocracy?
I knew I was playing the hard-ball, but I took the calculator and estimated the economic value of its supplies in the structure of 20 billion non-fuel supplies of our chain’s businesses. I got it at the level of less than one percent. The person’s face went from red to purple. At this point I finished our acquaintance, I hope, forever.
At times it seemed to me that even if you replace everybody with the robots the lies will continue, only now it’s going to be done by artificial intelligence. For the first time in my life I was faced with a situation where my manager’s will and my administrative resource were not enough to ensure that the situation would move from the dead point. But here the law of paired cases worked and I had yet another such meeting.
This visitor had a very common last name so the receptionist wasn’t paying much attention and confused him with another person, including him in the schedule of my meetings.
Externally, the visitor did not stand out, but immediately after the greetings he got to the point: «I have come to offer you a tool that will solve your problems in the management of non-fuel business”.
This one, of course, was different from the guy in sables, but how on Earth he dares to talk about «my problems» ?! I spoke with hin using winning scripts of the annual reports. The visitor listened and smiled, keeping a straight face. I felt that he understood my true relation to what I say, but what can he know about my true feelings about the whole non-fuel business?
«You could not answer me anything else, but I know that you cannot be satisfied with the state in which are the shops and caf?s at your gas stations», he said.
Then the visitor continued his story speaking that the error in our industry is that high-level managers without exception are attempting to restore order and the development of related businesses looking for a partner that can become a single integrated supplier. This kind of supplier is only possible in theory. With such an extensive geographical presence and relatively small orders from each station, no company will be able to complete the task in any other way besides including the costs of ensuring the uninterrupted chain of goods’ freight service in the price of the delivered goods.
The cost of the federal logistics companies will be significantly higher than that of its local competitors, therefore, the price of goods supplied to the gas station will be higher. Under the competitive tendering procedures, which are accepted in your chain, each assortment solution, putting each item in the array of supplies, would have to be taken on non-competitive basis, i.e. by top-manager’s personal decision. The feed of complaints at your address about inflated prices from suppliers will not only hinder its work but will turn it practically impossible! If a single supplier will try to win every tender by the lowest price, it’ll end up being ruined.
There’s only one way out — to solve the problem of supplying stations you do not need a single supplier and a single tool to manage all suppliers without exception. You need a company that processes the non-fuel business network. Just as in its own time the payment systems have streamlined interbank and customer payments processes. The processing company must regulate the activities of suppliers by automating the flow of orders from suppliers and gas stations to control the execution of these orders, which is automatic, too. Everything else will “tune up” itself.
I listened to him with interest and at the same time I was sad because I knew that no investment committee can justify the budget for the implementation of such an idea. So I asked: «How do you intend to implement it? Do you realize the scale of the required reforms?».
The visitor replied instantly: «Your chain has about two thousand stations, of which a little less than a thousand have stores — a large amount of work, but feasible». The preparation part was really good but I still was ready to politely refuse because of the lack of funding for the foreseeable future. «How much do you want for these services?» — That was a rhetorical question, which had to be followed by a refusal.
But I got a completely unexpected answer: «I’ll do it for free».
The debut of this game of chess was served beautifully, my visitor was playing clean. He said that he had his own business in order to be able to implement such projects.
— If we do not talk about funding, then what do you need to start implementing the project into practice?
— In today’s world the most important resource is the information exchange. The retailer which has no stocks or warehouses – Alibaba, hotelier without a single square meter of real estate – Airbnb, taxi company which does not have a single car — Uber. In order to run the project it is necessary that the processing company receives the data on the balance of goods in each of the gas station. Reports should be formed on a daily basis. In addition, the cash balances in the table must specify which company is a supplier of a product.
— You want the chain to give the information about their purchase prices for each product to a third party? Our security department will block the initiative, 100%.
— Procurement prices are an open secret. Any head of the gas station will provide information about it for a small fee. You do not practice back payments of suppliers, in contrast to the hypermarket chains, so the prices indicated in the shipping documents correspond to the real price of suppliers entering the network. For system’s work it is important that the report had the amount of ordered goods and actually received goods.
— I’m sold. The last question, why did you come to me exactly?
— The passenger can get into the boat, but only when it’s at the pier. If he tries to get aboard moment sooner or later, he’ll end up in the water. Your chain is growing faster than the rest, it is time to get on board. In addition, you, in contrast to the other major players in the fuel retail, have technical conditions for the implementation of such a project.
How can you deny a person after such words? I called the head of the federal accompanying business together with his deputy and ordered to cooperate fully with everything that our new partner insists on doing. Our next meeting was scheduled a month later.
During this month I had to listen many times that non-fuel processing businesses is a utopian idea, which cannot be implemented. Exactly 30 days after my visitor-partner sat again in my office, surrounded by my managers who were visibly nervous. We got a short meeting.
— You need to define intervals of filling the stations with each of the goods sold, he said.
— It is almost impossible, and there is no one to do it … — protested one of the managers.
In order not to multiply angry disputes, I’ll quote one of the stories by Victor Koneckyi. «Grisha, nicknamed “Iceberg”, disappeared from the fleet as a result of a single radio message from his own wife: «While in London buy me a bra, ask the size your radio operator, kisses, your Mumu». The wives of the crew meet, make friends and even have the same sizes sometimes. It’s not a sin to ask your radio operator about the size of the your wife’s bra, but you must be ready to answer for knowing it or lack of such knowledge. It’s absurd to discuss the level retail at this level in the XXI century!
— How do you intend to manage retail not knowing how much product needs to be at the station? How to make orders? What does «there’s no one to do it» mean?! We have in each regional office tens or even hundreds of employees, what they are doing? Make everything as requested by our partner, that’s an order!
The next meeting took place two months later. On the table a report laid, perhaps, the most valuable of those with which I had to become familiar during the past few years. The situation with the non-fuel business was growing just like in the famous joke: «As soon as we have reached the bottom, we heard someone knocking from below it». Firstly, it turned out that much of the data from the accounting systems is flawed and requires urgent measures for its actualization. Secondly, it became clear why there is no change of assortment on the shelves. Federal offices found the suppliers of quality goods that were worthy to be on our stations. However, buyers in the region en masse ordered products from «their» local suppliers in amounts far exceeding the real demand for these products. Stations got the “local” goods more than they needed with no demand from clients.
Field managers were chronically «forgetting» to determine the location of the goods from the federal range on the shelves. As a result, their arrival at the station was limited to the first delivery, goods were sent to the utility rooms, where it was gathering dust without any further movement. If the gas station was threatened with the check by the federal center, station’s bosses chaotically placed the right products in the sales area. After the departure of the inspectors all the products would return to the pantry. These products were listed in the accounting system, but due to the fact that they weren’t exposed on the shelves, they were not sold. The reports of the local managers said that the movement of goods is absent because no one buys it.
In addition, local firms, having lost competitive selection to their federal competitors, continued to supply products already deleted from a range of supply, while their products often enter in the books through the bar codes of products from federal assortment matrix.
Federal suppliers were helpless facing local lobby, as they did not have the means to collect orders. Local sellers fulfilled orders of gas stations to 110-150%, and federal ones to 30-40% of the actual demand.
Double reading the damning conclusions of this report, for a moment I felt helpless before the «invincible» agenda… But only for a moment.
— What would you do in my place? — I said to my partner.
— I would have transferred the most sold products in the category of products sold under private label brands and obliged suppliers to sell it at uniform prices approved by the federal office.
— Who will cope with such a huge task? Managers argue that it is necessary to arrange the release of nearly 400 items of goods to our shops and caf?s …
— The company processing non-fuel businesses of your chain already has sufficient information to control an array of goods under your own private label and delivering other goods at the gas station. Entrust it with the implementation of this project.
— Well, I will follow your advice.
There was a series of crushing meetings which could be compared to an earthquake. Tsunami-long waves ran along the wide open spaces of Russia. The result was the empowerment the processing company with special powers that allowed it to carry out tender procedures for the implementation of the greater goal — the full transfer of best-selling product ranges in our shops and caf?s under our own private label.
Over the next three months I received tons of memos from the regions. Processing company and its leadership have been complained about almost without exception by suppliers of non-fuel goods and therefore I could tell that the real work was out there, somewhere «under the carpet». I only could remain patient and see what the results will be after appearing on the surface.
It was the fifth month since we started to implement the project for processing non-fuel businesses of our chain of gas stations. My partner called me and said he wanted to show me something interesting.
Talented people always show up on time. I planned a long overseas trip, which began with the exhibition IPLS in Germany, then Belgium, England and America. I offered to meet immediately, to see if he would be ready. My counterpart was as methodical as Phileas Fogg in «Around the World in 80 Days». British calmness and sophisticated mathematical mind of Jules Verne’s hero attracted me as a child even more than all the captains put together. A couple of hours after the call there was a sort of plate with a map of the country, thickly dotted with flags in the corporate colors of our company.
— What do you want to show me?
— It’s an atlas of your chain of gas stations. You can choose any station and take it for a virtual tour. The program has preinstalled planogram — the form and content of each shelf in the station, whether it’s a caf? or a shop. The actual filling of the shelves is formed from the reports. When you visit any gas station, you can compare the state of the shelf «as is» with the planogram in real time. Atlas is a visualization tool of salesrooms at all of your gas stations.
In addition, the system recorded the entire history of the supply of goods. If during the check head of the gas station will say that a federal vendor did not bring any particular goods and the gas station was forced to fill the space on the shelf with item from a local supplier, you can go to the registry of automatically generated recommendations for orders. I give 10 out of 10, that the system offered this product to be delivered, but the head of the gas station gave preference to his «own» supplier on his own initiative.
«And under his own responsibility», — i added in my thoughts.
Planogram – a merchandising tool seen by everyone as a pointless and expensive toy, had come back to life. A few years ago, we began to introduce this kind of visualization. In each sales division had been created the departments whose employees had to design shelf space. And only then it became clear who and what really forms the layout of the goods on the shelves.
Now, every time I visit a station I check its appearance through the «Atlas». If I don’t like the content of the shelf then I open a planogram that was approved for this gas station. In just a few clicks everything becomes clear. It happens that the local managers approve a «distorted» planogram. More often, the head of the station does not comply with the prescribed display of goods. There were several demonstrational layoffs — the feedback and monitoring are great. When someone gets punished for a reason, people quickly realize this and cease to apply unnecessary «ingenuity», acting strictly under the rules.
Finally I was able to claim compliance with the gas station in terms of filling the shelves with goods prescribed in planograms, so there was a monitoring mechanism. The commander has no right to give the order if he’s not sure that it will be carried out in full. Order on how to fill the shelves found the actual content. Now the time or distance cannot be an excuse to cover up the use of lobbied suppliers. Each of the territorial heads in charge of filling the shops and caf?s has these plates.
The need for interaction with the processing company forced all suppliers to develop IT-competence. Easily and seamlessly the whole chain moved to the electronic documents. Suppliers got fewer by several times. Stayed only those who were able to carry out an uninterrupted supply in strict accordance with the actual demand from stations. Methodical work of one person moved the «mountains».
When we figured out the supply of goods, I was presented with the idea of ??remote monitoring of the process equipment of filling stations. Each station is a complex of technical devices that require high-quality service. Information about the downtime, the reasons for its failure, the volume of repair works, speed of response by service contractors – all of this data was received by the head office of the chain from the staff at the filling stations and from service organizations. The relevance and credibility of this information was virtually impossible to verify.
After the first trial implementations, it became clear that the monitoring of technological equipment of gas station reduces the initial response to the problem from 12 hours to 15 minutes. In addition, 3-5 times reduced the number of applications through the use of remote Express service and eliminated the risks of an unjustified billing for «false» service. It was about another revolutionary project, where on one side of the scales there were hundreds of millions of rubles saved from reduced downtime, and excluding payments for poor-quality repair and maintenance services, and on the other — the same amount, going into the pocket of “local” service contractors and their lobby in the leadership of our chain.
Organization of this direction required considerable processing costs. In addition to funds there was a need for coordination with suppliers of equipment, telecommunication links, server hardware, new IT-solutions. My partner, who during the first visit said that the processing of non-fuel businesses might be created for free, was true to his word. But in the new stage of development of the project, he began to seek funds and partners among the existing network of contractors.
Successfully implemented business idea has attracted the attention of investors. They invested money in exchange for equity participation of non-fuel processing company businesses. In the end, there was a rather banal business-story.
Instead of the development of idea and the creation of supergoods, the new shareholders would prefer to have the benefits “right here, right now”. There was a change of CEO. As a result, processing company turned out to be owned by those who were planned to become the objects of monitoring and control. The margin of safety inherent in the company turned out to be quite large. It was enough to function flawlessly even in this form for over a year. The new owners have successfully passed all tender procedures, established tariffs for service providers charging for their services from two to five per cent of the turnover served.
Author of the idea of ??non-fuel businesses processing and monitoring of process equipment of gas stations left the project. Phileas Fogg would not go around the globe in 80, or 60 days for a second time. Of all he left as his «heritage» remote monitoring of coffee machines is considered to be the most useful. To connect more than a thousand machines in one system we spent 25 million rubles. But in the first year of operation only on paying for transportation and travel service to technicians we saved 54 million rubles. The introduction of a new solution with the margin of 100% in the first year of its operation – isn’t that a dream of every innovator?
The Jerome’s novel ends with an episode which is not included in the film. The three friends run away from a boat under cover of night. “Well,” said Harris, reaching his hand out for his glass, “we have had a pleasant trip, and my hearty thanks for it to old Father Thames – but I think we did well to chuck it when we did. Here’s to Three Men well out of a Boat!”.
The ability to draw a line in time is a great feat. I do not know what business the man had gone to, and what it is now he’s engaged into. I do not fear that he would offer its free services to another manager competing with us. I’m only afraid of that processing company he created will cease to perform its functions.
Here’s a cup of coffee for the health of those who’s well out of a mismanaged business!