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The Stone Roses show you can’t do business sitting on your arse!

July 5, 2012

Home town favourites The Stones Roses returned to Manchester over the weekend, with over 225,000 sing-a-longers dancing in Heaton Park at the three gigs to their 15 great songs in a set-list of 19, and not a duff one there. And this didn’t include Elephant Stone, one of my favourites.

There were many questions facing fans when they arrived at Heaton Park. Could the Roses pull off the gig of their lives? Could Ian Brown stay in tune? Would they play any new songs? Does it always rain in Manchester? But the question nobody expected to be asking was: How much longer do I have to queue? Over the weekend many fans complained about the lack of toilets at the event. Hey, real rock ‘n roll when you’re 49 like me it is about the basic comforts in life – I imagine even Joey Ramone wanted privacy sometimes.

Many found it difficult to get a drink – and if they did, there was little chance of being able to relieve themselves afterwards as the queues for toilets became unmanageable. It might seem a petty gripe – many in attendance were from the generation who braved Spike Island and survived to tell the tale. But when you’ve shelled out £60 for a ticket it’s perhaps not too much to ask that you can have the occasional wee. There were many mobile devices at Heaton Park, but patently smartphones out numbered mobile loos by some margin.

Of course the Glastonbury festival will not be held in 2012 owing to an insurmountable pre-Olympic shortage of police officers and (more crucially) portable lavatories – the Olympic organising committee is talking around 14,000 units (fitted each day with two toilet rolls), more than the biggest British company could supply – so Glasto was cancelled. The Jubilee also handed the portable loo industry significant uplift in demand, so 2012 will see operators flushed with success. Intrigued, I looked into the sector further.

The Economist had a useful article, informing me that portable toilets arrived in Europe with the US army in the 1950s. They watched us digging latrines in post-war Germany, and they thought, we’ve got something a lot better than that. There is one successful British manufacturer, but the vast majority of facilities – which generally come complete with waste tank containing disinfectant and deodoriser, toilet, lockable door and foot-operated washbasin – still come from the US.

A basic loo, in low season, might set you back £25 a week to hire. More upmarket models come in the form of large portable buildings, each holding several porcelain toilets. Depending on the degree of luxury desired, the interiors may be heated, wallpapered, even decorated with appropriate artwork. Some may even pipe Handel’s Water Music through loudspeakers. All the toilets are drained, cleaned, disinfected and deodorised after use, with the contents carried in a tank to the nearest sewage pumping station. The beech paneling, wraparound mirrors, plasma-screen televisions and sumptuous toiletries of some modern trailers would not be out of place in a posh hotel.

Construction workers were the earliest adopters of mobile serviced lavatories, which became standard issue on building sites, and industrial users still account for three-quarters of the 100,000-plus portable loos in the country.

But it is hard to make money out of builders’ bums. Construction slumped during the financial crisis, and rental fees have dropped as the cost of transport, chemicals and waste disposal have risen. A basic portable unit, which costs £500 to buy, can often be hired for £20-25 a week, not a great return.

So most hire firms now serve the events market too. Leasing to music festivals, sporting events and private functions brings higher margins. But this business is difficult to predict, and since transporting loos is so time-consuming and expensive, most outfits remain small and fairly local. Even specialist events firms need construction work to tide them through the winter.

The industry’s best hope now lies in technology. Most luxury and bog-standard loos are ‘recirculating’, meaning they are flushed with existing waste from the tank below, combined with a blue chemical compound. But vacuum toilets, akin to aeroplane ones, are gaining popularity. They use little water and no chemicals and since they don’t send waste whizzing round again, they are better for health. But they are pricey, they will not soon transform the business – a high-end trailer with a vacuum toilet currently costs around £40k compared with £25k for a recirculating one.

Yet the technology has promise. Some humanitarian organisations are considering using vacuum toilets for crisis situations, because there is less waste to dispose of. Mobile loos may even inspire the next generation of fixed facilities as they use so much less water than normal lavatories that architects are getting interested in installing vacuum toilets in new buildings. If they catch on, the bottom could fall out of the flush toilet market.

In the UK, there is a highly fragmented market – compare this to the world’s largest supplier, ADCO of Germany who are proud owners of a barely imaginable 300,000 brand toilets. So what are the challenges facing a UK portable loo operator, and the characteristics of the market?

  • Unpredictable customer demand patterns, driven by short-term spikes and spot hires, and seasonal demand.
  • From this, pressure on inventory holding strategies and the impact on working capital.
  • A ‘bog standard’ end of the market (80%) and an up-market end (20%) where consumers, flushed with a little more cash, can sit more comfortably in their space.
  • New emerging markets (events) as the traditional core market (construction) declines.
  • No domestic market leader, a highly fragmented market place.
  • Extreme pricing pressures on equipment hire giving poor cashflow and low ROI on investment in product.
  • Very much a ‘me 2’ business, basically a single product market, little product differentiation.

Undoubtedly the biggest challenge is managing volatile demand in a cost effective manner, as this can lead to significant benefits for a company from lower supply chain costs to improved customer service levels, and ultimately potential pricing advantages. So how do you consistently meet service level and profitability goals without necessarily having the capacity – or visibility – to do so? It requires a flexible and responsive supply chain and fulfillment network to ensure dynamic alignment of supply with ever-changing demand. I’m sure that’s what they thought about at Heaton Park.

The challenge is in capturing and consolidating multiple ‘living’ forecasts to understand true demand and translating that into a single cohesive, collaborative decision and response. The reality is that the plan can never be completely accurate given the certainty of daily/weekly changes that will occur inside the planning horizon. More and more companies are operating in an environment where many of the assumptions taken into the planning process are proven wrong as soon as you complete that process.

Today’s demand driven supply chains, with their customer-focused, ‘pull-based’ models, have a customer-centric mind set acknowledges that you can no longer effectively ‘plan’ your customers’ needs, rather they must focus on responding to them. This requires abandoning the historic mentalities of forecasting and planning.

Given the level of volatility, human input and judgment is essential to figure out the right trade-offs to make when the business doesn’t run as planned, (e.g. forecast change, product revision, late customer order, supply shortage), which is now the rule, not the exception. Solutions combine collaborative ‘what-if’ analysis and rapid decision support.

Achieving excellence in responding to changing customer demands has become the number one challenge facing enterprises today and can represent the largest opportunity for companies to increase customer service, enhance margins and attain more predictable revenue across the entire value chain.

Meeting the portable toilet market demand is no different to any ‘on-demand’ business – the Internet has created new models such as Amazon Web Services (http://aws.amazon.com/), Zipcar (http://www.zipcar.com/), Airnb (https://www.airbnb.co.uk/) and Rent the Runaway (http://www.renttherunway.com/)

They have business models in the ‘on-demand’ economy — what you need, when you need it, without a long-term commitment. From Cloud services for IT, picking up a car for running an hour of errands, to staying in a cosy apartment for a few nights as if it were your own, to wearing a designer dress for a night and then sending it back, these companies operate in the new consumer paradigm supported by innovative internet based services – but have the same attributes as the portable loo market – some visibility on forward customer demand based on experience, but spot volatility.

June, July and August are already the busiest time of the year for Britain’s estimated 350-400 portable toilet hire companies. You’ve got your national sporting classics, music festivals – Glastonbury alone takes 650-700 units – and of course myriad little local events – fetes and gymkhanas and sports days and weddings. Add the Jubilee and the Olympics into the mix and it’s not what you might call, pardon the expression, a bog-standard summer.

As the consummate guitar of John Squire and on-stage braggadocio of Ian Brown entertained the crowd, the queue lingered. Damien Hirst’s recent assertion that the Stone Roses were more important than Picasso seems a little misplaced, but who needs loos anyway? Don’t eat or drink anything. It will make your night out cheaper and cut down the chances of catching E coli. Swallow several boxes of Imodium. Just be prepared for all hell to break loose when you get home.

The on-demand agile business model is the new economic landscape for all markets, driven by the global internet businesses where the customer model is ‘self-service’. Translating this to seemingly simple domains such as portable loos seems laughable, but it’s not. Your business needs to have increased agility, faster ROI, lower barriers to more flexible payment models for customers, alongside reduced complexity and cost of service management. ‘Pay-as-you-go’ models for Zipcar, Airnb and Rent the Runway show that simple markets have adopted this concept. Mind sets need to change from ‘product’ to ‘service’ and ‘transaction’ to ‘relationship’, and embrace new consumption and delivery models.

The maxim of entrepreneurs – You can’t do business sitting on your arse – applies at all times, but for operators in the portable loo market, that’s how they earn a living from their customers, on-demand and self-service.

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