stock buying

The conventional wisdom isn't always wise. One thing that terrifies most businesses is a high and mounting level of stocks. Very few managements would deliberately create a stock mountain on the factory floor - but that's how the West Yorkshire business of Camborne Fabrics has grown from £200,000 of sales to £25 million in nine years.

There was deep method in its apparent madness. Camborne regards itself as a 'customer service business', not a manufacturer. To provide next-day delivery, high stocks are essential. And Camborne meets the next-day requirement on 97% of 2,000 daily orders for furniture fabric.

Sensibly, however, managing director Nigel Roberts is less impressed with the 97% than 'with what happened to the 3%. That's an awful lot of upset customers.' The cost of their dissatisfaction is unacceptable, and Camborne has poured great effort into striving to cut 'the cost of failure' by a quarter this year.

Roberts, a disillusioned accountant who had been driving lorries, joined the firm and founder David Hill in 1980. Hill started his own business when his boss refused to accept the stockpiling theory. So Hill became a 'manufacturer without machines', buying yarn, having it converted and getting it finished miles away.

The fabric was delivered to a garage in Camborne Road - hence the name. Despite its sound anti-conventional principles, the business only pottered along until 1980, when Hill's brother, Robert, and Roberts created a triumvirate that took radical decisions. Out went a parallel toy importing business: they would focus on fabrics for furniture - specifically office furniture.

This market has no fashion element: 'charcoal' and 'peat' have been the top colours for 20 years. That's one important factor in the stockpiling policy: the stock stays saleable. Conventionally. says Roberts, people 'move stock from the asset side to the liability side.' But Camborne turns over its stock asset 6.5 times a year, generating £1 million of cash annually (and £1.6 million profit) in the process.

Every business passes certain watersheds. One arrived after rapid expansion took sales to £4-5 million in 1985. 'Too many goods were flying around the Yorkshire valleys on commission. It was very hard to control.' Buying Hopton Mills from a supplier took Camborne into manufacture. That didn't change its customer service focus: but the business did 'lose sight' of its core.

In addition to office furniture, the company started supplying leisure fabrics, wall-coverings, vertical blinds and carpet tiles. The top team felt they could do anything. 'We began to believe our own bullshit. When you do that, you're in deep trouble.' In 1989 they refocused - 12 months before recession hit Britain.

That was 'pure good luck' says Roberts. They cut overheads, reduced the cost base, concentrated on cash and profit as well as turnover, and, with considerable courage, dropped the extraneous businesses. 'To actually admit you were wrong and let turnover go is not always easy' - especially when recession is shrinking the core business as well.

Sales slumped from £19 million to £15 million in 1992 in those 'extremely tough' times. But the business, backed by Lloyds Bank's venture capital arm, stayed profitable and, more important, kept generating cash: 'You can lose money a few times, but you only run out of cash once.' Equally important, Camborne diversified away from the UK market - and now gets half its business from abroad.

The rapid response service, made possible by those stocks and efficient forecasting (now moving from thrice weekly to twice daily), explains how Hong Kong, Singapore and Thailand have become Camborne's strongest markets. Quality is also crucial - especially consistency of colour and the unblemished texture needed for screens in offices on the open plan: a principle which David Hill, 51, and Roberts, 38, strongly support.

Roberts, who bought out Robert Hill in 1989, explains that the four-man top team have offices separated only by sliding patio doors to encourage 'a very open and communicative management style.' Having started by challenging the conventional wisdom on stocks, they've continued in that vein; 'we're never frightened to try new ideas.' That's the way to make big new money from old, tired trades.