Standard Wool — Strategy

Better returns create more options

The operational levers that turn the working capital loan from structural to optional — and give the board a real choice about where to deploy the freed capital.

Illustrative throughout. Numbers on this page are placeholders on plausible assumptions, used to show the shape of the case. Real figures follow baseline measurement — the live case will differ, possibly materially.
The reframe

£30m turnover isn't the business you actually run

Most of that figure is stock cost flowing through on its way to a buyer — not value-add. The business you run is a capital recycling operation, and the right north star is different.

Misleading frame
£30m turnover
Top-line revenue is mostly stock cost flowing through to buyers. Benchmarking the business against it overstates size and understates the real economic signal.
Honest frame
Gross margin × Capital turns
A capital recycling business. Value is created by how many times the capital turns each year and the margin captured on each turn.
Governing equation
ROCE = Margin × Capital turns

Improve either lever and ROCE moves. Improve both and it compounds. A 10% lift in capital turns beats a 10% lift in turnover every time — and comes with lower price-risk exposure per lot.

The choice this unlocks

Today the working capital loan is structural — the business needs it to function. Improve capital efficiency and it becomes optional. The board gains a genuine choice:

Option A
Pay down the facility. Lower interest cost, lower exposure to rate cycles, stronger balance sheet position.
Option B
Keep the facility and redeploy freed capital — more wool, new product lines, acquisitions. Borrow by design, not necessity.

The choice itself is the prize. A business that can elect whether to borrow is more resilient to commodity cycles and rate moves than one that must.

Measurement

Two layers of numbers

Lagging numbers tell you whether ROCE is improving. Leading numbers are what the team watches weekly to get there.

Lagging — did it work?
The truth, but arrives too late to act on. Reviewed quarterly.
ROCE
Operating profit / Capital employed
The one that matters. Measured at group level — SW Trading and Thomas Chadwicks combined.
GMROII
Gross margin £ / Avg inventory at cost
Distributor's margin-adjusted turns metric. Keeps both margin and turns honest.
Cash Conversion Cycle
DIO + DSO − DPO
Days of cash locked per trade cycle. Directly proportional to capital employed.
Stock markdowns & sub-optimum lots
markdown £ as % of sales · lot clearance rate
Leakage from discounted stock (quality, fashion, supplier issues) and sub-optimum lots sitting below minimum client take sizes. Cash write-offs are small; the cost is holding time and markdown depth.
Leading — what moves the needle
Operational numbers surfaced continuously. Moves the lagging.
Stock health
age, allocation, carrying cost
Value-weighted avg age, age distribution, % allocated at receipt, % on documented hold, full carrying cost per lot per day.
Cycle times
quote → dispatch, DSO, DPO
Quote → contract → dispatch, invoice → payment (DSO per customer), goods receipt → supplier paid (DPO).
Margin discipline
leakage, Price Book adherence
Quoted vs contracted vs invoiced margin, Price Book adherence, on-time dispatch rate.
Customer health
trajectory, share of trade, DSO
Top customers by margin × volume, volume trajectory within each relationship, estimated share of customer's total wool spend, payment behaviour, CLTV direction of travel.
Harvest mode — worth naming explicitly

The wool merchanting market is mature — limited new customer supply. In harvest mode the lever isn't preventing customer churn (rare at this kind of B2B relationship length) and isn't winning new logos. It's growing share-of-trade with customers you already have. Reliability, grade breadth, and faster cycle times earn you more of each customer's annual wool spend — moving from 20% of their wallet to 30% is the kind of lift harvest mode is built for. The metrics weight accordingly: volume trajectory within existing relationships, share-of-trade indicators, and growth signals matter more than pure retention.

Together these roll up into a Working Capital Health Score. The full inventory with current tracking status, drilldowns, and proposed additions lives on the metrics page.

DIO days inventory outstanding (average stock age)  ·  DSO days sales outstanding, invoice → payment  ·  DPO days payable outstanding, receipt → supplier paid  ·  CCC cash conversion cycle (DIO + DSO − DPO)  ·  CLTV customer lifetime value  ·  GMROII gross margin return on inventory investment
Residual management

The tail is where margin quietly leaks

Primary stock moves on its own merits. It's the long tail of small-quantity residuals — what's left after most of a lot has been consumed — that accumulates, ages past easy clearance, and ends up as write-offs or bulk markdowns.

Stock age distribution — illustrative
0–30 days42%
Healthy
30–60 days28%
60–90 days18%
90+ days12% (target <10%)
The tail

Most merchanting businesses don't track residuals as a distinct class.

They should. Residuals behave differently — smaller quantities, harder-to-use grade mixes, often aged worse than primary stock because the easier portions have been taken first. Left invisible, they become write-off candidates.

Proposed residual classification rule
A lot becomes a residual when remaining quantity falls below 10% of original or below a kg floor (to calibrate with Pete), whichever comes first.
Residual KPIs
Each tracked in its own right, not folded into stock-wide averages.
  • Cycle time — days from residual classification to clearance
  • Clearance rate — % consumed via blend vs written off / bulk-sold
  • Tonnage & value in inventory — total and bucketed by age
  • Write-off £ — the margin leakage number directly
How the platform helps
Tracking and surfacing — blend recipes stay with the trader.
  • Surface at blend drafting — "7 residuals fit this spec; consider 50–100kg increments"
  • Alert on age thresholds — triggers clearance decision actively
  • Residual Price Book floor — different clearance pricing than primary stock
  • Lineage capture — which spec/blend generated it → commercial conversation
  • Clearance campaigns — triggered when tonnage crosses threshold
Thomas Chadwicks

Thomas Chadwicks is a real profit centre, not just a captive service

With roughly 20% external work, Thomas Chadwicks has its own economic weight. Optimising the group number means three things working together.

Principle 1
Transfer-price at fair market value
Charge SW the arm's length rate — what external scouring customers pay — not cost-plus, not at-cost. This is the HMRC standard and the only honest way to see SW Trading and Thomas Chadwicks as two businesses. For group ROCE the transfer price nets out; for divisional contribution and decisions about internal work earning its keep, market rate is essential.
Principle 2
Optimise for group contribution per line hour
Not Thomas Chadwicks line efficiency alone. Not SW priority alone. An aged SW lot burning £15/day in carrying cost and blocking a £40k sale ranks differently to a standard external job.
Principle 3
Protect external capacity
Reserve a floor (say 20% of slots, matching current mix) for external work to preserve those relationships. Internal lots compete for the remaining 80% by a priority score.

A connected trading and data platform makes this practical: the blend sheet carries lot age, residual status and carrying cost through to Thomas Chadwicks' view, so scheduling priority reflects group value rather than local optimisation. In the interim, a weekly prioritisation meeting closes the same gap with people and a spreadsheet.

Delivery phases

Moving the numbers — by phase

Four phases, each building on the previous. Phase 1 makes visible what's already in WTS; Phase 2 replaces WTS and introduces the new data entities (Quote, Price Book, residual lifecycle, holds) that unlock the bigger levers; Phase 3 adds the ROCE automation and blend optimisation; Phase 4 delivers a Manufacturing Execution Platform (MEP) for Thomas Chadwicks, integrated end-to-end.

Phase 1
Data platform on WTS
  • Pull WTS data into dashboards — no new platform yet
  • Value-weighted stock age + age distribution (from Inventory Lot received_date + cost)
  • Ageing alerts at 30 / 60 / 90-day thresholds
  • % of stock allocated at receipt (Lot Allocation vs received_date)
  • On-time dispatch rate (Delivery Stage planned vs actual)
  • GMROII and DIO (from MARGIN_REPORT + inventory cost)
  • Partial CCC — DSO/DPO from Dynamics GP, DIO from WTS
  • Estimated carrying cost per lot (capital + Lot Charges + insurance_rate)
  • Weekly blend prioritisation meeting, data-supported

What WTS data genuinely supports — visibility from day one. Residuals, Price Book, and quote leakage aren't here because WTS doesn't capture them.

Phase 2
Trading platform + new data capture
  • Replace WTS functionality — sales, purchases, dispatch, invoicing
  • Seed historical data; capture new transactions cleanly
  • New entities — Quote (was missing), Price Book (was missing), Residual lifecycle (original vs remaining quantity), Hold flag + rationale
  • Enriched blend sheet (age, carrying cost, allocation, residual flag)
  • Residual classification rule live (10% / kg floor)
  • Pre-received purchase contracts → allocation before receipt
  • Price Book guardrails on quotes — margin discipline lever active
  • Quote → contract → invoice cycle with margin leakage tracking
  • FX handling + firstCost/replacement logic
  • Documented holds with rationale

Same functionality as WTS, plus the new data entities that unlock residual management, Price Book discipline, and leakage tracking.

Phase 3
ROCE levers + blend optimisation
  • Full CCC dashboard — DIO, DSO, DPO consolidated
  • Customer dashboard — trajectory, share-of-trade estimate, CLTV segment, decline signals
  • Margin leakage analysis (quoted vs contracted vs invoiced)
  • Residual Price Book clearance floor + campaign triggers
  • Residual lineage reporting — which specs generate the tail
  • Blend composition optimisation — suggests compositions that clear aged residuals while meeting spec
  • Automation — ageing alerts, share-decline flags, clearance triggers, Price Book enforcement

Beyond visibility — active ROCE levers and decision support.

Phase 4
Thomas Chadwicks Manufacturing Execution Platform
  • Operational platform for the scouring line — scheduling, capacity, production execution
  • Bidirectional data flow with trading platform
  • Group-level scheduling score operational (margin + age + carrying cost + residual clearance + external floor)
  • External capacity floor enforcement — reliability for external customers
  • CLTV-informed pricing for scouring customers (internal and external)
  • Predictive age and residual alerts
  • Automated scheduling recommendations within policy

Thomas Chadwicks as a first-class operational entity, integrated end-to-end.

Baseline measurement runs alongside Phase 1 — and Phase 1 is what makes most of it possible. The achievable baseline from WTS: current ROCE (group and split), GMROII, DIO / DSO / DPO and CCC, value-weighted stock age and the 60+ / 90+ tail, on-time dispatch, estimated carrying cost per lot, and capital structure (facility vs shareholder funded). The parts that aren't baselineable until Phase 2 — because WTS doesn't capture them today — are residual tonnage and clearance rate, Price Book adherence, and quote-to-invoice margin leakage. Worth calling out honestly rather than overclaiming.
The prize

Five levers, each hitting a different part of the equation

The worked example below is illustrative — built on assumed current numbers to show how moderate movement on each lever compounds. Real baseline numbers replace these and the shape will shift.

Lever 1
DIO reduction
stock age + cycle time
Drop DIO from 75 → 60 days on £7m avg stock = £1.4m working capital released.
Illustrative ~£112k/yr
Lever 2
Sub-optimum lot clearance
the tail
Lots below minimum client take sizes accumulate and sit for ~12 months on average. Blend rules and age alerts clear them faster — holding cost recovered on each cycle turn.
Illustrative ~£35k/yr
Lever 3
Margin discipline
Price Book, leakage, rebates
Three leakage points: Price Book adherence (~1% gross margin), quote-to-invoice drift, and ~£90k/yr in volume rebates credited back to clients that are not priced into selling rates. Visibility surfaces all three.
Illustrative ~£74k/yr
Lever 4
Share-of-trade expansion
harvest mode
Reliability + grade breadth + cycle times earn more of each existing customer's wool spend. Top 20 customers lifting SW share-of-wallet by ~5 points = ~£1m incremental revenue.
Illustrative ~£180k/yr
Lever 5
Other income optimisation
wool grease & ancillaries
Wool grease and ancillary income (~£467k/yr combined) runs at near-100% margin — all costs already absorbed by the scouring operation. Currently managed without platform visibility. Tracking extraction rates, barrel inventory, and market benchmarks makes price timing and volume decisions active rather than reactive.
Illustrative ~£50k/yr
Combined — on assumed numbers

Moderate movement on five separate levers compounds because they each hit different parts of the ROCE equation — capital cycle, margin, tail clearance, share-of-trade, and other income.

~£450k/yr
Operating profit uplift
£1.4m
Working capital released
~15%
Illustrative new ROCE (from ~11%)

The point isn't the precise figure. At half these assumptions the upside is smaller but still meaningful. At zero movement on any lever nothing changes. The worked illustration shows the mechanism, not a forecast.

The dashboard — anchored to targets and periods, not arbitrary numbers

A dashboard without targets and a defined period is just numbers floating in space. Every KPI below is anchored to a period (YTD FY26 shown) and a target. The targets themselves come from planning — ideally OKRs or equivalent goal-setting, otherwise set against the ROCE strategy's illustrative prize figures. Without that layer, the dashboard can't tell you whether you're winning.

Standard Wool — Working Capital Health
Period
Mock — illustrative
ROCE (group, rolling 12m)
13.2%
target 12–15% FY
On track
Gross margin (YTD)
£2.8m
FY target £5.4m · pace £4.2m
Tracking light
CCC (current)
68 days
target 60 days by FY end
On track
Other income (YTD)
£218k
FY target £467k · pace £436k
Tracking light
Stock health · current snapshot
Value-weighted avg age
52 days
target <60 · residuals: 47 active, £340k value · clearance rate 73% YTD (target >70%)
0–3042%
30–6028%
60–9018%
90+12%
Cycle times · YTD averages vs FY targets
On-time dispatch
91%
target >95%
DIO
44 days
target <40
DSO
38 days
target <35
DPO
14 days
monitor only
Quote → contract
2.1 days
target <2d
Contract → dispatch
11 days
target <10d
Customer health · YTD margin + direction of travel
Customer A
£420k margin YTD
vol ↑
DSO 32d
Platinum
Customer B
£310k margin YTD
vol →
DSO 41d
Gold
Customer C
£275k margin YTD
vol ↓ 18%
DSO 56d
Share slipping
Customer D
£240k margin YTD
vol ↑
DSO 28d
Platinum
This week's actions
  • 3 lots crossing 90 days this week — see priority list
  • 8 residuals >120 days — clearance candidates
  • 1 share-of-trade decline (Customer C, vol ↓ 18%) — Pete to investigate
Where targets come from

The dashboard above is only meaningful because each number is anchored to a target and a period. Those targets need to come from somewhere. Two routes:

  • OKR planning (recommended). Set annual Objectives tied to ROCE, break into quarterly Key Results across the four levers. The dashboard becomes the weekly check-in on KR progress. Targets are discussed, owned, and reviewed with intent.
  • Strategy-anchored targets. Derive targets directly from the ROCE strategy's illustrative prize figures once the baseline is measured. Less structured than OKRs but still target-anchored.

Without one of these, the dashboard shows numbers but can't tell you whether you're winning. Worth a separate conversation on which route fits Standard Wool's planning rhythm.

Scope

What a better trading and data platform does, and doesn't

Worth being clear on what the platform capability actually delivers. Market skill, relationship skill, and commercial judgement stay with the team — a better platform makes them faster and more visible, not replaces them.

A better platform does
  • Make operational flow and commercial discipline visible and fast
  • Capture transactions once, consistently, so the metrics are real
  • Surface information at the decision moment — blend drafting, quote pricing, dispatch scheduling, residual management
  • Provide the data foundation for CLTV, margin leakage analysis, and tail management
A better platform doesn't
  • Sell wool — Pete and Paul still trade
  • Forecast the market or predict price movements
  • Make decisions — analytics guides, it doesn't decide. Trader judgement stays with the trader.
  • Solve structural cost issues unrelated to information flow (warehouse rent, scouring line capacity)
Risks

What has to be true for the plan to deliver

The design is only as good as the operating conditions it runs in. These are things to own, not caveats to hide behind.

Where this connects

This page is the commercial view — the detail lives here