Analysis
Johnstons of Elgin established by Alexander Johnston in 1797 started its business with a woolen factory located at Newmill in Aberdeenshire in Scotland (Wilson, 2015). The Company is one vertically integrated woolen mill located in Scotland which originally produced linen, oatmeal, tobacco, flax along with other products. The Company currently faces tremendous competition post-advent of globalization due to the presence of low-cost substitutes being available in the market. The low-cost competition provided Cashmere-based product alternatives being available for GBP29, whereas the Company sold it for GBP200. UK knitting industry experienced a steady decline with a sharp fall in profits. The competition in the garment industry became time-based, which was focused on a shortened time to market (Danka, Grochowska & van Rijt, 2017). The scope of current analysis includes devising supply chain agility methods such that the Company can become more profitable in the future.
Johnstons of Elgin has been facing tremendous competition due to their inability to cope with the pressure of current market competition. The primary trend across the fashion industry has been focused upon a shortened time to market characterized by reduced costs (Flynn, Huo & Zhao, 2010). The Company had to adopt innovative measures such that it could get back on track to its profitability. The primary focus of the fashion industry has been on developing effective supply chain and logistics strategies for the creation of leadership and competitiveness within the market. The Company is advised on various supply chain strategies, it becomes crucial to analyze its supply chain in general.
Figure 1: Supply Chain Components of Johnstons of Elgin
Source: Author
The following are some strategies in the supply chain, which The Company could adopt.
Vertical integration: Johnstons of Elgin focuses its process of production within its factory. With the availability of space to manufacture woolen within its factory is an added advantage, which could provide tremendous cost competitiveness(Pettit, Fiksel & Croxton, 2010). The Company could directly appoint designers to produce innovative clothing and subsequently ask works to knit them in small batches. Though initial investment of purchasing machinery might be present it might prevent the Company from cost delay in the future. This would significantly reduce lead times as through small batch of productions, it would be easier to check with customers regarding sample products. It would reduce wastages and allow scope for shorter life cycle products. Vertical integration will allow encompassing agility within the supply chain functionality. In case customer rejects an order, then immediately production would stop and designer would develop changed clothing according to needs and demands of customers. Losses from small batch production will also be minimized with stopped production and new product can be started off for production (Fabbe-Costes & Jahre, 2008).
Figure 2: Vertically Integrated Supply Chain
Source: Author
Driving efficiencies and supply chain mechanisms: Supply chain mechanism can drive efficiency within the latest fashion trends and provide competitiveness. Most fashion wholesaler and retailers are focussed on deriving synergies from supply chain efficiency(Prajogo & Olhager, 2012). Supply chain mechanisms established by Tesco, Wal-Mart, Amazon and other online and store retailers are focussed on deriving value from their supply chain. They have established logistics systems which collects finished goods from low-cost wholesalers to sell them at various points of their retail stores after storing them in their warehouses. With globalization and opening up of markets, raw materials suppliers and suppliers of finished goods are selling their goods at cost-effective rates in bulk globally. Retailers, who are stocking up cost-effective goods and selling them at low prices as alternatives to costly products. Similarly, Johnstons can procure cashmere raw materials and products from low-cost suppliers in China or other Asian countries. In case the Company is able to procure raw materials at considerably low prices, then with vertical integration strategy, it will be able to manufacture and subsequently sell its product at a low price. This can allow the Company’s products to compete in the market. Supply chain efficiency can be derived by creating value from such chains (Leuschner, Rogers & Charvet, 2013). The Company can create a value chain through effective communication, workforce training, increasing information sharing, customer information analysis and nurturing innovation in partnerships as depicted in the figure below.
Vertical Integration
Figure 3: Driving Supply Chain Efficiency
Source: Author
The factory of the Company is vertically integrated, effective means of communications can be easily established. The organization structure has to be flattened or horizontal in format to ensure cross-communication amongst one another. The organization needs to ensure effective flow of information by means of steady communication amongst knitters, designers, people working in batch processing of products along with the marketing department to understand customer feedback and demands. Hence, information sharing can take place amongst one another to ensure minimum wastages and reduction in loss of lead times. Information sharing directly from the marketing department would ensure productivity in the various acts of the organization. This would also create an opportunity for a steady increase in profitability of the Company.
Employing, upstream to downstream production and finishing processes:The aim and focus of current supply chain for garments manufacturers has to be on upstream to downstream production along with finishing processes (Rahman, Laosirihongthong & Sohal, 2010). The effectiveness of supply chain processes lies in the ability to deploy production and finishing processes. The capability of Johnston of Elgin in this manner can be tremendous as it has a factory, which is larger and well laid out. This creates an opportunity for upstream and downstream movement for production as well as finishing processes. All factors of the supply chain have to be well-coordinated with each other such that they are able to create responses randomly and rapidly. The below figures depicts upward and downward production/finishing process for Johnston. The suppliers of woolen and cashmere products will be given rapid feedback which will be soughed from customers. The process of feedback will allow integrating of customer point of view in the process of production and subsequently deliver products to its retail stores, online stores along with other retailers.
Agile and lean logistics strategies:An agile supply chain will be able to respond quickly to customer demands, which is an essential factor in the garment manufacturing business. Fashion trends in the garment manufacturing business are continuously evolving. Customer reliance on brand names is based on the capability of a brand name to deliver constant surprises and benefits. Johnston needs to focus its production processes on continuous innovation and hence make production in small batches. Producing smaller batches of products will lead to the creation of a limited number of a woolen style or fashion product, this, in turn, will make customer seek more. Customers will be waiting for more styles and products from the Company, where Johnston will not allow product repetition. The Company will have to employ full-time fashion designers with constantly responsive supply chain processes. Each point of product processing will have to respond every time the product passes so that it can seek inputs in it. Such agile technologies will provide a value addition to the brand name and the Company will easily be able to establish its brand identity. The concept of agility has been the driving factor for competitiveness in the present fashion industry. An agile supply chain management system can respond fast and can align itself to increasing customer demands. Meaning in case customer demands in Scotland shifts from Scarf to Blazers, such a supply chain system will have the possibility to react to such systems. The supply chain in the garment is driven by end-customer within dynamic marketplaces. Agility hence is the demand of end customers as customer behaviors could be driven by uncertainties. Introduction of new brands or substitute products possesses another threat to not being agile in production processes. Therefore the system of the agile supply chain will stand to benefit production processes tremendously at Johnston, driving profitability and cutting down on costs (Leuschner, Rogers & Charvet, 2013).
Driving Efficiencies and Supply Chain Mechanisms
Lean logistics strategies within Johnston can provide the best possible fit to mass production of an item or product. A large part of the market differentiator in the fashion industry has become cost and reliability. Forecasting demand for volume based production could allow the Company benefits from market dominators, which focuses on cost and reliability. Products at Johnston’s differentiator factor are its quality. The Company does not make any comprise regarding the quality of its products, hence customers have the assurance of quality products when they conclude a purchase from Johnston. However, current generation customer is focussed on changing fashion trends, which makes them purchase low-cost products, which are often substitutes for actual products. Meaning a consumer while making a purchase of a scarf is more likely to select a low-cost alternative from Tesco compared to high-value product from Johnston. This possesses a great challenge for Johnston, which faces a steady decline in market share due to low-cost substitutes. The only appropriate strategy which the Company can make use of is source its raw materials from suppliers around the globe, procuring from the lowest possible bidder. Focussing on purchasing quality raw materials including linen or cashmere from low-cost suppliers can help the Company adopt lean strategies. Moreover, the Company has to devise its production strategies based on lean manufacturing, which can provide competitiveness to it. Employing contractual workers, in-house distribution logistics and coordinating throughout the supply chain are some strategies which the Company can adopt. This will not only allow a reduction in cost, rather it will help increase profitability for the Company.
Analysis of the above situation of lowered profitability might lead to non-sustainability for the Company in the future. Therefore, the Company needs to adopt any strategy which might create sustainability for the Company in the future. The Company will need to adopt the following recommendations in order to create sustainability for its operations;
- Expansion of Business:The Company needs to expand its operations in the future on basis of supply chain and logistics initiatives such that it can cater to more areas around the world. As the Company’s products are well-liked amongst the sophisticated and regarded as a quality brand, it can easily expand its brand name around the globe. Developing supply chain and logistics functionality around the globe will allow enhancing competency for the Company.
- Agile Supply Chain with Versatile Products:Johnstons of Elgin have been known for having a vertically integrated knitting factory. This can allow the business to readily have an agile supply chain with versatile product designing strategy. The Company can employ a trendy fashion designer and fashion industry specialists to advise the production department regarding the latest trends in fashion and textile. Through such advice products, devices can be launched at a faster pace in the market, which can allow the Company leadership in the area.
- Devise Core Competency:The Company can devise a sustainability strategy for the Company by sticking to its old fashion trends of cashmere and hand knitted woolen garments and suits. Through the latest designs, old fabrics with newest colors can provide development of the core competency of the Company. This will be against the current market trends and help in attracting consumer’s attention to the brand name.
Conclusion
Garments and woolen industry have undergone tremendous changes. Current market leaders have identified the faster time to market as being their strategic choice. With the adoption of a wide range of strategies, which match with current trends across the garments and woolen industry such as vertical integration, agile and lean logistics strategies might allow the Company to become profitable again. The Company needs to redevise its strategies such that it is able to match up with current trends in global competitive spheres. There has been a massive transformation in the textile and garment industry in the 21st century. Companies which are unable to cope up with challenges posed by the fast-moving garments and textile industry will subsequently phase out in the long run.
Reference Lists
Danka, B., Grochowska, A. and van Rijt, K., 2017. Influence Towards a Sustainable Cashmere Supply Chain: A Case Study of a Medium Sized Luxury Fashion Manufacturer in Scotland.
Fabbe-Costes, N. and Jahre, M., 2008. Supply chain integration and performance: a review of the evidence. The International Journal of Logistics Management, 19(2), pp.130-154.
Flynn, B.B., Huo, B. and Zhao, X., 2010. The impact of supply chain integration on performance: A contingency and configuration approach. Journal of operations management, 28(1), pp.58-71.
Leuschner, R., Rogers, D.S. and Charvet, F.F., 2013. A meta?analysis of supply chain integration and firm performance. Journal of Supply Chain Management, 49(2), pp.34-57.
Pettit, T.J., Fiksel, J. and Croxton, K.L., 2010. Ensuring supply chain resilience: development of a conceptual framework. Journal of business logistics, 31(1), pp.1-21.
Prajogo, D. and Olhager, J., 2012. Supply chain integration and performance: The effects of long-term relationships, information technology and sharing, and logistics integration. International Journal of Production Economics, 135(1), pp.514-522.
Rahman, S., Laosirihongthong, T. and Sohal, A.S., 2010. Impact of lean strategy on operational performance: a study of Thai manufacturing companies. Journal of manufacturing technology management, 21(7), pp.839-852.
Wilson, L., 2015. The sustainable future of the Scottish textiles sector: challenges and opportunities of introducing a circular economy model. Textiles and Clothing Sustainability, 1(1), p.5.
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