The Johnstons of Elgin, popularly known as Johnstons Cashmere is referred to a woollen mill located at Elgin, Moray, Scotland. Initially, the mentioned mill was associated with the production of linen, oatmeal, flax as well as tobacco. However, the original products of the mill got faded, when the founder Alexander Johnston introduced textiles in the year 1797. Johnston had pioneered the usage of tweeds for camouflage. This style got popular as Scottish estate tweeds and the company got highly reputed. The mentioned organization carries out the process of dyeing, spinning, weaving and finishing on one site and this act makes it only vertical mill in Scotland.
In the middle of the 19th century, the company developed a successful business by producing Estate tweeds (Tayur, Ganeshan and Magazine 2012). At the same time, the company had also started to import cashmere and soon a range of fine woven cloths made of fiber was developed by the company. This range of cloths has earned huge popularity and even today consumers from various parts of the world give the special order to the company for the mentioned range. In this report, the management strategy of Johnston Cashmere will be analyzed in order to identify how the company continued on its path to becoming more profitable.
Along with that several issues associated with the management strategies of the company will also be discussed in this report. Finally, recommendations, in order to solve the issues, will be provided.
Issues faced by the Johnston Cashmere
With the change in the garment industry of Scotland over time, the following issues were being faced by the company.
Low-cost competition:
Due to its high producing costs, initially, cashmere based products were sold only to the affluent consumers. But with the advancement of time, the management of the company understood that lowering the price is highly crucial in order to enhance its consumer base.
This becomes more import due to the emergence of a good number of garment companies that acted as competitors for the company. In order to maintain and enhance its consumer base, the company reduced the price of its products so that it can be old in the supermarkets. However, lowering the price imposed a negative impact on the quality of the product offer to the consumer. As a result of this, the company started losing its consumer.
Time-based competition:
Another issue faced by the company is the lack of capability of the company to meet the high demand of consumers. With enhanced competitors like Chanel and high demands of the consumers, it became highly difficult for the company to meet the demand due to lack of skilled labors. Moreover, the workforce of the company was aging and thus the company experienced a huge loss of profit. In 2006, the revenue of the company fell from 2.2 million pounds to 336,000 pounds (Seuring, 2013, pp.1513-1520). The excessive dependence of the company on its workforce and lack of machines can be considered to be the two major reasons behind this drastic drop in the revenue.
Shifting the focus:
Johnston cashmere was found to shift its focus from selling menswear to womenswear. The chief reason behind this shift, as was stated by the management was to gain a powerful platform for competing against the low-cost country sources. However, in order to meet its objective, it was highly crucial to launch innovative products in the market on a quicker basis and keep track of the changing requirements of the consumers. In spite of being innovative, Johnston cashmere was not able to achieve its goal due to its incapability to launch products before its competitors.
Strategies developed by Johnston Cashmere to enhance its profit
In order to overcome the above-mentioned issues, Johnston had implemented various strategies that saved the company from losing its consumer base and evolve as a well-reputed garment manufacturing organization. In the following paragraphs, the action taken y the company to deal with the issues has been discussed.
Vertical integration
The term vertical integration can be defined as the arrangement in which the supply chain of the company is owned by the company itself. In this supply chain process, each member of the supply chain produces individual products that come along to satisfy the common need of the consumers. As been discussed earlier, the Johnston of Elgin had adopted a vertically integrated supply chain and currently is the only organization with vertical integration in Scotland. That means the whole procedure that involves converting the raw material into a completed product that is, dying, spinning, weaving, knitting and milling are done into the site by itself.
The management of the organization had initially implemented the strategy in order to enhance the speed of manufacturing of the garments (Ahi & Searcy 2013, pp.329-341). However, several other benefits associated with the system had been evidenced by the management after implementation of the vertically implemented system. For instance, consumers, like the big Couture houses, often come to work with Johnston because they can see everything in one place, and get a sense of all their possibilities. Thus, the vertically integrated supply chain has benefited the company in different ways. Firstly, with the implementation of the strategy the company is able to eliminate price markups related to the buying of a product from a third party.
Unlike its major competitors like Chanel, Johnston was able to save a commendable amount of cost and invest it upon recruiting skilled labors in order to gain a competitive advantage in the market. Moreover with the help of this strategy the company is able to control the quality of its products it wants to deliver to the consumers. Considering the fact that one of the chief reason behind the drop of revenue of the company took place due to lack of time-based competitiveness, with the help of vertical integration the company is able to produce innovative garment within a much shorter time period.
Driving efficiencies and supply chain mechanisms
The supply chain strategy of Johnstone has greatly driven the efficiency of the company. Considering the fact the two unique strengths of the company include the usage of high-quality raw materials and handcrafted suits for consumers, the vertically integrated supply chain is highly suitable for the company. This enables the company to expand its business in both the menswear as well as womenswear sections without changing their path of production. With the help of an effective supply chain mechanism, the company was able to create a positive differentiation. It helped the company to enhance the amount of production in the stipulated time period.
For instance, the company had more access to the production inputs (Nenni, Giustiniano & Pirolo, 2013, pp.5-36). Not only that, vertically integrated supply system had also enabled the company to promote specific item keeping in accordance with the demographics of the marketplace. Moreover, Instead of seeking our vendors and contractors with specific skill sets, vertical integration allows an organization to invest in internal assets that can specialize in the skill set that is required. According to researchers, the chief advantage of vertical integration includes improvement in the efficiencies while reducing the costs (Christopher, 2016, pp.43).
This supply chain mechanism has enabled Johnstone of Elgin to control all aspects of their business operations without depending on the third party and thus a greater efficiency was built within the system. However, considering the fact that the mentioned supply chain mechanism has made the company highly dependent on its workforce, minor disruption within the supply chain has the potential to put the entire process of the organization in risk.
Employing, upstream to downstream production and finishing processes
Considering the fact that the company is highly dependent on its skilled employees, the management considers the employees as a major part of their business. In order to retain its employees, the company invested a good amount of the costs on the salary of the employees. Apart from that, Johnston of Elgin also provided a good number of facilities to the skilled employees. However, these strategies were not able to solve the major employee-related issue that includes that the majority of the skilled employees associated with the organization are aging. In order to deal with the solution, the company came up with the strategies that include recruiting novice employees and enhancing their skills with the help of training.
Upstream activities in the textile industry can be defined as the activities that are confined to the supplier’s side in the supply chain management. The major upstream activity of the Johnstone of Elgin company includes raw material sourcing, raw material extraction and delivery of the processed material to the production plant of the company. Wool is the key raw material used by the company. Being a traditional mill, the company produced its own raw material.
The weaving mill of the company is located in Elgin and the knitting mill is located at Hawick (Perry & Towers, 2013, pp.478-501). The upstream process includes the following steps. Firstly, highly skilled employees are recruited for weaving and knitting the wool. This raw material is then designed by skilled designers and the same is then transformed through 30 different processes that include dying, spinning, blending and weaving in order to produce the final product.
Downstream in manufacturing is defined as the process that occurs later to the production of the complete garments. The downstream production process in the Johnston includes marketing, sales, order entry, packaging, shipping and invoicing. With the help of its innovative and high-quality product, the company had gained a high reputation in the global market. International garment retailers are the chief consumers of the company. Majority of the products are delivered by the company with the help of shipping.
Agile and lean logistics strategies
As being discussed earlier, Johnstone of Elgin has always followed the lean supply chain statistics in order to ensure the reduction of costs without hampering the quality of the product. The term, lean supply chain management can be defined as the management that focuses on reducing the costs of the organization as well as n lowering waste as much as possible. This method of supply chain management has proved to be highly beneficial for the mentioned company. Considering the fact that the supply chain of Johnstone is vertically integrated, this factor has enhanced the probability of lean logistics strategy for the company to work out (Wichaisri and Sopadang, 2017, p. 85.
With the help of this logistic strategy, the management of the organization was able to eliminate the cost of production to a great level by involving in vertical integration (Chen & Fung, 2013, pp.303-316). Producing its own raw material with depending on a third-party supplier has effectively reduced the cost of the company to a great level. Moreover, the company had also trained the employees to reduced product wastage by decreasing the product in line waiting to be delivered. Moreover, decreasing the amount of transportation of products which can exhaust the workers and the effects that are causing to rework are another to factors that helped in effective cost reduction of the company.
However, according to researchers, Johnston of Elgin, in order to deal with the highly competitive market, should also consider agile logistic strategies (Cohen & Roussel, 2013, pp.56). The agile supply chain can be defined as a highly flexible supply chain that enables an organization to quickly adopt the changing situations. The methodology is considered crucial for an organization which wants to adapt unanticipated external economic changes lie economic swings, changes in technology and consumer demands. Implementing an agile supply chain allows organizations to quickly adjust their sourcing, logistics, and sales.
Since the chief focus of the company is to attract higher class and elite consumers to buy its product, the company has always concentrated on the quality of the garment material and innovations. This strategy has served the company effectively and thus Johnston of Elgin is conceded to be one of the best garment producers of the world (Fernie, 2014, pp.35). However, with the emergence of technology, the preferences of the consumers are rapidly changing. In order to deal with the rapid change, it is highly crucial for the company to implement agile logistic strategies so that Johnston can enhance and maintain its yearly revenue in the following years (Nandi and Ganapathi, 2015, p. 56).
SWOT analysis of the Company
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Strengths 1. High reputation across the world due to design, quality as well as reliability. 2. The company has the expertise, in designing, key technologies and manufacturing 3. Commendable involvement in the international diverse market 4. The product line of the company is highly innovative (Bonetti & Schiavone 2014, pp.55-69) 5. Highly skilled and educated workforce 6. The company has a partnership with premium apparel chains across the world. |
Weaknesses 1. Low expenditure on promotion casing limited brand awareness. 2. The price of the apparels are too high to be accessed by the middle class and lower middle-class population 3. The image of the company is not good in the labor market. As a result of this, the company experience a critical labor shortage (Jakhar &Barua, 2014, pp.938-957). 4. The company lacks flexibility in workforce and manufacturing. |
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Opportunities 1. The company can invest in new markets by reducing the seasonal nature of the business and introducing lighter weights of fabric along with the new business channel. 2. The company can diversify its business by adopting an agile business strategy in order to capture the middle class and upper middle-class consumer base (Tarafdar& Qrunfleh, 2017, pp.925-938) 3. Johnston can target the emerging markets of the eastern zone of the world. |
Threats 1. The major competitors of the company include luxury apparel brands like Chanel and Gobi GSC, a high-quality cashmere producer from Mongolia. 2. The changing traits of the consumers and low-cost fabrics from China can be considered as two major threats of the company. |
Conclusion
From the above discussion, it can be concluded that Johnston in spite of going through a major drop in its profit has been able to maintain a highly good reputation n the garment industry of Scotland. Excessively skilled workforce along with the high quality of the products manufactured can be considered as two major reasons behind that.
Another reason behind the gradual recovery of the company from its initial profit loss is the vertically integrated supply chain. However, it has been finding out that the company I missing out a highly potential consumer base due to lack of its agile logistic strategies. Hence, the management of the company should implement the bellow mentioned recommendations in order to maintain and enhance its revenue in the upcoming years.
Recommendation:
In order to deal with the issues suffered by the company, several recommendations have been provided in the following paragraphs:
Reference list
Ahi, P. & Searcy, C., 2013. A comparative literature analysis of definitions for green and sustainable supply chain management. Journal of cleaner production, 52, pp.329-341.
Bonetti, E. & Schiavone, F., 2014. Identifying and mapping strategic groups in the fashion industry. International Studies of Management & Organization, 44(1), pp.55-69.
Chaudhry, H. & Hodge, G., 2012. Postponement and supply chain structure: cases from the textile and apparel industry. Journal of Fashion Marketing and Management: An International Journal, 16(1), pp.64-80.
Chen, I.S. & Fung, P.K., 2013. Relationship configurations in the apparel supply chain. Journal of Business & Industrial Marketing, 28(4), pp.303-316.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK, pp.43.
Cohen, S. & Roussel, J., 2013. Strategic Supply Chain Management: The Five Core Disciplines for Top Performance, Second Editon. McGraw-Hill, pp.56
Fernie, J., 2014. 02 Relationships in the supply chain. Logistics and retail management: Emerging issues and new challenges in the retail supply chain, pp.35.
Hines, T., 2012. Supply chain strategies: Customer driven and customer focused. Routledge, pp.23
Jakhar, S.K. & Barua, M.K., 2014. An integrated model of supply chain performance evaluation and decision-making using structural equation modelling and fuzzy AHP. Production Planning & Control, 25(11), pp.938-957.
Nandi, S. and Ganapathi, S. 2015. Logistics management. New York: Oxford Univ. Pr.
Nenni, M.E., Giustiniano, L. & Pirolo, L., 2013. Demand forecasting in the fashion industry: a review. International Journal of Engineering Business Management, 5(Godište 2013), pp.5-36.
Perry, P. & Towers, N., 2013. Conceptual framework development: CSR implementation in fashion supply chains. International Journal of Physical Distribution & Logistics Management, 43(5/6), pp.478-501.
Seuring, S., 2013. A review of modeling approaches for sustainable supply chain management. Decision support systems, 54(4), pp.1513-1520.
Tarafdar, M. & Qrunfleh, S., 2017. Agile supply chain strategy and supply chain performance: complementary roles of supply chain practices and information systems capability for agility. International Journal of Production Research, 55(4), pp.925-938.
Wichaisri, S. and Sopadang, A. 2017. Integrating sustainable development, lean, and logistics concepts into a lean sustainable logistics model. International Journal of Logistics Systems and Management, 26(1), p.85.
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