Logistics and Supply Chain Management: A Case Study of Johnstons of Elgin

This report discusses the logistics and supply chain management of Johnstons of Elgin, a woollen mill in Scotland. It covers issues faced by the company, management strategies, supply chain mechanisms, and agile and lean logistics strategies. The report also provides recommendations for the company to improve its operations.

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Contents
Introduction......................................................................................................................................2
Overview of Johnstons of Elgin..................................................................................................2
Issues faced by Johnstons of Elgin in logistics................................................................................3
Vertical integration..........................................................................................................................3
Management strategies................................................................................................................4
Driving efficiencies.........................................................................................................................4
Management strategies................................................................................................................5
Supply chain mechanisms................................................................................................................6
Management strategies................................................................................................................7
Employing, upstream to downstream production and finishing processes......................................8
Management strategies................................................................................................................9
Agile and lean logistics strategies..................................................................................................10
Management strategies..............................................................................................................10
Recommendations..........................................................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

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Introduction
The aim of the report is to talk about the logistics and the supply chain management of the given
case study that has been provided. The logistics and supply chain management field make sure
that the goods and services get into the hands of customers. The logistics industry is considered
an as an important driver of the development and economic (Gianpaolo, Laporte and Musmanno,
2013). The report includes the discussion related to the vertical integration, driving the supply
chain mechanism's and the efficiencies, employing, upstream to the downstream production of
the given case and the finishing process. The discussion for both agile and lean logistics
strategies has been done. This analysis will reflect the issues which might be faced by the
company and the solution related to the management strategies has been discussed. These
management strategies will help the company in bringing the effectiveness in their operations
which will ultimately lead to the success.
Overview of Johnstons of Elgin
Johnstons of Elgin history began in the year 1797 when Alexander Johnston first initiated by
taking a lease on a woollen factory in Newmill in Aberdeenshire, Scotland. The business that is
operated by the company is a woollen mill that is operating the business operations at the same
place. The workers of the mill also sometimes wear the clothes that are manufactured with the
custom design and produced tweed (Oscar Hunt, 2018). This shows that the business of the
company is in success but the company is dealing with the issues related to the supply chain and
logistics. Gradually, the company began to import the cashmere due to which they were able to
develop a range of the fine woven clothes that are made from the fibre. In the year 1931, the
company entered into the cashmere kitting industry and also opened the separate factory in
Hawock which is located in the Scottish borders.

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Issues faced by Johnstons of Elgin in logistics
In the case of the logistics of Johnstons of Elgin, there are various issues that are faced by them
while performing the activities involved in the supply chain management. One of the major
issues that are faced by the company is time management. The time is consumed by a mill in
processing not only in slow-moving processes but also in the unnecessary stock holding which
includes raw material, work-in-progress and the finished inventory. Along with this, the
company faced the issues in the fall of profit in the year 2006 due to the rise in the competition
and the shift of the focus. Though, the company can reduce the issues which are faced by them
by applying the management strategies. These management strategies are going to be
incorporated in the processes.
Vertical integration
The vertical integrations are referred to as the arrangement of the supply chain management in
which two or more stages of the production normally operated by the different firms (Harrison
and Hoek, 2011). In this integration, the company is able to control more than one stage of the
supply chain at the same place. According to the case study, this has been found that over last
two hundred years the mill of Johnstons of Elgin is still at the same location. Along with this, the
woollen mill is also considered as the UK’s last remaining vertically integrated woollen mill.
Considering the concept of the vertical integration, the woollen mill processes the operations at
the same location which include the receipt of the raw material to the finished products. This
provides the potential benefits to the company which are discussed below: -

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Reduce in transaction cost: - The high-level vertical integration within the organisation can
bring the decrease in the transaction cost that takes place throughout their supply chain. This will
help the company to earn the maximum profit which is essential for the business.
Focus on investment: - Company gets the benefit as they will get more focused towards the
specialization as they can select the best suppliers or vendors with the special skill sets (Logistics
Bureau, 2017).
Stability: - Company who make use of the vertical integration they can maintain the stability in
their products which will help in maintaining the consistency and will improve the market value
of the company. This is one of the major reason due to which the company was able to achieve
the success (Vittana, 2018).
Management strategies
It is suggested to the company to become more focused towards it and to expand the business in
different areas with the quality of work. Johnstons of Elgin can follow the quality management
process with the help of which they can deliver the quality services to their customers. This will
help the company to increase the market share as more and more people will start consuming the
products which are offered by them. This will ultimately bring the improvement in the
profitability of the company as well as open the new doors of opportunity.
Driving efficiencies
According to the case study, the cashmere based products which are offered by the company are
tended to be high prices due to which very few customers were able to make the purchase of the
product. Though, the rise in the globalisation affected the business of cashmere because more

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companies started offering their products in other countries. The removal of the trade barrier
leads to the low-cost competition with the emergence of the 21st century. Along with this, the
availability of the cashmere products was on a hike as maximum people visited the nearby
supermarket and retailers for buying the products with the label of cashmere. The company faced
the issues when numerous businesses entered the market and started offering the same quality
cashmere at the low prices. UK cashmere offered by the Johnstons of Elgin started getting
impacted as people started buying the products from other importers. Johnstons of Elgin was not
able to deal the pressure of competition due to which in 2006 the profit falls from 2.2 million
euro to 336,000 euro (Christopher, 2016). This shows that the company was not able to maintain
its supply chain effectively. The company can easily bring the decrease in the price because they
are making use of the vertical integration which shows that they can offer the products at the low
prices (Mangan and Lalwani, 2016). Though, the company was not able to offer the products at
the low prices which show that there was a fault in the supply chain mechanism of the company.
Management strategies
The company should drive the efficiencies in their business operations for which a company
need to follow some managerial strategies: -
 A strong relationship with suppliers: - Johnstons of Elgin need to form the strong
relationship with their suppliers which will help in sourcing the products at low prices.
Along with this, the sourcing of the raw materials will improve and become regular. This
is the way through which the company can utilize the resources effectively and drive the
efficiency within the organisation.

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 Training to the workforce: - Johnstons of Elgin need to provide the training to their
employees which will help them in improving the productivity which will ultimately
boost the performance of the company (Langham Logistics, 2018).
 Effective communication: - Johnstons of Elgin team members and employees need to
communicate effectively which will help in improving the operations effectively.
Supply chain mechanisms
The supply chain mechanism that is followed by the company includes different processes that
are followed by the company. The supply chain of a company is given below: -
This process is followed by the company which helps them in making the products available to
the customers. The design of the product is one of the major and initial processes which became
Design of products
Sourcing of raw material
Warehousing the products
Manufacturing the products
Distribution of products
Customer consume the products
and share the feedback

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the issue for the company. This is the fact that for many years the Johnstons was offering the
menswear with the stable products that include suiting fabrics. Though, with the change in the
time the company started performing the activities for the women wear with the high fashion
content but with the shorter life cycles. This was observed that the company believes in
producing the standard products on the repetitive basis. Though the company made the
customers products for their fashion houses due to which they find the design of the product is
one of the most critical elements which might affect the product development process
(Govindan, Soleimani and Kannan, 2015).
According to the case study, the company led in the design which helps them in providing a
powerful platform for competing against the companies who are offering the products at low
prices. Though, this has been found that the company was not sufficient to be innovative in
design if they are not able to bring the new products to the market for meeting the needs. The
sourcing of products was effectively done by the company at the same location which offered
benefits to the company. The company was not supposed to pay the additional amount for the
warehousing because of the vertical integration strategy (Song and Parola, 2015). The company
stored the raw material where they conducted the process of manufacturing the products. Further,
the products which are manufactured by the company are distributed among the customers
present in the UK. These customers consume the products and share their feedback with the
company related to the quality and prices.
Management strategies
The company is facing the issues related to the design and innovation of the products. Therefore,
over here the company need to follow the strategy which helps them in improving the process.
The company require a dedicated team which will help them in designing and innovation in the

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clothes that they are offering to their customers. Along with this, there is a need for the research
centre where they can experiment with the design that they are willing to introduce in the market.
The proper testing is required before the launch of the products in the market.
Employing, upstream to downstream production and finishing processes
Employing is very essential for the companies to conduct the business operations and also to
grow in the market. The effective team is essential for the success of the business. The case study
doesn’t mainly disclose the fact related to the skills and capabilities of the employees but this is
clear from the success which is achieved by the company in the initial days of the business.
Though, this might be difficult for the company to search for the employees and to recruit them
so that they can perform the working efficiency.
The upstream and downstream are the production processes that are mainly used by the
company. In the upstream production are the material inputs that are required for the production
of the product (Hugos, 2018). On the other hand, the downstream is the opposite end where the
products get manufactured and further distributed to the customers (Bass, 2018). According to
the case study, the company seems to be in the downstream production process because they
procure the raw material which is used by them for offering the finished products on the market.
This is the fact that the textile and apparel industry generally takes time. This might be due to the
inflexibility of the traditional production and the finishing process that is followed by the
company.
According to the case study, the significant cause of delay was the need to produce the samples
of the finished fabrics for the customers and sometimes to make the frequent changes to the
design of the product at the due request of the clients. The delay in the process affects the cost to

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the company and also extends the time period till the goods reach to the market (Bode &
Wagner, 2015). This shows that the design is the only way through which the company can
safeguard themselves.
Finishing process of the company includes different processes that are required to be undertaken
by the company. When the cloth has been woven its appearance is rough and Johnstons of Elgin
perform the activity in which they transform the cloth into luxurious finished products. They face
the issues when many of them remain unchanged for the hundreds of years. This is the reasons
due to which the company make use of the softest natural Scottish water to scour the fabric.
Along with this, they ensure that it is gently restored to the natural and super soft state. In the
next step, the scouring removes the oil that is used mainly to safeguard the fibre during the entire
course of manufacturing processes while on the other hand, milling shrinks and thickens the
fabric. After the process of the wet finishing, the fabric gets dried by the passing it over the
rollers in a tentering machine (Johnstons of Elgin, 2018). Johnstons of Elgin conducts the
finishing process which includes cropping, raising, and pressing before the final inspection. This
is the entire process which is carried by the company.
Management strategies
This has been found that the process is time-consuming due to which the company should
manage the time. The company should offer the attractive amount to the employees which are
one of the effective ways which will help them in bringing the improvement in the productivity.
This results in the increase in the revenue or profit of the company. Along with this, the hiring of
experts in design might help the company to reduce the time in designing of the clothes. Further,
the finishing process includes the use of the device which can reduce the waste while making the
material smooth.

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Agile and lean logistics strategies
A lean strategy mainly focuses on reducing cost by producing the high volume of products with
low variability. On the other hand, the agile strategy focuses on the responding to the market
demand with the smaller and customized batches of items. Johnstons of Elgin, managing director
Sugden recognized the opportunity due to which they need to reduce the total capacity of the
industry. The company found the lack of capability to cope with the large increases in the
demand for the products. The problem which is faced by the company is the dealing with the
large international brand like Chanel. In the past, the company was focused towards reducing
capacity to bring the decrease in cost (Ugarte, Golden & Dooley, 2016). This shows that the
company has implemented the lean strategies. This means that the company has reduced the cost
for producing the high volume of the products.
Though, on the other hand, the company implemented the agile strategy in which the company
started offering the designer clothes for meeting the needs of the customers. The company need
to find out the effective ways with the help of which they can make use of existing capacity or
the possibility to access the capacity (Cheung, Chiang, Sambamurthy & Setia, 2018). The
problem with the capacity was not so much the number of machine hours available but rather the
availability of the skilled people.
Management strategies
The company is facing the issues related to the availability of the machine hours which can be
fulfilled with the help of the effective use of it. The company should follow the lean strategies
which will help them in producing the products in quantity and will also reduce the cost of the
same.

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Recommendations
 Just in time approach: - It is recommended to the company to make use of the just in
time approach in which the inventory system is a management strategy that gets align
with the raw material orders from the suppliers directly with the schedules of the
production. This approach will help them in managing the inventory effectively so that
they can manage the production and cost (Murphy and Wood, 2010). This will help
Johnstons of Elgin in managing the time for the processes.
 Quality management: - Quality management ensures that the company is able to
maintain the consistency in products. Along with this, the consistency in the design of
products will also take place.

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Conclusion
In the end, it can be concluded that the Johnstons of Elgin case study shows the processing of
supply chain management with the fact that there are different issues that can affect the working
of the company. The discussion shows the major elements of the supply chain management that
are followed by the company with the management strategies that can be followed to reduce the
impact and to bring the profitability. Further, the recommendations are provided for the near
future because Johnstons of Elgin can take help of these strategies to grow further.

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References
Gianpaolo, G., Laporte, G., and Musmanno, R., 2013. Introduction to Logistics Systems
Management. 2nd ed. U.S.A: Wiley.
Harrison, A., and Hoek, V. R. I., 2011. Logistics Management & Strategy, Competing Through
the Supply Chain. 4 th ed. London: Prentice Hall.
Murphy, P. R., and Wood, D., 2010. Contemporary Logistics: International Edition. 10th ed.
U.S.A: Pearson Higher Education.
Ugarte, G. M., Golden, J. S., & Dooley, K. J., 2016. Lean versus green: The impact of lean
logistics on greenhouse gas emissions in consumer goods supply chains. Journal of Purchasing
and Supply Management, 22(2), 98-109.
Govindan, K., Soleimani, H. and Kannan, D., 2015. Reverse logistics and closed-loop supply
chain: A comprehensive review to explore the future. European Journal of Operational Research,
240(3), pp.603-626.
Bass, B., 2018. The Definitions of "Upstream" and "Downstream" in the Production Process.
[Online]. Available at: https://smallbusiness.chron.com/definitions-upstream-downstream-
production-process-30971.html [Accessed 16th August 2018]
Langham Logistics, 2018. 5 Ways To Improve Supply Chain Efficiency. [Online]. Available at:
http://www.elangham.com/2016/04/5-ways-to-improve-supply-chain-efficiency/ [Accessed 16th
August 2018]

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Johnstons of Elgin, 2018. Finishing. [Online]. Available at:
https://www.johnstonsofelgin.com/international/about-johnstons-of-elgin/the-craftsmanship-
story-johnstons-of-elgin/finishing/ [Accessed 16th August 2018]
Oscar Hunt, 2018. Introducing Johnstons of Elgin. [Online]. Available at:
<https://www.oscarhunt.com.au/blog/introducing-johnstons-of-elgin> [Accessed 16th August
2018]
Logistics Bureau, 2017. Vertical Integration in the Supply Chain: Is it on the Rise? . [Online].
Available at: <https://www.logisticsbureau.com/vertical-integration-supply-chain/> [Accessed
16th August 2018]
Vittana, 2018. 13 Advantages And Disadvantages Of Vertical Integration. [Online]. Available at:
<https://vittana.org/13-advantages-and-disadvantages-of-vertical-integration> [Accessed 16th
August 2018]
Song, D.W. and Parola, F., 2015. Strategising port logistics management and operations for
value creation in global supply chains. International Journal of Logistics Research and
Applications, 18(3), pp.189-192.
Mangan, J. and Lalwani, C., 2016. Global logistics and supply chain management. 3 rd ed.
Hoboken: John Wiley & Sons.
Christopher, M., 2016. Logistics & supply chain management. UKP: Pearson.
Hugos, M. H., 2018. Essentials of supply chain management. New Jersey: John Wiley & Sons.
Bode, C., & Wagner, S. M., 2015. Structural drivers of upstream supply chain complexity and
the frequency of supply chain disruptions. Journal of Operations Management, 36, 215-228.

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Cheung, W., Chiang, A. H., Sambamurthy, V., & Setia, P., 2018. Lean vs. Agile Supply Chain:
The Effect of IT Architectures on Supply Chain Capabilities and Performance. Pacific Asia
Journal of the Association for Information Systems, 10(1).