Logistics and Supply Chain Management - Johnstons of Elgin Case Study

This report showcases the crucial features of Johnstons of Elgin’s supply chain management process, including vertical integration, efficiency drivers, upstream and downstream production processes, and agile and lean logistics strategies. The case study highlights the challenges faced by traditional textile manufacturers in the face of globalisation and the strategies adopted by Johnstons of Elgin to adapt and succeed in the competitive marketplace.

Running Head: Logistics
Logistics and Supply chain management

Logistics 1 | P a g e
Executive Summary
Alexander Johnston took lease for opening a woollen factory in 1797 in the name of Johnstons of
Elgin. The factory was located at Newmill in Aberdeenshire, Scotland. Johnstons of Elgin was
used to manufacture traditional woollen items in the initial time period but with the effect of
rising competition in this industry, organization changed its functionalities and moved towards
textile business and fashion industry. Johnstons of Elgin believed in adopting change for
grabbing the opportunities for sustained growth and development. With regards to this,
organization survived for approximately 200 years and at certain point of time, Johnstons of
Elgin was the last company to survive for so long. Organization was practicing vertical
integration process of supply chain management which is mainly used for reducing cost of
production. Johnstons of Elgin used to conduct its all operations from one site i.e. from
manufacturing to distributing the final products in the market (Ahi & Searcy, 2013).
This report will showcase certain crucial features of Johnstons of Elgin’s supply chain
management process. Main attractions of the report will be vertical integration process of supply
chain management, efficiency drivers of organization and upstream and downstream production
processes. Apart from this, second phase of the report will focus over agile and lean methods of
logistics strategies which were mainly used by the organization in terms of enhancing its
efficiency as well as for attaining their desired goals and objectives.

Logistics 2 | P a g e
Table of Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................3
Vertical Integration..........................................................................................................................3
Drivers for efficiency and supply chain mechanisms......................................................................4
Employing, upstream to downstream production and finishing processes......................................5
Agile and lean logistics strategies....................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

Logistics 3 | P a g e
Introduction
Johnstons of Elgin was one of the giant manufacturers of woollen clothes in the nineteenth
century. But with the introduction of globalisation in the market, multinational corporations
increased the competition in the market which reduced the market share of Johnstons of Elgin.
While, company was at its peak, they expanded its business and for this, they started importing
cashmere for developing exclusive range of woven clothes. Just before the globalisation entered
into market, in 1973, organization opened another factory in Hawick, Scottish Borders with the
motive of manufacturing cashmere knitting clothes.
As Johnstons of Elgin was following traditional manufacturing system due to which organization
was not able to produce much quantity, thus, organization was insufficient to fulfil its target
audience’s demand. Apart from this, organization was not able to reduce its cost of production
due to traditional manufacturing approach and this is the major reason of organization’s failure
when globalisation entered into market and multinational corporations took over the market
share of traditional textile manufacturers. High cost of production also limited the customer
segment for the organization to an extent due to their product’s high prices. After introduction of
globalisation, supermarkets were also offering the cashmere and all other products which were
sold by Johnstons of Elgin at much cheaper rates, although, there was a huge difference between
quality offered by Johnstons of Elgin and supermarkets but with the help of cheaper rates,
supermarkets was used to target all customer segments. When Tesco was selling cashmere
pashmina at £29, it was also available for £200 in departmental store in Harvey Nicolas which
shows the difference in quality sold by multinational corporations (Christopher, 2016).
Vertical Integration
Johnstons of Elgin believed in vertical integration method of supply chain management. This
process is adopted when a company is producing more than one item and all those items are
related to each other. Vertical integration system is contrasted to horizontal integration process of
supply chain management. With the help of vertical integration system, organization attained
sustained growth and overall development in the textile industry for decades. When all
companies in the textile industry were shifted to some other business, Johnstons of Elgin was the

Logistics 4 | P a g e
only traditional manufacturer left in the textile industry after introduction of globalisation.
Expansion, adaptation of change, innovation, etc. are some of the key elements of an
organizational success. Vertical integration is one of those strategies through which organization
could easily attain its desired goals and objectives in relation with the expansion and growth of
business. This process is necessary as it helps in maintaining effective relationship with the
suppliers of raw materials (Christopher, et. al., 2017). Along with this, this method also procures
the market as a platform which is necessary for distributing products to the target audience.
Apart from these advantages, this system is efficient enough to block free competition in the
open marketplace and becomes anti-competitive.
Nature of this method is both forward as well as backward through which organizations could
easily analyse the requirements of business environment. Apart from this, this method is also
used for the purpose of reducing cost of production in terms of transportation expenses, as well
as by speeding up the delivery transactions between suppliers and manufacturers for enhancing
efficiency as well as for the objective of determining. Motive of application of this system is
when an organization controls all processes from their end i.e. from manufacturing to
distribution and as per the case study; Johnstons of Elgin was also executing their all tasks from
one site and by own. Forward and backward forms of vertical integration process are adopted on
the basis of business’ requirements as well as for the objective of enhancing organizational
performance (Fawcett, et. al., 2011).
Drivers for efficiency and supply chain mechanisms
Supply chain management is the process of buying raw materials from suppliers and producing
finished products with the help of different resources such as human resources, machinery, etc.
Due to globalisation in the UK textile industry, organization shifted its interest from
manufacturing cashmere pashmina and other traditional clothes to designer menswear as per the
business environment’s requirements. Shifting interest helped the organization in terms of
attaining sustainable growth and overall development in the marketplace for a longer period of
time. As organization always believed in expansion, organization expanded its product offering
by adding womenswear (Hill & Fredendail, 2016). In addition to this, organization also adopted
design as the main element for sustaining in the marketplace. With effective designs,

Logistics 5 | P a g e
organization becomes capable enough to differentiate its products from its competitors and this
attribute also helped the organization to approach to the other customer segments which were not
yet approached by the organization. In the twentieth century, companies with appropriate and
effective designers were meant to be powerful in the marketplace.
In order to face the competition, organization opted for differentiation and customisation strategy
in order to gain competitive advantage. With the help of these strategies, organization developed
its distinctive image from its competitors which led the company towards overall development
and growth. Customisation strategy helped the organization to grab the interest of target audience
towards their product offering through which they become capable enough to fulfil their
customer’s demands (Helfat & Campo-Rembado, 2016). One side customisation strategy was
helping organization to develop its distinctive image in the market whereas on the other hand, it
was enhancing exceeding the time taken for production. This was affecting organizational
goodwill because they were not able to fulfil their target audience’s demand in appropriate time
frame. Increase in cost of production, waste of labour, and other resources were several
ramifications faced by the organization due to enhanced time taken for the production of goods
as per the target audience’s demands and wants. Competition was also increasing in the market
but it was also originating several opportunities for the companies who were operating in
competitive business environment in terms of expanding their product offering, moving towards
fashioned products as well as for producing the apparels as per the target audience’s
requirements (Lambert & Lambert, 2012).
Grabbing these opportunities was hard for the organization as it was operating with traditional
approaches and all these opportunities were leading Johnstons of Elgin to adopt contemporary
approach in order to match up with the trends set by the competitors as well as with the objective
of gaining competitive advantage. Organization then adopted design oriented strategy for
producing different and unique designed apparels. This helped the organization to develop
separate image from the competitors which boosted organizational performance for a while but
later on, multinational stores like Tesco, Aldi, etc. started offering advanced products from
Johnstons of Elgin at lower rates as compared to Johnstons of Elgin (Lambert & Schwieterman,
2012).

Logistics 6 | P a g e
Apart from the drivers of efficiency, organizational success was also dependent over its supply
chain mechanisms through which organization was being able to manage all the tasks from one
site. These mechanisms play vital role in terms of enhancing organizational performance as well
as for the motive of gaining financial as well as reputational advantage. Main objective of supply
chain mechanisms is to develop an effective coordination amongst the organizational activities
through which organizational operations could be done in a smooth manner. This helped the
organization to enhance its performance along with maximising the scope of further
improvement and development. Johnstons of Elgin was operating their functionalities on the
basis of vertical integration system and this is one of most effective supply chain mechanisms in
the supply chain management process (Leonard, 2012). Thus, it leads the organization to grab
the opportunities for the purpose of attainment of their desired goals and objectives.
Employing, upstream to downstream production and finishing processes
In terms of enhanced performance of Johnstons of Elgin, major role was supposed to be of
effective and efficient employees. Organization was used to believe in collaboration, cooperation
and teamwork. Apart from this, employee encouragement was another major tool used by the
organization for empowering them to take decisions at their level without getting approval from
senior authorities. This helped the organization to fill appropriate confidence amongst the
employees through which both organization as well as employees attained their desired goals and
objectives (Eriksson, 2018).
Due to globalisation, competition in the apparel industry increased at vast rate which makes
survival of traditional manufactures bit difficult. At that time, traditional manufactures were only
left with the single option of customisation or producing design oriented apparels. But with the
introduction of advanced machineries by multinational corporations, traditional firms were not
able to compete with the contemporary firms in an effective manner. This lead the organization
towards failure but as organization was used to believe in innovation, creativity and adaptation of
change, organization adopted machinery for producing apparels with the combination of
traditional designs and latest machinery (Gligor, Esmark & Holcomb, 2015). Apart from this,
organization also adopted late-dyeing of yarn in terms of introducing new styles and designs in

Logistics 7 | P a g e
the apparel and textile industry for the objective of enhancing options for target audience as well
as for the objective of grabbing their attention towards organizational products (Meng, 2012).
For enhancing the productivity of organization, upstream and downstream production system
was adopted by the organization. These production systems were also one of the changes
adopted by organization for maintaining its place in the dynamic and competitive business
environment. These systems are efficient enough for enhancing organizational performance in
today’s business environment. Upstream production system was considered as the initial stage of
production process as the main motive was to extract the raw materials from natural resources, or
the primary resources. This system is mainly used for extracting minerals, petrol, and other
natural elements. Apart from extraction, no further activity is being processed (Gronemeyer, Ditz
& Strube, 2014).
Downstream production system includes further stages of upstream production system i.e. from
processing the extracted raw materials till making final products are certain crucial elements of
downstream production system. With regards to the operations of Johnstons of Elgin, they used
to operate their functionalities on the basis of downstream production system because there was
no link with the upstream production system as organization was not into extraction of certain
sort of raw materials for executing their functionalities (Hammerschmidt, et. al., 2014).
Agile and lean logistics strategies
Textile industry was at its peak in the mid-nineteenth century but with the effect of globalisation
in twentieth century, textile industry loosed the momentum as multinational corporations took
over the market share of traditional firms in textile industry. In 2007, textile industry not much as
strong in comparison to the 10 years previously but still, textile industry created huge turnover in
comparison to the period where textile industry was huge. In 2007, total number of employees
working in textile industry was recorded at 17,000 but this figure was twice a decade before.
With the effect of huge turnover, all losses were compensated. Turnover of the whole textile
industry was £1 billion including £390 million export sales (Monczka, et. al., 2015).
Number of employees was huge in comparison a decade before in comparison to the number of
people in the industry in 2007, but they were not able to fulfil demands of target audience. Major

Logistics 8 | P a g e
reason behind this success and growth is the adaptation of agile and lean principles of
manufacturing process for the objective of gaining competitive advantage (Tseng, 2014). Agile
system is known as the essence of supply chain framework and this lead the organization to fulfil
its clients’ requirements in an effective manner. The major reason behind the whole industry’s
overall success and growth is the adaptation of these frameworks has helped the whole industry
for reaching to the huge turnover of £1 billion.
Along with agile framework, organization has also adopted lean principles for the objective of
reducing waste in the production system along with enhancing the productivity. Johsntons of
Elgin was used to operate their functionalities with these two frameworks in order to enhance
their productivity as well as to attain desired goals and objectives (Wisner, Tan & Leong, 2014).

Logistics 9 | P a g e
Conclusion
From the aforesaid information, it can be concluded that adaptation of supply chain management
is an effective approach for enhancing organizational performance as well as for the objective of
attaining desired goals and objectives. In this report, various frameworks in relation with supply
chain management have been discussed. Some of these frameworks discussed in relation with the
operations of Johnstons of Elgin are vertical integration, efficiency drivers and supply chain
mechanisms, upstream and downstream production system. The last part of the report has
discussed the agile and lean production concept in relation with the supply chain management.

Logistics 10 | P a g e
References
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.
Christopher, M., 2016, Logistics & supply chain management, Pearson UK.
Christopher, M., Christopher, M., Holweg, M., & Holweg, M., 2017, Supply chain 2.0
revisited: a framework for managing volatility-induced risk in the supply chain, International
Journal of Physical Distribution & Logistics Management, 47(1), 2-17.
Eriksson, K., 2018. An option mechanism to coordinate a dyadic supply chain bilaterally in a
multi-period setting. Omega.
Fawcett, S. E., Wallin, C., Allred, C., Fawcett, A. M., & Magnan, G. M., 2011, Information
technology as an enabler of supply chain collaboration: a dynamic‐capabilities
perspective, Journal of Supply Chain Management, 47(1), pp. 38-59.
Gligor, D.M., Esmark, C.L. and Holcomb, M.C., 2015. Performance outcomes of supply chain
agility: when should you be agile?. Journal of Operations Management, 33, pp.71-82.
Gronemeyer, P., Ditz, R. and Strube, J., 2014. Trends in upstream and downstream process
development for antibody manufacturing. Bioengineering, 1(4), pp.188-212.
Hammerschmidt, N., Tscheliessnig, A., Sommer, R., Helk, B. and Jungbauer, A., 2014.
Economics of recombinant antibody production processes at various scales: Industry‐standard
compared to continuous precipitation. Biotechnology journal, 9(6), pp.766-775.
Helfat, C.E. and Campo-Rembado, M.A., 2016. Integrative capabilities, vertical integration, and
innovation over successive technology lifecycles. Organization Science, 27(2), pp.249-264.
Hill, E. & Fredendail, L.D., 2016, Basics of Supply Chain Management, CRC Press.

Logistics 11 | P a g e
Lambert, D. M., & Schwieterman, M. A., 2012, Supplier relationship management as a macro
business process, Supply Chain Management: An International Journal, 17(3), pp. 337-352.
Leonard, L. N., 2012, Attitude influencers in C2C e-commerce: Buying and selling, Journal of
Computer Information Systems, 52(3), pp. 11-17.
Meng, X., 2012, The effect of relationship management on project performance in
construction, International journal of project management, 30(2), pp. 188-198.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L., 2015, Purchasing and
supply chain management, Cengage Learning.
Tseng, S. M., 2014, The impact of knowledge management capabilities and supplier relationship
management on corporate performance, International Journal of Production Economics, 154, pp.
39-47.
Wisner, J. D., Tan, K. C., & Leong, G. K., 2014, Principles of supply chain management: A
balanced approach, Cengage Learning.