Logistics and Supply Chain Management - Johnstons of Elgin Case Study

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.

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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

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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