Lantex: Strategic Supply Chain Management

Introduction

Lantex Manufacturing Company Limited is a textile manufacturing company established in 1918. The company has a wealth of experience in textile management with elaborate supply chain management. Strategic Supply chain management has made a tremendous move from cost focus to customer-oriented and currently to strategic focus. The burning need to think and operate strategically about supply chain management has never been more important than it is currently (Bahli & Rivard, 2003). In this regard, the success of a strategy is based on the ability of the company to properly execute it.

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There is a rush all over the business organizations to streamline the supply chain management sector. According to Bahli & Rivard, (2003).

It appears that sourcing operations have been so focused on creating a strategic supply chain that they’ve forgotten how important purchasing pros with materials management skills are to a company’s bottom line. So, world-class companies are creating such positions as a master data analyst or vice president of materials, with the VP reporting directly to the chief purchasing officer (CPO). And, they are looking for individuals with not only a background in materials but also systems experience.

According to Rousel and Cohen (2005), supply chain strategy is an iterative process that evaluates the cost-benefit trade-offs of operational components.

While the business strategy constitutes the overall direction that an organization wishes to go, the supply chain strategy constitutes the actual Operations of that organization and the extended supply chain to meet a specific supply chain objective (Hurbner, 2007, p. 27).

Most companies have a well-designed business strategy but fail to have a well-organized supply chain strategy. These in most cases pose a great challenge to the effective operation of the companies. It, therefore, calls for an organized and effective chain supply which not only sets good working relations with the supply chain partners but also sets the company way above the rest. This will ensure that the company is actively competitive and thus enjoy economies of scale. This report takes a critical analysis of Strategic Supply Chain Management, its importance, and challenges. To succinctly explain the concept of strategic supply chain management, the paper analyzes Lantex Manufacturing Company limited as a case study. A comprehensive analysis of SWOT, PESTLE, and Karljic’s models will be used during the discussion.

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Lantex SWOT analysis

Gattorna, (1998, p.31) highlights that:

As an experienced and established textile manufacturer, we work closely together with companies large and small in the screen printing and laundry business, fine food producers, dental supplies and catering supplies as well as hotels, clubs and restaurants, art colleges, schools, and cleaning supplies. Cruise ships, conference organizers, and seafood restaurants take our muslin lemon wraps and conference table cloths all over the world.

SWOT analysis involves a critical and comprehensive examination of the internal and external factors that affect the business in its quest to achieve its objectives (Barney, 1991, p. 71). The exercise starts with a clear objective statement and the purpose of carrying out the SWOT analysis. This objective helps is design the business opportunity in which a company can venture into in the future.

The internal analysis of Lantex Company will not only help in revealing the strength and weaknesses but also use the information in drawing a strategic management plan. In this endeavor, the external analysis takes a critical examination of the market and competitive business environment and further goes ahead to analyze the possible external factors which may affect the growth of the business.

Importance of SWOT analysis to the Company

According to Caniëls & Gelderman (2005, p. 7), business success requires a continuous analysis of the strength, weaknesses, opportunities, and threats that affect the business. In this case, an investor can easily track the performance of the business and plan appropriately. In this line, Lantex Company limited, in the same way, applies the concept and model of SWOT analysis in its business pattern analysis.

Strength

Kotabe (2008, p. 12), explains that:

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Lantex has many hundreds of satisfied customers throughout the United Kingdom, Europe, the USA, Australia, New Zealand, and other sister Commonwealth nations. Lantex is based in the UK in the heart of East Lancashire where cotton was once king. We continue to work with cotton and our specialist textile fabrics are still woven in Lancashire. We also source direct from any textile manufacturing company worldwide for the best and most suitable quality on behalf of our clients.

Weakness

Lantex Company has a small weakness of handling change management. This is because the company has stuck to most of the old management strategies.

Opportunities

The company has got a wide experience in textile manufacturing business coupled a well established brands a cross the globe. The company has developed a great partnership relation with other major textile manufacturing companies world wide hence can outsource their material easily. This world wide links put an immense opportunity to the company’s’ present and future growth.

Threats

The company experiences stiff completion in the market. This makes it to come out with the new business strategies to compete in the market. In this case, the cost of implementing new strategies increases the company overall operational cost hence erodes the expected profits.

The SWOT matrix

The SWOT matrix presents the analysis of the company in four distinct quadrants.

Strength of Lantex

  • Superior technological know how in textile business.
  • Strong Brand name Lantex
  • The company has got a well established distributional channel not only in Europe but also in other parts of the world.
  • The company has an excellent product reputation with great customer management
  • The company has over the year installed a competent management team

Weakness

Like any other business, Lantex Company is faced with internal weakness for instance the complaint normally forwarded by the employees over payment. This has been a weakness because it has not been addressed fully.

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Opportunities

With a well and organized distribution channel world wide, the company has set bits position way above thee rest in this textile e manufacturing business. However, the company canner be complacent but continues exploring new ideas to enhance their competitiveness.

Threat

The company is faced by a number of threats in the market. This is brought about with the continuous increase in the number of textile manufactures. In addition, the reduction of cotton which is caused by environmental and weather conditions pose great threats the future growth of the company. In the analysis of the threats that faces Lantex, some of its challenges are shared by other companies the world over but its central problem and threat rears its head in the availability of raw materials. The leather market has recorded tremendous decline in the raw materials that have been left behind by increasing demands for leather products. Furthermore, the stringent legislations on the trade in some of the products from animals have attracted a keen attention on leather and its finished products. The company has to look further beyond its traditional suppliers to satisfy its demands for leather.

PESTLE- Analysis

According to Das &Teng, (2000, p. 13), PESTLE means Political, Economical, Social-Cultural, Technological, and Legal and ecological factors that affect a business entity.

PESTLE-Analysis Chart

Political Economical
  • Legislation (current and pending)
  • Laws relating to the industry
  • Tax laws
  • Regulation of transfer for capital and labour
  • Stability of the political system in a nation
  • Membership in free trade areas
  • Development of relevant economic indicators
  • Business cycles
  • Unemployment situation
  • Availability of relevant resources
  • Key industries and textile Manufacturers
  • Industry structures
Socio-Cultural Technological
  • Population and demographics figures
  • Distribution of income
  • Mobility
  • Level of education in a nation
  • Customer behaviour and culture
  • Savings rates
  • Preferences for branded / unbranded products in the market
  • Technological level of
  • The economy
  • The own industry
  • Supplier and customer industries
  • State and private R&D expenses
  • Lifecycle phases of the company products

According Hoecht and Trott (2006, p.73), explains that:

Regarding the subject of analysis, the PESTLE tool can be used to analyse business segments, industries, particular markets or whole economies. Thus the PEST provides a summary of the driving forces in the macro environment. It identifies drivers that were of high importance in the past, indicates to what extend they might change in future and how this will interfere with the organization or the whole industry. Depending on the objective of the analysis, a distinction between the current situation and potential future changes may be helpful.

In the analysis of Lantex Company using this model, there are a number of drivers that affect both positively and negatively the industries structure. PESTLE therefore gives an opportunity to analyze the level of impact each driver will have in the company and the industry as a whole. This can be easily visualized by the use of an impact –uncertainty matrix.

Uncertainty Matrix

Uncertainty Matrix

Karljic’s models

Outsourcing Advantages and Risks

“Increasingly, with rapid wealth growth of emerging global economies, the basis of Competitive advantage is changing from internal capacities to network capabilities” (Gottfredson & Puryear, 2005, p.17).Harland & Knight, (2005, p. 43) further support this argument by illustrating that,

Outsourcing may reduce operation costs and free up asset. In the early 1980s, companies started outsourcing non-core activities to suppliers for the purpose of securing specialized expertise and lower costs. Firms have moved their internal manufacturing and operations to lower cost countries to seek competitive advantage. Reasons for such outsourcing practices include low cost strategy, proximity to foreign markets and easy access to innovative capabilities. In recent years, outsourcing is associated with attaining firm’s competitive advantages. Through outsourcing, firms can access to external technologies and increase operational flexibility and concentrate more on core business activities and innovative new projects.

Strategic Outsourcing Matrix

Profit Impact Out sourcing risks
Low High
High Low Leverage items :
Increase market penetration and
expansion of market with high level outsourcing to increase economies of scale.
Strategic items:
In sourcing for competitiveness
Seek strategic partnership for long-term
market position of Lantex company
Low Non-critical items :
Ensure efficient cost reduction strategy
for economies of scale
Bottleneck Items :
Close partnership for assuring supply of raw materials
Sourcing alternate partners

Duplication which may arise between Lantex company and the other company which has been bought is that the when procurement is done differently it will be costly and results in duplication of roles. Outsourcing for chain supply increases efficiency in the company and above all it reduces the cost of procurement.

Strategic Outsourcing Matrix

Based on the analysis of the company using the three models that is SWOT analysis, PESTLE analysis and Karljic’s models, I would recommend that we the family of Lantex company take a joint outsourcing from the headquarters. This will reduce the cost strategic chain supply management.

Conclusion

Strategic chain supply management is very crucial for the success of a company. In this regard, Lantex Company should employ new strategies in running chain supply management. This is because looking at a scenario of China as compared to UK, it is relatively cheap to outsource from China hence Lantex will enjoy the economies of scale associated by outsourcing. The SWOT, PESTLE and Karljic’s models as made applicable in the case of Lantex Company indicate that the company has made tremendous efforts in its struggle to streamline the chain supply management. Strategic supply chain management cannot be overlooked and more so in a company that has a number of clients and suppliers. Lantex Company has supplies not only from the UK but from other countries producing leather as well.

References

Bahli, B. & S. Rivard , 2003, “The information technology outsourcing risk: a transaction cost and agency theory-based perspective.” Journal of Information Technology 18(3): 211-221.8

Barney, J 1991, “Firm Resources and Sustained Competitive Advantage.” Journal of Management 17(1): 99.

Caniëls, M. C. J. & Gelderman, C,J, 2005, “Purchasing strategies in the Kraljic matrix? Apower and dependence perspective.” Journal of Purchasing and Supply Management 11(2-3): 141-155.

Das, T. K. and Teng, B, S, 2000, “A Resource-Based Theory of Strategic Alliances.” Journal of Management 26(1): 31.

Gattorna J, 1998, Strategic supply chain alignment: best practice in supply chain management. Gower Publishing, Ltd.

Gottfredson, M., R. Puryear, 2005, “Strategic sourcing: from periphery to the core.” Harvard Business Review 83(2): 132-9.

Harland, C.,& Knight, L, 2005. “Outsourcing: assessing the risks and benefits for organizations, sectors and nations.” International Journal of Operations & Production Management 25(9): 831-50.

Hoecht, A. and Trott, P, 2006, “Innovation risks of strategic outsourcing.” Technovation 26(5-6): 672-681.

Hurbner, R, 2007, Strategic supply chain management in process industries: an application to specially chemicals production network design. Springer.

Kotabe, M, 2008, “Outsourcing, performance, and the role of e-commerce: A dynamic perspective.” Industrial Marketing Management. 37(1): 37-45.

Kraljic, P, 1983, “Purchasing must become supply management.” Harvard Business Review. 61(5): 109-117.

Rousel, J & Cohen, S, 2005, Strategic supply chain management: the five disciplines for top performance. McGraw-Hill Professional.

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