DAWSON LINKS UNITS TO LIFT PROFITS
Byline: Michael Hickins
NEW YORK — By using technology to streamline processes at its five principal business units, Dawson International PLC, a manufacturer of cashmere yarns and finished goods, has improved its forecasting abilities and boosted on-time delivery and fulfillment rates. The company also expects to reduce inventory costs 15 percent.
The technology should produce savings that will add $2.5 million to the bottom line annually and pay for itself within two years. Dawson, based in Edinburgh, Scotland, operates business units around the world, including processed fiber manufacturer Joseph Dawson, fine cashmere yarn maker Todd & Duncan, and private label and branded knitwear makers Barrie Knitwear, Ballantyne Cashmere and Dawson Forte Cashmere.
The businesses had operated in a highly decentralized manner; Joseph Dawson billed Todd & Duncan for processed fibers and Todd & Duncan invoiced sister companies for finished yarns.
This decentralization was intended for create maximum profits for each operating unit. But the internecine rivalry prevented the firms from squeezing out the best margins and fully leveraging their collective knowledge of the cashmere market. In the long run, this strategy reduced the total profits consolidated by the parent, Dawson International.
The company has made a strategic about-face and has launched Project One to “bring the companies together and act as one company,” said James Kresge, group information technology manager at Dawson.
The backbone of this cultural change is a company-wide enterprise-resource-planning system from Intentia, based in Kista, Sweden, which Dawson is using to improve its management of cashmere.
“The degree to which we can effectively link and manage our supply chain has a huge impact on the amount of money available to invest in inventory and to lower the cost of goods sold,” said Kresge.
Kresge’s goal has been to “identify opportunities for integration. We’re talking about big-time business change enabled by IT.”
Operations and materials planning across business units has enabled the firm to coordinate purchasing, production and distribution at each division, said Kresge.
Most of the savings will come from better management of cashmere as a commodity. Indeed, the price of cashmere is very volatile and can fluctuate from $50 to $150 per kilogram, depending on supply and demand. “It’s a very costly material,” said Kresge. “It’s the highest component of our cost of goods.”
In the past, Joseph Dawson, the unit that acquires and transforms raw cashmere, made purchase quantity decisions based on purchase orders from Todd & Duncan. It sells more than half its finished goods to Todd & Duncan.
No longer constrained to carry the lowest possible inventory because of the change in strategy, Joseph Dawson can now make purchase decisions based on its knowledge of the market and, for instance, engage in forward buying, which is buying more than immediately necessary, to take advantage of lower prices.
This kind of information reverberates through the organization. “If there’s a perceived shift in the market, the earlier you have that idea, the better you can adjust forecast sales, production and purchasing plans,” said Kresge.
The company “can [now] improve forecast accuracy by 5 percent, which represents a huge savings,” he said. Using technology to “share knowledge across the company is a huge opportunity.”
The technology is expected to help smooth the flow of goods among the various business units and “should bring about a 15 percent reduction in our cost of inventory,” he added.
On-time delivery and customer fulfillment have also improved and now stand at more than 95 percent, compared with less than 90 percent previously.
“Undoubtedly,” he said, “this kind of information technology is required to allow business change to take place.”