7. (Ex 10) WWL: Manufacture and Supply

Question 1

How many tufting machines does WWL have?

Answer 1

8 tufting machines, of varying ages

Question 2

What is the spec of WWL’s tufting machines?

Answer 2

Range of ages
Ranges from recently acquired high volume modern machine that can create complex patterns with multi-coloured yarn

to 30 year old relatively simple but still functional machine, used for single-colour carpets and rugs

Question 3

Are there many manufacturers of carpet tufting and weaving machines?

Answer 3

No, there are only a small number of large international manufacturers that supply carpet tufting and weaving machines

But they are supported by range of smaller businesses the supply ancillary carpet making equipment & offer specialist maintenance and repair services to carpet manufacturers

Question 4

What are tufting machine manufacturers supported by?

Answer 4

But they are supported by range of smaller businesses the supply ancillary carpet making equipment & offer specialist maintenance and repair services to carpet manufacturers

Question 5

How does WWL produce a range of carpets in different colours, weights and styles?

Answer 5

Varies the ‘pile’ or soft surface of the carpet, created by punching the yarn through the backing material into a series of loops

Yarn can be left as loops, which is more suitable for durable hard wear carpet
or the tips of the loops can be sheared off - a cut pile style, which produces softer carpets
These are easier to clean, but are more prone to flattening and fibre loss through wear

Question 6

Describe the 2 ways carpets can be made

Answer 6

Yarn can be left as loops, which is more suitable for durable hard wear carpet
or the tips of the loops can be sheared off - a cut pile style, which produces softer carpets
These are easier to clean, but are more prone to flattening and fibre loss through wear

Question 7

Which carpets are more durable - looped yarn or cut yarn?

Answer 7

Looped is more durable

Question 8

What are the characteristics of a cut yarn carpet?

Answer 8

Easier to clean
More prone to flattening and fibre loss through wear

So cut pile carpets tend to need replacing more often
So producing them can be seen as being less sustainable

Question 9

Which kind of carpet is seen as less sustainable?

Answer 9

Cut yarn carpets
As they need replacing more often as they aren’t as durable as looped yarn carpets

Question 10

How does WWL construct its backing material?

Answer 10

Using synthetic materials and adhesives

Question 11

What is WWL’s yarn treated with?

Answer 11

Treated with insecticide to reduce moth infestation and limit warranty claims

Question 12

How seasonal is carpet demand?

Answer 12

Type of carpet sold by WWL is highly seasonal - especially from retailers who make up 60% of WWL business

Question 13

Why do carpet buyers often want their carpet ASAP?

Answer 13

As a new carpet is an expensive and significant purchase, so have committed themselves and placed an order and then want the carpet ASAP

Question 14

When is the peak season for carpets and why?

Answer 14

Those who place their order in the second half of the calendar year invariably want the new carpet fitted before Xmas
Creates additional pressure on carpet retailers manufacturers, as have busy peak in Q4 of calendar year followed by much lower level in Q1

Question 15

What impact does the peak season for carpets have on manufacturers and retailers?

Answer 15

Added pressure in Q4 of calendar year
Then followed by much lower levels in Q1

Question 16

Why do carpet manufacturers need to anticipate demand?

Answer 16

Because of the long lead time associated with manufacturing carpets
So need to anticipate seasonal demand, often well in advance of actually receiving any orders

Question 17

How does WWL overcome the issue of long lead times for manufacturing carpet?

Answer 17

Builds up inventory by manufacturing ahead of peaks in demand

Question 18

How are the seasonal peaks in retail revenue mitigated?

Answer 18

By having revenue streams from commercial and bespoke design clients, which don’t follow such a marked seasonal pattern

Question 19

How much inventory does WWL typically hold?

Answer 19

Needs to carry sufficiently high level of each product to cater for demand

Typically holds what appears to be in excess of 100 days of sales
(Inventory days = closing inventory/CoS * 365 days)

But this masks the fact that WWL has over 20 different carpet products and a high average order value

Question 20

How many carpet products does WWL have?

Answer 20

Over 20

Question 21

How many days worth of inventory does WWL typically hold?

Answer 21

Over 100 days worth

Question 22

How do you calculate number of inventory days?

Answer 22

closing inventory / CoS * 365

Question 23

Why does the production scheduling team calculate days sales of inventory per product on an ongoing basis?

Answer 23

To avoid stock outs of WWL’s key ranges

Question 24

Describe the issues of purchasing raw wool?

Answer 24

Raw wool required for carpet yarn is a globally traded commodity, and demand for it can be erratic

Creates unpredictable risks over a key input cost

E.g. cost of yarn doubled from 2010 - 2018, rising to all time high, before a global oversupply in 2020 resulted in dramatic fall in price.
Price fell back to 2011 levels
Since 2020 wool prices have began to rise again as demand increases

Question 25

What must be done to yarn before it becomes carpet yarn?

Answer 25

Raw wool passes through a variety of treatments before it becomes carpet yarn

Question 26

Does WWL produce its own yarn?

Answer 26

No, they don’t have the scale to manufacture its own yarn
So procures its wool-based yarn from a specialist UK yarn manufacturer (Eaton Yarns Ltd)

Question 27

Who does WWL source their yarn from?

Answer 27

Eaton Yarns Ltd (Eaton) - based just outside Kidderminster

Question 28

Where is Eaton Yarns Ltd based?

Answer 28

Just outside Kidderminster

Question 29

How have yarn prices fluctuated over the years?

Answer 29

From 2011 - 2018 the price of wool doubled
rose to an all-time high until global oversupply in 2020 resulted in dramatic price fall back to 2011 levels

Since 2020, wool prices have began to rise again as global demand increases

Question 30

Why does WWL use Eaton Yarns Ltd in particular?

Answer 30

As despite there being lower-cost, larger-scale yarn manufacturers located in Europe, Kas Mukesh feels that being physically closer to a key supplier provides WWL with more protection against interruptions in supply

Question 31

What are the benefits of using a local yarn supplier?

Answer 31

Having a physically close supplier creates more protection against interruptions in supply

Mitigates other risks associates with using OS suppliers
- Currency variations
- Transport costs
- Ability to control quality
- Clearer visibility over ethical aspects of supply (e.g. env sustainability & appropriate treatment of workers)

Question 32

What are the current issues with WWL distribution/

Answer 32

As WWl’s business has expanded across the UK, it is becoming increasingly difficult for WWL to manage delivery efficiently

Fay Drost used the services of various smaller regional distributors but found their reliability variable
In addition trying to manage numerous deliveries using a large number of providers was administratively onerous

Question 33

How high is the supplier power among distribution companies and why?

Answer 33

Only a small number of national transport organisations in UK can offer reliable services
So this creates supplier power, since these companies can potentially dictate transport costs that could force companies like WWL to raise prices, and thus become uncompetitive

Question 34

Who is Mistral Logistics plc?

Answer 34

Mistral
= National transport company that WWL switched to on 1 April 2021

One of the largest distribution companies in the UK
Has good reputation for reliability

Contract with WWL provides degree of assurance for WWL in ensuring carpets are delivered on time

Question 35

Describe WWL’s contract with Mistral

Answer 35

Switched 1 April 2021
Mistral charges fee for haulage based on distance and weight transported, adj for fuel price surcharges and annual inflationary increase

Contract is renewable every 2 years

One of the largest distribution companies in the UK w reputation for reliability, so provides WWL with degree of assurance for ensuring carpets are delivered on time

Question 36

How often is the contract with minstrel renewable?

Answer 36

Every 2 years

Question 37

How does Mistral charge?

Answer 37

Based on distance and weight transported, adjusted for fuel price surcharges and an annual inflationary increase

Question 38

What is WWL’s policy on warranty?

Answer 38

Clients have come to expect carpet manufacturers such as WWL to offer warranties over longevity and damage on their wool based carpets

Question 39

What are WWL’s credit terms like?

Answer 39

WWL takes extended credit from suppliers when required, but balances the need for liquidity with ensuring that the trading relationship isn’t jeopardised