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Technical textiles: Strategies for the millennium

The technical textiles and nonwovens industries continue to grow. At the same time, however, they and their markets are changing and companies involved need to review their strategies to ensure that they maximise their chances of success. The following are among the important trends to which businesses must adapt:

Market pull

The industry has evolved significantly over the last 20 years. It was initially based on textile production techniques, such as weaving; the emphasis then changed to types of product, such as filter media; it has recently switched in many areas to focusing on the needs of particular market segments and customers. Over the years, end-use customers have learnt about the potential of technical textile and nonwoven-based products and are now able to state very clearly their performance needs. In this sense, they are creating a market pull for products which increasingly are complex assemblies of which technical textiles and nonwovens form only a part.

Supply chains

The increase in the power of the final customers and the emergence of more complex products aimed at very specific end-uses has led in some areas to the creation of supply chains dedicated to particular customers and end uses. The following are some of the features commonly found in these supply chains:

• Driven by the needs of the final customer
• Members at several production stages
• Collaborative development by members of materials, components and finished products
• Shorter delivery lead times, including just-in-time where necessary
• Planned cost reduction and quality improvement programmes

Vertical integration

The increasingly tight performance targets set within these supply chains is leading some businesses to integrate either forwards or backwards to improve their levels of control over quality and service and to increase the added value retained by them. Examples include:

• Coating equipment being installed by producers of sewer linings (backwards)
• Nonwovens manufacturers carrying out laminating (forwards)
• Technical weavers integrating both ways by inline coating (forwards) and texturising of yarns (backwards).

Horizontal integration

Similarly, companies are buying businesses making similar products in order to achieve economies of scale and/or greater geographical market coverage. Some are acquiring businesses making different, but complementary, types of product in order to satisfy a wider range of requirements for their key customers. This is often preceded by a period of sourcing products from other businesses, which is another growing activity in response to changing needs.

Technology changes

Nonwovens is the major area in which technology is moving on. There are new fibres (e.g elastomeric, superabsorbent) and new fabric forming techniques such as the co-extrusion of spunbond and meltblown polymers to form laminated materials(e.g SMMS). In other areas of technical textiles the emphasis is largely on using the already vast array of materials and processes to design better products and to address new market needs.

Need for good strategic planning

There is a clear need for technical textile companies to take a well-considered approach to deciding on their future strategies and action plans to ensure that they adapt to change. The question arises as to how best they can do this. In the past two years, DRA have carried out strategic planning consulting assignments with five technical textiles companies operating internationally. These projects have covered a wide variety of production and value-adding technologies, all the high volume end-use market sectors and many speciality product/market combinations.

Common strategic issues

In all these consulting projects we have used a system of segmenting the company into strategic business units (SBUs), and into strategic product/market segments (SPMSs) within each SBU, for the purposes of analysis. Within this overall approach, we found in all these projects that we have had to investigate and resolve issues in the following areas in helping the company to decide on future strategies:

• Choosing an appropriate product/market/customer focus and a basic method of competition.
• The different levels of maturity of SBUs and SPMSs and the different strategies they require.
• New product development (NPD).
• The structure of supply chains, where value is added and retained and who the major decision makers (channel captains) are.

Deciding on product/market/customer focus

Many technical textiles and nonwovens businesses have become unfocused over the years. They have too many products, markets and customers. Market pressures are now leading companies to become more focused and to have a clear view of how they will compete in the future. We have developed two models to help companies to achieve a tighter market and business focus.

Model I: Company focus - Types of business

Every technical textiles business (SBU) can be classified as being one of three generic types. The first type (production based) is focused on a particular technology (e.g spun bonding, weaving, coating) as indicated by the heavy point at the apex of the triangle. It makes a few different products (eg fabrics, roll-goods types) and services many end-use markets (eg automotive, wipes, hygiene, medical). The triangle therefore broadens out progressively through products towards customers and markets. The second type of business (product based) concentrates on a particular type of product (e.g filter media). It uses several production technologies (e.g weaving, spunlacing, thermal bonding) and serves many end-use sectors. The third type of business (customer/market based) concentrates on a particular end-use sector (e.g automotive, hygiene) and supplies a number of products using several production technologies and often includes outsourcing in its activities. We find that discussion of this simple model, using fairly crude data on the market and on the business’s sales and margins by product and customer, can quickly lead to a high degree of strategic insight for our clients about their current business and how it should be evolved into the future.

Model II: Value disciplines - How to compete

Closely allied to this is a model of how a business actually competes now and how it should compete in the future based on three alternative value disciplines.

• Operational excellence: A low cost producer based on best technology, lean manufacturing and high capacity utilisation. These tend to be high volume, low margin businesses.
• Product/service leadership: A problem-solving business using several technologies.
• Customer/market focus: Concentrating on supplying the continuing product and service needs of a particular customer set or market segment.

Again, we find that the discussion of this model with clients using crude market and company data can lead rapidly to the identification of key strategic issues. In applying both these models, we carry out a strategic analysis of the company, its SBUs and SPMSs which includes consideration both of the markets the company is in and of its relative competitive strength in those markets. This latter involves a clear definition following a detailed discussion of the company’s distinctive capabilities, core competencies, strengths and weaknesses.

Different strategies for other type of businesses

There are some other matured businesses that call for different strategies altogether. There are three levels maturity. Evolved technical textiles based business; generic or speciality technical textiles intermediates and new technical textiles product development.

At the heart of any technical textiles business, there is usually 60-80 per cent of its sales which come from a small number of generic or speciality intermediate products sold to a few customers with whom special, and often long-term, relationships have been established. These generate the bulk of the business’s sales and profits and provide financial stability. The strategic issues for this type of business usually involve finding ways of holding on to and evolving important relationships by means of cost reduction, product evolution, improved service etc. Some of them ultimately evolve into businesses in their own right (the highest level of maturity) and the significance of the technical textiles often recedes to that of being just one of the material components of fairly standard value added products, such as surgical procedure packs and interlinings, which have quite specific functional end-uses. The strategic issues for these products usually concern how to achieve the economies of scale necessary to compete against more focused competitors. Mergers and acquisitions to service better the target end-use market segments and to achieve wider geographical market reach are often an important way forward for businesses of this type.

New product development

At the other end of the maturity scale is the third type of activity, new product development (NPD), which we find is badly targeted and managed by most companies. The key to success here is to focus the vast majority of scarce NPD resources (people and money) on to problems which specific customers have identified now and want a solution to quickly. Solving non-problems, or producing solutions to problems before they are needed, are both very wasteful in resource and demotivating to NPD staff.

Source: www.davidrigbyassociates.com