Could your business benefit from vertical integration?

Posted on 30 May 2017 by Jonny Williamson

The operations of globally celebrated plumbing systems company, John Guest are almost 100% vertically integrated, with the business leveraging considerable benefits – and growth opportunities – as a result.

Vertical Integration - As an expanding business, it’s understandable that automation is taking on an increasing amount of the company’s production processes – image courtesy of John Guest.
Every part of the process is handled in-house, from R&D and design, to manufacturing and distribution – image courtesy of John Guest.

From humble beginnings, almost 60 years ago, John Guest has grown to encompass five sites in the UK: the head office in West Drayton, where most of the fittings are designed, engineered and manufactured, a tube and pipe extrusion facility in Maidenhead, an overflow manufacturing site in Cornwall, its primary distribution centre in Bracknell, and a warehouse in Hayes.

The business is 100% family-owned, with many members of the Guest family in senior management roles. A very real advantage of being family-owned is the ability to move quickly when necessary. The communication flow and flat hierarchy within the organisation enables decisions to be rapidly made and acted upon, a process helped immeasurably by John Guest’s approach to vertical integration.

Every part of the process is handled in-house, from R&D and design, to manufacturing and distribution. The company operates its own machine tool shop, fleet of trucks and on-site testing facilities (though not formally accredited), and even the restaurant, security and cleaning staff are employed by the business – a rare thing in this modern age of outsourced services.

The Manufacturer recently sat down with the family-owned firm’s director of international sales & marketing, James Guest –  grandson of founder, John Guest.

He explained: “As we grow, we aren’t so blinkered as to believe that absolutely everything must always be in-house, and if there is an external skillset that can enhance our offering or is something we couldn’t possibly do, we would look to cherry pick that expertise.

“Fundamentally, we have not changed our belief that we want to be self-reliant. From a manufacturing perspective, all that we need is energy and the raw materials. Having that level of control is critical as we believe that companies make their own growth.

“John Guest is quite a unique organisation in that we really do operate a supply chain from the first seeds of design through to end-distribution. There are of course certain challenges associated with that, as well as a cost-structure, but it really puts a lot of added-value into the process.”

Through an expanding network of fully owned sales subsidiaries, John Guest exports to countries across Europe, North and South America, Asia and Australasia. Exports have grown to become a cornerstone of the business, accounting for roughly half of total sales.