louis vuitton supply chain case study

DDMRP in the Supply Chain Fashion Industry: Louis Vuitton Case Study

How does DDMRP Manage Supply Chain Risks and Challenges?

Adaptation of DDMRP for Retail Products on Sale

The sale of fashion products has been a leading driver of the world economy for decades. Led by the likes of French fashion brand Louis Vuitton, one of the most iconic and well-known brands in the world, known for its high-quality luxury products , fashion has become a critical aspect of global trade. The demand for a brand name and designer products has grown steadily over the years, and the desire for consumers to get the latest news before anyone else has increased. However, fashion buyers have been reticent in integrating technology into their supply chain management for a long time.

In recent years, Louis Vuitton has used a new supply chain management system called DDMRP. DDMRP is a demand-driven, inventory-based system that helps to optimize inventory levels and ensure that products are always available to customers. It has been proven to be very effective in the fashion industry, where demand varies significantly from season to season.

What Is DDMRP?

DDMRP stands for Demand Driven Material RequirementPlanning. The next-gen planning and execution strategy strives to regulate a company’s or enterprise’s supply chain. This approach is centered on the preservation and control of critical information flow.

DDMRP is concerned with minimizing changes and absorbing potential supply shortages in the production process. Customer demand constantly drives the supply chain, and shortages are often unavoidable, even in tiny enterprises.

By introducing buffers to the supply stock and changing them as needed, it can regulate replenishment effectively and on schedule by utilizing the demand-driven material needs planning technique (DDMRP).

DDMRP allows businesses to plan their supply chain more flexibly and adaptively, ensuring they have the right amount of stock.

How does DDMRP work?

DDMRP drives supply order creation and management throughout a supply chain by utilizing key decoupling points.

• Strategic decoupling: The only way to eliminate the bullwhip effect, decrease unpredictability, and shorten lead times is to decouple the supply chain.
• Buffer sizing : Buffer sizing acts as a shock absorber, reducing or eliminating supply and demand unpredictability and reducing or eliminating the bullwhip effect.
• Dynamic adjustments: A dynamic adjustment of the buffer profiles calms the supply chain and smooths operation for all variations within a specific time frame.
• Planning based on demand: Demand-driving planning entails producing supply orders based on actual inventory, ordered but unreceived stock, and qualifying sales order demand.
• Visible and collaborative execution: When workers have visibility into inventory through notifications that track consumption, ordering lead times and material delivery may be linked.

Louis Vuitton and DDMRP: Case Study

Louis Vuitton is a leading fashion brand using DDMRP in its supply chain for several years. The main benefits of having DDMRP in place are improved inventory visibility and reduced stockouts. Louis Vuitton has achieved a significant improvement in inventory turnover and a reduction in the amount of stock held at any one time.

This has resulted in a more efficient and streamlined supply chain, which has helped to improve customer service and reduce costs.

How Did Louis Vuitton Implement DDMRP?

You are probably wondering how well Louis Vuitton implemented DDMRP and what benefits they have gained.

Louis Vuitton, in partnership with Anaplan and Bemyapp, organized a Hackathon at an Information Technology School in Paris called Ecole 42. The purpose of the hackathon was to develop a new and better supply chain model so that Louis Vuitton could implement it globally on its supply chain. There were 50 participants in the hackathon divided into ten teams. Each team was provided with dedicated coaches from Louis Vuitton, and support from Anaplan for implementation was also given. The teams had to follow while developing the new supply chain model.

One of the criteria was that the model should be based on DDMRP. This methodology made the supply chain react according to the customers’ demand, and also, they should use Anaplan to develop the model. The team which won the hackathon was Plan!T. Students handled complicated problems such as supply, distribution, and manufacturing . They also dealt with unforeseen circumstances inspired by real-life occurrences, such as monetary swings, factory productivity influenced by a flu pandemic, and increased orders following social media promotions by various fashion fans.

After that, Louis Vuitton started using DDMRP in its supply chain in 2013. The change in the supply chain control was real and visible. They planned buffer stocks and built decoupling points that helped them manage the supply better. Since the implementation of DDMRP, it has seen a number of benefits, including increased inventory accuracy, reduced stockouts, and improved customer service.

DDMRP has allowed Louis Vuitton to become more agile and responsive to changes in the market , and it has helped to improve the flow of information and communication within the company.

What Benefits Has Louis Vuitton Seen Since Implementing DDMRP?

Louis Vuitton has seen significant benefits from using DDMRP in its supply chain. For example, it has reduced inventory levels by 30% while ensuring that products are always available to customers. It has also improved delivery times by up to 50%.

DDMRP has allowed Louis Vuitton to become more agile and responsive to changes in the market, and it has helped to improve the flow of information and communication within the company.

The company has seen a reduction in stockouts and improved customer service. In addition, implementing DDMRP has resulted in a more synchronized supply chain and reduced lead times.

How Can Other Fashion Brands Benefit From DDMRP?

Other brands in the fashion industry can benefit from DDMRP in a few ways.

First, by using DDMRP, brands can improve their forecasting and inventory management. This will help them reduce excess inventory and ensure they have the right amount of stock on hand at all times.

Second, DDMRP can help brands to manage their supplier relationships better. By collaborating with suppliers on forecasting and inventory management, brands can create a more efficient supply chain and improve lead times.

Third, DDMRP can help brands to manage their products more effectively. By planning production and collaborating with suppliers, brands can ensure that they produce the right amount of products at the right time.

Fourth, DDMRP helps to lower order management costs. All the costs are reduced as there is less last-minute, frantic reordering of production. Planners, for example, do not need to spend as much time revising and readjusting the plan (leaving more time to work on things that provide more value to the organization.) Because less expediting is required, material costs and administrative costs like shipping frequently fall.

Fifth, DDMRP helps in maintaining higher margins. When manufacturers have to decrease their prices to obtain business or when overhead expenditures such as the cost of expediting orders grow, margins collapse. DDMRP often allows manufacturers to dramatically reduce lead times, allowing them to compete without lowering pricing. Many have even been able to charge a premium for their services. Furthermore, as previously said, a more predictable, less variable production plan reduces overhead expenses, which can eat into profits.

The Future of Fashion and DDMRP

Looking to the future, it’s clear that fashion businesses need to adopt DDMRP if they want to remain competitive. This innovative methodology has already proven its worth in the supply chain management industry, and there’s no reason why it can’t bring the same success to fashion businesses.

With DDMRP in place, fashion companies will be able to streamline their supply chain, reduce inventory costs, and improve responsiveness to customer demand. So if you have a fashion company in need of a more effective way to streamline your supply chain, start implementing DDMRP today and see the benefits for yourself!

The fashion industry is a cutthroat business. Brands are always looking for ways to set themselves apart from the competition, and one of the best ways to do that is through efficient and effective supply chain management.

Fashion leader Louis Vuitton turned to DDMRP to help them streamline their supply chain. And the results have been impressive. Thanks to DDMRP, Louis Vuitton has been able to reduce inventory levels, improve stock accuracy, and shorten lead times.

So if you’re looking for a way to improve your supply chain management, DDMRP is worth considering.

Interested in knowing how Patrick Rigoni can step up the game of your supply chain? Contact us today and get a free consultation . Patrick Rigoni also offers in-depth DDMRP courses; if you are interested to know more about DDMRP for the supply chain for your company, here is the link to the NEW DDMRP Page.

Related posts

Embracing DDMRP: Liberating Your Supply Chain from Conventional Constraints for Unrivalled Agility

Navigating Market Dynamics: Building Resilient Supply Chains with Real-Time Demand Insights

The Power of Proactivity: Leveraging DDMRP for Demand-Driven Excellence

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Louis Vuitton Supply Chain and Production Processes Analysis

Introduction.

       Louis Vuitton , the globally sought after ultimate status brand, “manages to combine mass production with a highly aspirational image”   (Haig 2006, p.137). The company was started in France in the mid-nineteenth century by Louis Vuitton, a carpenter’s son, who became renowned for his luggage, bags, and accessories for the wealthy. Creating a revolution like travel, Vuitton established a new era of modernity. However, with a decline in the glamour of travel, the company diversified into high-fashion clothing, jewelry, shoes, and watches. Significantly, brand weakening due to product diversification has been avoided, with a focus on strengthening the brand name.

Thesis Statement: The purpose of this paper is to analyze Louis Vuitton’s high fashion collections for Autumn Winter 2009 (AW09) and Spring Summer 2010 (SS10) and to investigate the supply chain and production processes of the company.

Besides advertising through celebrity endorsement and sports sponsorship, Louis Vuitton’s success is attributed to the control it maintains overall its operations from creative design to distribution. This ensures not only a commitment to quality (New York Magazine 1985) but also its high operating margins of around 45 percent as compared to those of its closest competitors. Marc Jacobs is Louis Vuitton’s high profile designer.

Louis Vuitton’s AW09/ SS10: Range Plan and Fabric Selection

      At the Paris fashion week, Louis Vuitton’s Autumn-Winter 2009 (AW09) and Spring  Summer 2010 (SS10) collections depicted designer Marc Jacobs’ blending of various influences. Olde world appeal was combined with “a little bit of French fancy, a sprinkling of 80s bad taste and a Playboy bunny” look (O’Neill 2009). The fabrics used were mainly cashmere, wool, silk, satin, lame velvet, fox fur, taffeta, embroidered panne velvet, re-embroidered printed textiles, leather, and diaphanous tulle (Fall Winter 2009).

Figure 1. Louis Vuitton’s AW09 Collection: Paris Fashion Week 

(O’Neill, 2009)

     In Figure 1. above, the mixed influences are visible, and the clothes range from the “sublimely wearable” (O’Neill 2009) to the “gorgeously unusual to the not so delightfully strange.” The collection is divided into groups based on different colors. The black apparel was most appealing, and the touches of color at the sashes added to the beauty of the dresses. The oversized shoulders lent an unusual but attractive look and the use of sheer fabric in some of the garments added to the feminine appeal.

Figure 2. Louis Vuitton’s AW09 Collection: Paris Fashion Week

(O’Neill 2009)

       In figure 2. above, a couple of the garments in beige or nude tones are seen. The range in this shade was found to be the most reliable outfits, with “cute bubble skirts” (O’Neill 2009), while the oversized double-breasted jacket in the image at the left appeared attractive. The coral highlights in the enormous pink taffeta bow on the head was the right color combination, adding to the appeal of the outfit. The nude range of clothing was the subtlest in the entire collection, with feminine lines and a pretty presentation on the whole. The accessories such as the shoulder bag in nude embossed leather and the white metal and resin hair stick completed the look, along with the knee-length black boots.

Like the green, black and nude shades above, the blue range had an 80s look, while the bold reds depicted power dressing; the attractive coats, however, did not have the flow that was found in the other color groups. The painted prints were also worth taking note of, with perfect details and intricately cut cuffs and collars. The bunny ears and thigh-high lace-up boots did not, however, add to the otherwise very wearable look. Some of the outfits in the entire collection were winners.

The Spring Summer 2010 (SS10) collection displayed at the Paris Fashion Week was dominated by the Afro-wig worn with all the outfits.

Figure 3. Louis Vuitton’s SS10 Collection: Paris Fashion Week

(Vogue Blog 2009)

     In Figure 3. above, the row of models in the SS10 collection sport the wild look, with over-sized Afro wigs composed of five mini hairs stitched together, raccoon tails attached to monogrammed purses, and furry heeled clogs and toggles on the feet. Enormous faded denim knapsacks, The entire look achieved the over-the-top feel that was intended by the designer. The garments are a combination of hip-style cycling shorts and dresses, hunting, and fishing-tackle jackets (Vogue Blog 2009). Tweed jackets had big patch pockets, similar to safari jackets.

As seen in Figure 4. below, plenty of outerwear and parkas in neutral shades were used, which is unusual for summer wear. These were teamed with pleated gym-style skirts and mini skirts in “clear sparkly stretchy nets and cycling shorts” (Grazia 2009).

Figure 4. Louis Vuitton’s SS10 Collection: Paris Fashion Week

(Blogspot 2009)

     Figure 4. above displays the clog sole shoes with small heels, and trimmings of tassels and little pom-poms.

Logistics Plan

       The company’s control over all its functions facilitates Louis Vuitton’s unique high-

the wire balancing act, sustaining its prestige and image as a luxury brand while mass marketing its products. The original LV logo provides immediate social significance with its power to command people’s attention. Despite mass marketing, the brand’s high status is “enforced through carefully targeted advertising in high-end publications and selective distribution” (Haig 2006, p.140).

The supply chain cannot be organized in a conventional manner if optimal outcomes are to be achieved. According to Dussauge and Moatti (2008), the Louis Vuitton case has to be tackled using a segmented approach to supply chain management. This means differentiating between functional and innovative products, consequently setting up a physically efficient process for the former, and a market-responsive process for the latter to obtain significantly beneficial results.

According to i2 (2004), the main challenges faced by Louis Vuitton were: a requirement for a better supply of finished products in stores, increased accuracy in sales forecasting, managing greater complexity of supply chain due to increasing number of product lines, and support for the expansion of the company’s stores. The solutions implemented to meet these challenges were: the initiation of global supply chain review, taking into account the organizational processes and technology, creating new forecasting systems at the zonal and central levels, and establishing new planning processes. The results of these actions for improving the logistical operations were: increased in-store availability of products, more accurate sales forecasts on a global basis, provision of support for the company’s expansion, and its more complex supply chain.

Timing Plan

       According to IBM (2005), changing business conditions compel organizations to find innovative ways of planning and allocating their human capital according to future projects to be implemented. Greater efficiency and flexibility in labor-scheduling activities are being facilitated by new technologies in today’s business world.

Louis Vuitton in North America successfully reduced costs, and focused staff and managerial time and attention on customers “by upgrading its labor-scheduling practices” (IBM 2005, p.5). By integrating this with human resources, customer counting, and point of sales technology, Louis Vuitton achieved more excellent staff attendance on customers during higher traffic periods in the company’s outlets. This has also resulted in a lowering of costs related to manual data entry for payroll processing by 50 percent, besides significantly reducing the time taken by managers to perform payroll and labor-scheduling tasks. In the timing, planning, and implementation of fashion shows and other related events, the company employs similar strategies to ensure maximum allocation of resources for the event, with efficient and flexible labor scheduling.

Distribution of Products at Louis Vuitton

As an environmentally conscious and socially responsible organization, some actions are undertaken by Louis Vuitton in the company’s operations and transportation of products to its various outlets located all over the globe. The company has increased the proportion of leather goods transported by sea, which is 40 times less polluting than air transport. It could save expenditure on intermediate packaging for transport from workshop to stores, and similarly eliminated the need for 20 tonnes of plastic and its consequent environmental hazard, by not using plastic wrappings for finished products ready for delivery. Instead, eco-labeled paper is in use for all packaging. New lighting concepts have been introduced in newly opened stores, thus saving 30% of energy. Significantly, the education and training of employees have improved operations to a great extent (Environment 2007).   Moreover, to speed up processes in order to adequately meet the demand for the products, Louis Vuitton has started using modern methods as in factory lines (Passariello 2006).

This paper has highlighted Louis Vuitton’s Autumn-Winter 2009 (AW09) and Spring Summer 2010 (SS10) high fashion collections. The company’s supply chain and production processes have been examined with respect to range, fabric selection, logistics, timing plans, and the distribution map of the products. It is concluded that the company’s limiting itself to its outlets for the sale of its products, and maintaining a robust independent functioning are significant contributors to Louis Vuitton’s sustainability and success, with its increasing presence all over the globe.

Bibliography

• Blogspot. (2009).  Say what’s right?  Retrieved on 19th December, 2009 from:  https://saywhatsgood.blogspot.com/2009/10/say-whats-good-tolouis-vuitton-ss10.html
• Dussauge, P. and Moatti, V. (2008). Louis Vuitton: New product introductions versus product availability. ECCH Case Details. Retrieved on 20th December from: https://www.ecch.com/casesearch/product_details.cfm?id=79272&rc=1&tc=1&pg=1&adv_search=1
• Environment. (2007).  The protection of the environment: Louis Vuitton actions.  Retrieved on 20th December, 2009 from: www.louisvuitton.com/media/images/…/en…/environnementGB.pdf
• Fall Winter. (2009).  Louis Vuitton collections: Women.  Fall Winter 2009. Retrieved on 19th December, 2009 from: https://www.louisvuitton.com/web/flash/index.jsp;?buy=1&langue=en_US&direct1=unfa
• Grazia. (2009).  Live! Louis Vuitton’s ghetto fab mash-up.  graziadaily.co.uk. Retrieved on 20th December, 2009 from: https://www.graziadaily.co.uk/fashion/archive/2009/10/07/live-louis-vuitton-s-ghetto-fab-mash-up.htm
• Haig, M. (2006).  Brand royalty: How the world’s top 100 brands thrive and survive. Great Britain: Kogan Page Publishers.
• i2 (2004).  Blending new technologies with trustworthy tradition and creativity at Louis  Vuitton. i2: The Supply Chain Results Company. Retrieved on 20th December, 2009 from: https://www.i2.com/assets/pdf/CSS_RET_louis_vuitton_css7254_083004.pdf
• IBM. (2005).  Good timing: Realizing value from investments in labor scheduling.  Human Capital Management. IBM Institute for Business Value. Retrieved on 19th December, 2009 from: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.127.3806&rep=rep1&type=p
• New York Magazine. (November 25, 1985). Louis Vuitton: A commitment to quality. New York Magazine , 18 (46): p.20. The United States of America: New York Media, LLC Publishers.
• O’Neill, S. (March 13, 2009).  Paris fashion week: Louis Vuitton AW09.  myfashionlife. Retrieved on 19th December, 2009 from: https://www.myfashionlife.com/archives/2009/03/13/paris-fashion-week-louis-vuitton-aw09/
• Passariello, C. (2006).  Louis Vuitton tries modern methods on factory lines. Business. post-gazette.com. Retrieved on 20th December, 2009 from: https://www.post-gazette.com/pg/06282/728653-28.stm
• Vogue Blog. (2009).  The wild bunch.  vogue.com. Retrieved on 20th December, 2009  from: https://www.vogue.co.uk/blogs/the-vogue-blog/articles/091007-paris-fashion-week-ss10-louis-vuitton.aspx

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Implementing Vertical Integration in the Fashion Industry

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Downstream integration is when a company expands forwards in the supply chain. An example of this would be a fashion manufacturer purchasing a retail store. This essay will explore the research surrounding the strategy of vertical integration highlighting the benefits it can have on a company’s supply chain. As well as this, it will also look into the consequences and costs involved with the strategy thus providing an overall analysis on vertical integration. Furthermore, this essay will specifically look into firms within the fashion industry underlining how the strategy of vertical integration can be used. It will discuss both upstream and downstream vertical integration highlighting how fashion retailers and manufacturers can use the strategy.

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Dumbrill, W., Wang, Y. (2021). Implementing Vertical Integration in the Fashion Industry. In: Wang, Y., Martinsen, K., Yu, T., Wang, K. (eds) Advanced Manufacturing and Automation X. IWAMA 2020. Lecture Notes in Electrical Engineering, vol 737. Springer, Singapore. https://doi.org/10.1007/978-981-33-6318-2_50

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Supply chain strategy in the luxury fashion industry: impacts on performance indicators

International Journal of Productivity and Performance Management

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Article publication date: 30 November 2021

Issue publication date: 17 May 2023

The purpose of this paper was to investigate what types of supply chain strategies (SCS) are implemented within luxury fashion companies, according to the drivers that regulate competitiveness in this sector (brand positioning, distribution channel, type and line of product). Moreover, the objective was to define which key performance indicators (KPIs) should be measured according to the chosen strategy, and finally to evaluate the alignment of luxury fashion companies with the proposed indicators.

Design/methodology/approach

The literature review was the first step performed. Thereafter, a case study was conducted and the sample, composed of six companies, was selected, a questionnaire was then developed to guide the interviews, after which the data were collected. From the data, a primary case analysis was conducted, from which cross-case patterns were also researched.

From the results obtained, it was possible to state that companies involved in the case study adopted different SCS within the same company according to the drivers that regulate the sector competitiveness. As a result, the product line was shown to be the only driver that affected both the alignment between the expected and implemented SCS, respectively, and the alignment with the selected KPIs.

Originality/value

The paper provides valuable insights to companies that are trying to align SCS and KPIs. The close link between these aspects had not yet been explored previously. In particular, there were no indications about the KPIs that have to be measured for a specific SCS.

Supply chain strategies

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Bindi, B. , Bandinelli, R. , Fani, V. and Pero, M.E.P. (2023), "Supply chain strategy in the luxury fashion industry: impacts on performance indicators", International Journal of Productivity and Performance Management , Vol. 72 No. 5, pp. 1338-1367. https://doi.org/10.1108/IJPPM-02-2021-0079

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Copyright © 2021, Bianca Bindi, Romeo Bandinelli, Virginia Fani and Margherita Emma Paola Pero

Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

1. Introduction

The luxury fashion (apparel and footwear) and leather goods accounted for 50% of the luxury goods revenue in 2021. The worldwide revenue in 2021 are estimated to be US$150 billion ( ‘Luxury Fashion – Worldwide | Statista Market Forecast’, 2021 ). In particular, luxury fashion and leather goods industry in Europe is expected to overcome US$55 billion, attained by more than 185,000 companies comprising 2 million employees ( “Luxury Fashion – Europe | Statista Market Forecast”, 2021 ).

The luxury fashion sector represents a distinct example within the manufacturing industry, showing several characteristics rendering it difficult for the management of both the productive and logistic processes. In particular, three principle aspects have been identified ( Christopher et al. , 2004 ). The first aspect pertains to the short product life cycle of the fashion product designed to capture the current mood of the moment. The second relates to the unpredictable and volatile demand of customers that are subject to complete change within a relatively short period of time ( Wang et al. , 2012 ). Finally, there is the impulsive purchasing behavior ( Newman and Foxall, 2003 ), attributable to the nature of fashion shoppers as well as the impulsiveness surrounding their purchase behavior.

The strong competitiveness within this sector has led many companies to undertake initiatives in rationalizing the operating processes, aimed at improving the ability to respond to the continuous changes in customer demand, while simultaneously, improving both the efficiency and speed of the entire supply chain (SC) ( Vona, 2003 ).

Therefore, in the face of the constant changes in consumer needs, successful companies can be defined as those with the ability to respond to these rapid changes by reducing lead time ( Christopher and Peck, 2004 ). Within this context, there is the need to define an SCS that can maximize the performance of fashion companies. The SCS is defined as a set of management methods and activities by which a SC obtains advantages over competitors ( Brun and Castelli, 2008 ). It is necessary to specify that, when talking about an SCS, there is no “one best way” or best choice in any specific case. Rather it is an approach that depends on both the internal characteristics of the company as well as the environmental characteristics ( Lee, 2003 ). Therefore, in order to define the correct SCS, it is necessary to, firstly, identify the context in which the SCS has to compete and then define the objectives of the single SC.

The definition of the SCS is strongly linked to the issue of performance monitoring, in order to assess whether the strategy is implemented correctly and to direct the SC toward strategic objectives. For the fashion sector, the literature provides information about various SCS and performance indicators ( Brun et al.. , 2017; Brun and Castelli, 2008 ). However, the close link between the two concepts has not yet been explored. In particular, there is no evidence regarding the types of performance indicators that have to be measured for a specific SCS.

Based on a literature analysis and case studies, the present article aims to provide necessary information to fashion luxury companies regarding the type SCS that should be implemented, based on the factors that regulate competitiveness in this sector. Moreover, the article also aims to identify the correct KPIs to measure, according to the chosen strategy.

What types of SCS are currently adopted by fashion companies and why are these strategies adopted?

Which KPIs should be measured by fashion companies according to the SCS identified in RQ1?

Investigating what types of SCS are implemented within fashion companies and understanding the reasons why companies choose to implement these strategies.

Defining which performance indicators should be used to measure luxury fashion companies in relation to the strategy adopted and the evaluation of the alignment of luxury fashion companies with the proposed indicators.

Given this background, the paper has been developed as follows. Section 2 presents a literature review on the SCS implemented within the fashion companies and the factors that influence these choices, as well as the KPIs measured within fashion companies. Section 3 outlines the RQ and methodology, also introducing the principle features of the companies involved in the case studies performed. Section 4 and Section 5 present the findings and analysis of these results, respectively. Finally, section 6 offers some concluding remarks with suggestions for further developments.

2. Literature review

2.1 supply chain strategy.

Regarding the SCS strategies proposed in the literature, particular attention should be paid to the characteristics between lean and agile strategies, mentioned in all papers regarding this topic, as well as the hybrid strategy that results from the combination of the two aforementioned strategies.

The lean SCS ( Table 1 ) is aimed at creating a cost-efficient SC, by effectively managing inventory and focusing on improving the quality in the SC ( Cagnazzo et al. , 2010 ), thus eliminating waste ( Huang et al. , 2002; Christopher and Towill, 2002 ). Christopher and Peck (2004) have argued that lean SCs perform well under conditions where demand is relatively stable and predictable, and variety is low.

On the other hand, an agile SCS is aimed at being flexible by adapting quickly and effectively to rapidly changing customer needs ( Christopher et al. , 2004; Huang et al. , 2002; Christopher and Towill, 2002; Lin et al. , 2006 ). Effectiveness is the primary goal of this strategy. Finally, the hybrid strategy is derived from the combination of the two aforementioned strategies. In the hybrid SCS, the practice employed to ensure adaptability to the constant changing customer demands is that of postponement ( Cagnazzo et al. , 2010 ). The latter strategy is aimed at moving the differentiation of the product downstream to the final assembly, and as a consequence closer to the customer ( Mason-Jones et al. , 2000 ). In particular, the decoupling point (DP), is the point at which real demand penetrates upstream in a SC. Christopher and Towill (2002) contend that processes are designed to be lean up until the DP and agile beyond that point, respectively. Therefore, the hybrid strategy pursues the cost effectiveness up until the DP and the high service level, necessary in the volatile marketplace, downstream of that point ( Christopher, 2000 ).

Depending on the positioning of the DP, different order fulfillment strategies can be defined, for instance make to stock (MTS), in which the SC activities are based on forecasts, and make to order (MTO), in which the supply chain activities are triggered by orders ( Wortmann, 1992 ). In line with Christopher and Towill (2002) , lean SC strategies are expected to be mostly associated to MTS situations, while agile for MTO. Interestingly, given the SC perspective of the paper, the term lean is used to consider the entire SCS, not the specific tools used in each stage of the SC, differently from operations management literature that is traditionally focusing on the techniques, such as Kanban systems ( Slack et al. , 2010 ), used within a factory.

2.2 Factors that influence the choice of a supply chain strategy

From an analysis of the literature, there is the possibility of implementing, within a single company, multiple SCS on the basis of factors that drive the competition, namely brand positioning, distribution channel, type of product ( Brun and Castelli, 2008 ) and line of product ( Brun et al. , 2008 ). Based on these four factors, a company is in a position to make various decisions. These decisions may include the application of the same strategy to the entire SC, the application of a different strategy based on one factor (i.e. business segment), selecting an intermediate level, thereby segmenting the SCS on the basis of two of the proposed factors and finally segmenting the SCS according to all four factors proposed ( Brun and Castelli, 2008 ). In addition, from this segmentation, it is possible to understand the hierarchy of the four factors (i.e. which is the main determinant of the strategic segmentation).

Table 2 reports the four factors and highlights how these can influence the choice of the SCS.

2.3 Link between supply chain strategies and key performance indicators

The KPIs can be defined as the physical values which are used to measure, compare and manage the overall organizational performance ( Gosselin, 2005 ). The KPIs may include the quality ( De Toni and Tonchia, 2001; Gosselin, 2005; Badri et al. , 1995; Neely et al. , 2005 ), cost ( De Toni and Tonchia, 2001; Neely et al. , 2005; White, 1996 ), financial ( Parmenter, 2015; White, 1996 ), flexibility ( De Toni and Tonchia, 2001 ; and White, 1996 ), delivery reliability ( White, 1996 ), employee satisfaction ( Leong et al. , 1990; Ishaq Bhatti and Awan, 2014; Parmenter, 2015 ), customer satisfaction ( Ittner and Larcker, 1998 and Neely et al. , 2005; Parmenter, 2015 ), safety ( Flin et al. , 2000; Mearns et al. , 2003; Parmenter, 2015 ), environment/community ( Neely et al. , 2005; Parmenter, 2015; White, 1996 ) and learning and growth ( Parmenter, 2015; Sadler-Smith et al. , 2001; Utterback and Abernathy, 1975 ).

KPIs are used by the organizations in order to ensure that they are proceeding in correct direction, achieving targets in terms of organizational goals and objectives. The performance measures are used to evaluate and control the overall business operations. These indicators are also used to measure and compare the performance of different organizations within the industry, plants, departments, teams as well as between individuals, respectively ( Ghalayini et al. , 1997; Ishaq Bhatti and Awan, 2014; Parmenter, 2015 ).

Therefore, KPIs, beyond the objective of improving SC performance, may also represent the means to align the SC with the business strategy.

In order to identify the KPIs measured by fashion companies, a structured literature analysis was conducted ( Figure 1 ).

From the analysis of the selected papers, an initial set of 33 KPIs was firstly identified starting from the following keywords: (“Key performance indicator” OR “performance measurement”) AND (fashion OR luxury) and (SCOR AND fashion). These were both generic for manufacturing and specific for the fashion sector. The identified KPIs were then integrated and detailed through the metrics of the supply-chain operations reference (SCOR) model and design chain operations reference (DCOR) model. For example, the supplier service level was subdivided into three indicators identified in the SCOR model as follows: % of orders received on time with respect to the requested date, % of orders received with the correct quantity requested and % of compliant orders received. Thus, the number of KPIs identified in the literature as a result of the integration of the metrics present in the DCOR and SCOR models increases from 33 to 53. Finally, the number of identified KPIs increases again from 53 to 71 as a result of the previously detailed breakdown operation ( Figure 2 ).

Subsequently, a further analysis to understand how to classify and categorize the identified KPIs was then conducted. The literature provides several examples of classification, but for the purpose of the present article, KPI classification was performed using the classification framework of the DCOR and SCOR models, respectively ( Thilakarathna et al. , 2015 ).

Following this classification, a second classification was performed according to the three types of SCS previously identified.

The classification of KPIs within a single strategy was made according to the order winner-qualifier matrix. Hill (1995) introduced the concept of order winner (OW) and order qualifier (OQ) by contending that manufacturing companies should choose their strategy based on these parameters. The correct definition of the OQ and OW leads to a correct definition of the business strategy which, in turn, results in strategic choices at the SC level.

It' is essential to understand the connection between the concept of OW and OQ, and lean and agile strategies, respectively. For example, a lean strategy is more effective when the OW is the cost, whereas an agile SCS is more effective when the OW is the service level ( Mason-Jones et al. , 2000 ).

Starting from the OW and OQ matrix, it was possible to produce a second classification by positioning the KPIs within the identified strategies. The association between KPIs and SCS, identified from the literature analysis, was carried out using the OW concept, since it was chosen to report and classify only those KPIs related to the cost (OW of the Lean strategy) for the lean strategy and those related to the service level (OW of the agile strategy) for the agile strategy.

The results of the KPIs process classification and the association to a strategy are shown in Table 3 .

During the case studies, the above classifications were used in order to verify whether the companies measure and monitor at least the set of identified KPIs, even if under a different name, necessary to achieve the objectives and implement a lean or agile SCS.

3. Research methodology

The methodology selected was case-based research since this was considered a more suitable approach in answering the type of RQs formulated. The case-based research was carried out in the first phase and included the analysis of secondary sources and interviews carried out in all the companies. These interviews were conducted using a questionnaire.

The methodology was organized into two steps. The first step was the selection of a sample of luxury fashion companies ( Eisenhardt, 1989; Maimbo and Pervan, 2005 ). Multiple-case sampling was used to increase confidence in the findings ( Miles and Huberman, 1984 ) and support their external validity. The research involved selecting a sample of six companies, belonging to the luxury fashion industry, with different sizes and turnovers that were representative of most of the companies in this sector. Of the six sample companies selected, there were two international brands belonging to leading groups in the luxury fashion sector, one smaller company with a strong vocation for craftsmanship and exclusivity, and three brands with smaller turnover and company size. According to Eisenhardt (1989) selecting a sample size ranging between four and ten cases is effective in this type of research approach. Hence, a sample size of six was considered sufficient in providing an accurate representation in an empirical based research. The sample was composed of companies with heterogeneous characteristics regarding the drivers that potentially influence the choice of SCS identified in the literature. In particular, the selected companies were also represented by some common drivers, thereby permitting us to compare the strategies and KPIs implemented by these companies. Additionally, the companies were also represented by different drivers, thereby highlighting all the differences and permitting us to cover all the distinctive features of the sector.

Then in the data collection phase, all the information in answer to the RQ was obtained. In the first phase, a semi-structured two-hour interview was conducted. Initially, information was collected from indirect sources and from previous knowledge given by projects carried out within the company, and thereafter, included the SC and Information Manager (IM) of the companies identified within the sample. The interviews were carried out using a questionnaire (i.e. consisting of a first part of open-ended questions and a second part of closed-ended questions) divided into three sections. In the first section, general information about the companies was gathered. Then, the second section was dedicated to obtaining information about the drivers (i.e. distribution channel, type of product and line of product) that could be influenced by the choice of SCS. In turn, the third section was aimed at discovering the KPIs monitored, controlled and/or optimized by the luxury fashion companies examined. Finally, both the main characteristics of the individual companies and any points of contrast or similarity between all the companies in the sample were identified in the analysis and synthesis phases, respectively. In the data analysis phase, a transcription and reworking of the information obtained by each individual interviewed within the company was carried out in order to compare all the answers obtained. The realization of these documents was necessary in order to be able to make a representative report of each case study, and then to compare the case studies through a cross-case analysis.

In Table 4 the individual luxury fashion firms involved in the present case study were presented.

A brief summary of the companies is presented below.

Company 1 forms part of the luxury fashion industry, founded in Spain in the 1900s. Last year alone, the company invoiced about 239 M€. Currently, this company is experiencing a period of strong growth and as a result is planning to be autonomous from the owner group, particularly in the footwear sector.

Company 2 is one of the most important luxury fashion companies both in Italy and worldwide. This company was founded in the early 1900s with an increasing turnover (1 B€ in 2019). It manages multiple product lines, including handbags, small leather goods, footwear, ready to wear, bijoux, fashion accessories, furs, belts and fashion jewels.

Company 3 was founded in Milan and is focused on leather goods (bags and accessories). The turnover, according to the latest available data, is approximately 3.2 B€. This company manages many lines, including ready to wear, footwear, leather goods, bijoux, accessories, bags, belts, jewels, perfumes and cosmetics.

Company 4 was founded in Florence in the second half of the 1900s. Originally a small family-run luxury fashion boutique, specialized in the creation of ties, it has currently expanded to become an important international luxury group pillar of made in Italy haute couture with about 600 employees worldwide. The specialized production area is the “ total look for men” (suits, shirts, jeans, polo shirts, casual wear and ties), which comprises completely hand-made items.

Company 5 was founded in France about 25 years ago and is positioned within the luxury fashion sector of women's footwear. The core business is represented by women's footwear, which has permitted the brand to attain a turnover of 1B€.

Company 6 originated in 1856 in Hampshire. The iconic items of the English luxury fashion houses are yarns, scarves, shawls and trench coats. The turnover (year 2017) was 2.8 B£ with more than 10 thousand employees (in February 2018) and a capitalization of 7 million pounds (in April 2018).

For every single company, different case studies have been carried out, according to the specific product types realized by the companies. In total, 20 different case studies have been analyzed.

3.1 “Within case” analysis of the SCS – RQ1

In this section the results of the RQ1 were analyzed. In particular, the results of each case study are reported in Table 5 .

Company 1 represented the high market segment of the luxury fashion industry. Regarding the second driver, distribution and sales channels, this company used both the wholesale channel (about 40%), as well as the retail and commerce channels (about 60%). The core business of the company is footwear and leather goods that are managed internally. Within this company, four different case studies have been carried out, according to the combination of different product types and product lines realized by the company. According to this, for each type of product there are different lines: carry over and seasonal. The carry over products represent 30% of the total products while the remaining 70% is composed of seasonal products. The raw materials (RM) are managed in stock and are, therefore, purchased in advance (before the arrival of the orders). For the carry over, the management of the RM stock is based on the order history, while for the seasonal products RM stock management is attained from “blind orders” through sales forecasts. At the finished product (FP) level, carry over, seasonal products are managed through an MTO type of production. In particular, the decoupling point is positioned in the warehouse of the RM.

To summarize the results related to the drivers identified in the literature that influence the choice of the SCS, it can be seen that the company 1 belongs to the luxury fashion market segment, that employs the use of the retail channel (60%) as the preferential sales channel. Finally, the core business is made up of two types of product, and each comprises two product lines, respectively. The results of case studies 1 and 2 show a misalignment with the strategies that are expected (based on the literature analysis) at FP level. In particular for these case studies, company 1 implemented a hybrid SCS with an MTO type of production instead of a lean SCS with an MTS type of production. Instead, for the case study 3 and 4 company 1 implements an SCS in harmony with those suggested and expected by the literature.

Company 2 was also shown to manage many product typologies; however, the core business is in leather goods, shoes and ready to wear (RTW). The sales channels used by the company are both retail and wholesale. For leather goods (bags) approximately 70% is sold through the retail channel and the remaining 30% through the wholesale channel, respectively. For the footwear, 60 and 40% are sold through the retail and wholesale channels, respectively. The company 2 deals with both carryover products (about 20% for shoes and 40% for bags) as well as seasonal products. Within the company 2, carry over product planning is accomplished through a sales forecast with a time horizon spanning six months on the basis of data derived from marketing. These data are then cross-referenced with real demand. For case studies 5, 6 and 7 all the types of product and carry over lines are obtained according to an MTS type of production, while for the case studies 8, 9 and 10 all the type of products and in particular for seasonal lines are managed according to an MTO type of production.

Summing up, company 2 uses the retail channel (60%) as a preferential distribution channel. Unlike company 1, for company 2 there was a complete alignment with the strategies expected downstream the literature analysis for all the case studies conducted.

The results reported for Company 3 and 4 are similar to those of Company 2. Both companies produce the same type of products and implement for all the case studies 11, 12 and 13 an SCS in harmony with those suggested and expected by the literature.

Company 5 represents an icon for luxury fashion women's footwear. As far as sales channels are concerned, the company owns 126 mono brand shops located all over the world. The ecommerce channel still has rather limited sales volume and is not exploited by the company compared to the more classic retail channel, which is comprises 60% of total sales. For the case studies 14 and 15 and in particular for footwear, both the carry over and seasonal lines are managed by a hybrid SCS and an MTO type of production. Overall, 80% of the collection comprises seasonal products, with the remaining 20%, composed of carry over products. From the data, it is evident that this company is focused on the development of new products to meet the needs of the customers for each season.

To sum up, company 5 belongs to the luxury fashion market segment that uses the retail channel as the preferred SCS channel (60%). It is possible to highlight a misalignment for the case study 14 since for footwear type of product and carry over product line, company 5 implements a Hybrid strategy through an MTO type of production contrary to what the literature suggests. On contrary, it is possible to find an alignment for the case study 15 with the SCS suggested by the literature in particular for footwear product type and seasonal line, company 5 implemented a Hybrid SCS with an MTO type of production.

Finally, company 6 is a world-renowned brand operating in the luxury fashion sector. The core business of the company is represented by men's and women's clothing, comprising 70% of the turnover, with the remaining 30% relegated to accessories, particularly leather goods, which have been expanding in recent years. The distribution channels used by the company 6 are both retail and wholesale, respectively, comprising 45% of the sales volumes. In company 6, five different case studies have been conducted (from 16 to 20) for the three different types of products managed by the company. These include permanent products, such as the traditional trench coat, waterproof coats and various bags and scarves, which have a long-life cycle. In addition, there are the carry over products with a life-span of least one year and finally, the seasonal products that are designed to respond to the customers' needs. A total of 40 and 60% of the collection are composed of carry over products and seasonal products, respectively. The company produces all products externally, ordering finished items directly from the suppliers. For the permanent products, the supplier's stock both RM and FP as sales forecasts for these products have a time span of two years. Also, seasonal products are made by suppliers who exercise freedom to purchase RM. In case study 17 and 18 for both product types and carry over line are made with an MTO type of production. No stock is produced because in case the products remain unsold, the supplier is directly responsible for the goods left in the warehouse.

As before, the company 6 uses the retail channel as the preferred SCS channel (80%).

For the case study 16 , there is total alignment with the strategies expected after the literature analysis. In particular, it is possible to highlight how a lean strategy was implemented for products that are permanent fixtures on the market. In  case study 17  and case study 18  considering different type of product (RTW and leather goods) but the same line of product (Carry Over), for both case, there was a misalignment with the literature. For these cases, a Hybrid strategy was implemented instead of a lean strategy suggested by the literature, as for the seasonal products ( case studies 19 and 20 ), because if left unsold, the supplier is responsible for the goods remaining in stock.

3.2 “Cross case” analysis of the SCS – RQ1

In order to carry out this analysis a “clustering” of the sample was made. The clustering was obtained distinguishing between companies that produce leather goods (bags) and footwear with leather as the RM and companies that produce the RTW as the principle product. This type of cluster was created because the SC of leather goods and footwear are very similar, characterized by a network of local suppliers and production planning that are connected to leather as the main RM. Instead, the SC of RTW is very different because is much more extensive and has a production planning that is linked to all components and not only to the availability of the principle RM.

As can be seen in Table 6 , for both types of clusters identified, the only product line not aligned with the expected SCS is the carry over (case study 2, 14, 17, 18). Instead, the seasonal line was always shown to be aligned with the expected SCS, regardless of the type of product being produced. It is possible to conclude that the only driver that affects the alignment between the expected and implemented SCS, respectively, is the product line.

“ The forecast of the demand of carry over products is affected by high error ” as mentioned by the SC manager of the company 1 for the case studies #1 and #2. In fact, the accuracy of the predictions is affected by the number of years the product remains on the market. For this reason, it is feasible to make reliable predictions when dealing with iconic and stable products that remain on the market for many years. This scenario is very different for seasonal products that become carry overs from one season to the next. Market predictions for these carry over products have duration equal to one year. The high value of the RM (especially fine leathers or accessories) necessitates that companies store such RM inside warehouses that have high purchase and management costs.

Also, the SC manager of the case study #5 and #14 for footwear type of product said that “ There are difficulties in managing sizes when it comes to clothing or footwear products ”.

For the case studies # 1, # 2, # 3, # 4, #14 and #15 there is also increased complexity in the simultaneous management of different types of productions according to the product category (carry over, seasonal and capsules)

Moreover, both the SC and IT manager of the case studies # 5, # 6, # 7, # 17 and # 18 said that “ To pursue the saturation of the façonists, companies are ordering the production of carry over ”.

3.3 “Within case” analysis of the KPIs – RQ2

Among the KPIs selected in the literature, the main performance parameters measured by the companies were identified. In a second step, the alignment between the KPIs actually measured by the six companies comprising the case studies and those identified in from literature classification of KPIs within a single strategy were verified.

Below, in Table 7 , the results that emerged from the individual case studies carried out are reported:

From the results of the single case analysis it was found that depending on the product line of the brand, it was possible to identify different approaches to KPIs measurement.

3.3.1 Carry over products

For all companies implementing this product line, regardless of the SCS implemented, there was a partial alignment with the cost KPIs characteristic of a lean strategy, expected after the classification realized and the indicators measured by companies. Within the design phase, the companies measure only one cost KPI among those identified. This aspect was justified by the number of years the product has been on the market. Therefore, for a structured product, subject to only occasional changes, it is less important to monitor KPIs related to the prototyping and engineering phase. These indicators were measured only in the first year, following the introduction of the product, and possibly in the following years, when the product was classified as seasonal. As far as the plan phase was concerned, the companies in the sample only measure the indicator related to the “total supply chain cost”. For this type of product, the demand is more stable and therefore indicators such as “accuracy of forecasts” and “volatility of forecasts” are not subject to continuous monitoring and measurements.

There was a complete alignment with the source, make, delivery and return phases and the cost KPIs characteristic of a lean strategy expected after the classification realized and the indicators measured by companies. An aspect that emerges from the source and production phases is that the attention of some of the companies is addressed, not only to the monitoring of costs, but also to the quality of the RM and the product produced. This aspect is confirmed from the luxury fashion brands examined, indicating that the companies view both the quality of the RM and FP as an essential value for the product produced. In these aforementioned phases of the process, companies monitor lead time indicators. This is because the company implements continuous process improvement techniques in order to streamline the life cycle and reduce the product throughout time. Specifically, the parameters related to quality (% compliant orders received) and lead time (% of orders received on time compared to the requested date, % of orders received with the correct quantity requested, % orders with change in delivery date, # order change requests satisfied, # accessible information/# total information) are monitored and reported by companies, in addition to the cost KPIs for the source and make phases.

3.3.2 Seasonal products

For seasonal and capsule products, the KPIs are fully aligned with the cost indicators characteristic of a lean strategy, as could be expected from the classification of KPIs obtained from the literature those indicators measured by companies. For this type of product, all the KPIs of new product development (NPD) are measured and considered very important by the companies. This is attributable to the fact that the costs related to the development and the industrialization of new prototypes have a significant impact on the total cost of the collection.

Within the plan phase, the companies in the sample study measure all the KPIs very carefully because the demand for these products is both uncertain and difficult to predict. Within this phase, some purchase orders of “critical” RMs or production orders are made in advance, especially in the case of commercialized products. The reason why these orders are made is twofold. This is related to the limited availability of some RMs and the high supply lead time, often not compatible with the market demands.

For the source phase, the sample companies monitored all the KPIs related to the service level present in the set of indicators characteristic of an agile strategy identified from the literature analysis. In particular, among the service level KPIs measured, are those pertaining to the capacity of the supplier to change both the delivery date and the quantity ordered, after the first issue of the order by the brand. For some of the companies in the case study, the supplier's ability to meet the requirements for small batches of materials and to be willing to work with the brand in order to develop new products is critical. It is important to emphasize that KPIs related to the service level are influenced by parameters such as lead time and quality (OQ for an agile SCS) in both the source and make phases. Companies are often compelled to change their production planning either because of delays in delivery times or because of non-conformity relating to the RM. In the case in which the suppliers of RM (like leather or precious materials) deliver a material with high lead supply time and with non-conformities, the combination of these two parameters could impact both on production time and, as a result, on the service level.

In the source phase, some companies also monitor KPIs relating to costs including the total cost of the RM, warehouse and obsolescence. In particular, companies also monitor the cost of the RM that they purchase from additional suppliers. This serves to always guarantee the availability of RM and to obtain better prices, attributable to the competition between the various supply companies.

The KPIs monitored in the production phase by the companies include “production efficiency”, but also the “% of non-conformity on the total product”, the “% of available capacity” (both internally and at the façonists) and the “% of orders with delivery date variation during the production lead time”.

Having to guarantee a high quality of the FP, “production efficiency” is a particularly important KPI, and is monitored by the company. This KPI is translated in specific measures related to the quality of the FP but also on the capacity of the suppliers.

With regard to the service level KPIs, similar to that of the sourcing phase, companies monitor the “ability to adapt to the variation in demand” both in terms of priority on orders and in terms of quantities ordered by suppliers. In the luxury fashion sector, the ability to correctly predict demand is a fundamental requirement for all types of products, especially when the production of seasonal products is fundamental. For seasonal products, it is very important to monitor the capacity of suppliers in order to guarantee the same service level in the event that delivery dates and quantities are subject to variation. These variations are due to the continuous alignment between the sales predictions and the purchased orders.

For the delivery and return phases, managed in an agile mode by all six companies, the main indicators included the “% shipments managed on time compared to the customer's request”, the “% compliant orders processed” and the “average time associated with the receipt of a product to the store”. The principle KPIs measured in the retail phase are closely linked to the preferred sales channel implemented by the company. All six companies in the sample study employed the retail channel as the predominant channel. As a consequence, attention was primarily focused on the performance of the stores, and in particular on the KPIs such as the success rate of new products, coined by the phrases “Sell In”, “Sell Out” and “Sell Through”.

3.4 “Cross case” analysis of KPIs – RQ2

Following the single case analysis, a cross case analysis of the companies was then carried out.

To perform this analysis, we used the same clusters proposed in the cross-case analysis for DR1. In order to verify the alignment of the companies with the KPIs expected by the literature analysis, the percentage of indicators measured by each company with respect to the total KPIs proposed was calculated. The analysis was carried out for each company and for each type and product line produced by the respective company. In particular, the first step was to verify the alignment between the KPIs measured by the companies, for each product line, and the expected KPIs identified in the classifications obtained from the literature analysis. There was a total alignment (100%) of the KPIs for the seasonal product line and capsule products for both Cluster 1(composed by the companies producing bags and footwear) and Cluster 2 (composed by all the companies that producing RTW) For the carry over product line, a partial alignment of 76% was found compared to the KPIs presented in the literature analysis (see Figure 3 ).

Subsequently, a second analysis was carried out, in each cluster, for the carry over product line (for which a partial alignment was found). The percentage of indicators monitored for each phase of the process was then calculated. The first phase of the process examined was the new product development. It was shown that all companies producing the carry over product line, for both clusters, measured only one indicator compared to the five indicators identified for this phase in the literature analysis. This was suggested to have contributed to 8% of the misalignment. The second phase of the process examined was the plan phase. The analysis showed that even within this phase the companies of both clusters measured a lower number of KPIs than those presented within literature analysis. Both clusters for the carry over product line were shown to have measured only one KPI of the three proposed indicators. In turn, this would have contributed to 16% of the misalignment. Hence, the results showed the misalignments reported were attributed only to these two phases within the process, given that the remaining phases were completely aligned with all the KPIs proposed by the literature analysis.

4. Discussion

The results allow us to provide an answer to the two research questions posed and to discuss the results against the literature. We focus our analysis on the differences between carry over, seasonal and capsule collection because this product line classification is widely used also in practice, thus creating a bridge among academic research and the industry.

As far as RQ1 is concerned, results suggest that there is a misalignment between what literature suggests and what companies implement for the carry over products, while literature is confirmed for seasonal product. In particular, although the literature suggests a lean strategy for carry over products ( Brun et al. , 2008 ), this strategy is not always followed by companies. Carry over products are managed by most companies using a hybrid strategy, differently from what is suggested by the literature, i.e. lean ( Bruce et al. , 2004 ).

The analysis of the reasons why the companies examined opted for such strategies allow us to provide some contributions to the literature in the field.

First of all, the demand of carry over products is not always easy to forecast, differently from what the literature ( Caniato et al. , 2008 ) suggests. Indeed, the accuracy of the predictions is affected by the number of years the product remains on the market. For this reason, it is feasible to make reliable predictions when dealing with products that remain on the market for many years, i.e. those called permanent ( Rigaud-Lacresse and Pini, 2017 ). This is not the case of those seasonal products that become carry over, for which therefore demand forecast is based on limited sets of data. Moreover, forecast accuracy is affected by the number of different sizes to forecast, and they can be an issue when it comes to clothing or footwear products.

Secondly, literature is suggesting a different SCS for each product family ( Brun and Castelli, 2008 ). However, companies are managing portfolio of product families. So, to reduce the complexity in the simultaneous management of different types of SCS according to the line of product, they tend to not apply the SCS in its pure form. This might result in a reduction in the efficiency of the management of each product line, but in an increase in the global efficiency. This is the case, for instance, of the use of carry over as products to fill the production capacity of the façonists to compensate the low volumes of production of new products, which is strongly seasonal.

As far as RQ2 is concerned, the KPIs monitored confirm the suggestion by literature for any product line, but for carry over for the KPIs for NPD and plan process. This misalignment with the literature can be due to the nature of the product produced. The carry over line is by definition a product line that is sold season after season until market demand runs out ( Caniato et al. , 2008 ). For this reason, NPD indicators are occasionally measured on sample products. In addition, the planning phase of this product line is carried out on the basis of the average sales trend of previous seasons given that the product has been on the market for several years. Indicators such as uncertainty and volatility of demand do not need to be constantly monitored as unsold products can be left in stock and disposed of in the sales of the following season.

These results can be used to build a decision-making tool that build upon literature (e.g. Brun and Castelli, 2008 ) to propose companies a tool for selecting the SCS and the KPIs to monitor its deployment. First, the company defines the specific theoretical SCS for each combination of brand positioning, line of product, type of product and distribution channel, then, considering portfolio effects, the applied SCS is defined. Finally, based on the SCS chosen, the set of KPIs to be used in each process are selected, as suggested in Table 8Table 9 .

5. Conclusions and future developments

This article stems from the desire of companies in the luxury fashion industry, which operates within a highly dynamic context, to implement SCS strongly linked to action. Quite often, it is the inability to connect SCS to the actions, and the consequent lack of attention in the implementation phase, that result in failure pertaining to the concretization of initiatives and ideas, even if supported by apparently coherent plans.

Within this context, the request to monitor KPIs arises in order to understand whether the business strategy has been translated into operational levers. The difficulty encountered by companies resides in identifying which KPIs need to be measured, according to the SCS implemented by the company.

Therefore, the objective of this article was to investigate the alignment between the SCS implemented within fashion luxury companies and the KPIs monitored within them.

Regarding RQ1, although the literature suggests adopting a lean strategy for carry over products, the case studies have shown that this type of strategy is not always adopted. As far as seasonal products are concerned, a hybrid SCS, consisting of a lean phase, followed by a subsequent agile phase, appears to be the approach adopted. This result was confirmed from both the single case analysis and by the cross-case analysis. Finally, the capsule product was shown to follow the same strategy used for seasonal products, despite the fact that the literature recommends an agile SCS for these types of products that focuses on reactivity and flexibility in order to meet customer demand.

From the RQ2, through the literature analysis, it was possible to identify the KPIs measured by companies and to subsequently integrate them with those present in the SCOR and DCOR model. These indicators were associated with the strategies identified in DR1 and compared with those monitored by the companies involved in the case study through the use of questionnaires and direct interviews.

The scope and results of the overall research are broader than those presented in the previous sections. In terms of managerial implications, one of the most interesting contributions is the identification of the product line as a driver influencing the SCS choice and the different approaches to measuring KPIs. Managers could adopt the listed elements in order to define the most suitable SCS for the specific targets of the brand. Since this decision is strictly related to the company positioning on the market, it is important to fully understand and identify the set of drivers that the brands pursue on the market. As a consequence, it is possible to evaluate the actual SCS, in terms of structure and practices. This will permit the company to understand in which aspects it is aligned toward the KPIs identified in literature and where not, allowing those aspects to be revised.

A limitation of the present study is related to the sample dimension and composition. While case studies permitted us to understand and compare different SCS in the fashion luxury industry, a wider sample should be applied in order to evaluate different sectors, as the fast fashion or the mass market. On the other hand, sample could be extended including other luxury segments, as jewels, boat or cars. Despite this fact, the present study is a starting point for further research in these directions. Last, the study and the sample could be extended to include additional types of fashion luxury products in order to understand different approaches to SCS and KPIs derived from different type of distribution channel and product typology.

Literature review strategy

KPI selection

Results of RQ2 cross case analysis

KPI classification

RQ1 single case analysis

Results of RQ2 single case analysis

KPIs measured according to the SCS

Appendix: - Questionnaire

The questionnaire is made in order to collect data to identify the most suitable supply chain strategy (SCS) and performance measures more adopted in luxury fashion supply chain.

Supply chain strategy (SCS)

Open-ended questions regarding SCS.

Which is your company brand positioning?

How many lines are managed within the company?

Which are the sales channels of your company?

For the type of product mentioned above, do you manage carry over, seasonal and capsules/special projects or other types of products?

If you manage both carry over and seasonal product, what is the percentage of carry over rather than seasonal?

There is a diversification for each parameter (distribution channel, type and line of products)?

There are other parameters you consider?

For each combination of parameter define the type of production (Make to Stock, Make to Order etc.)?

There is a diversification in the strategic choices for any of the above parameters (distribution channel, type and line of products)?

Key performance indicators (KPIs)

The column “Utilization”: if each performance measure is actually used by your company;

The column “Importance”: specify the degree of importance of the indicator.

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Corresponding author

About the authors.

Bianca Bindi graduated in 2016 in Mechanical Engineering at the University of Florence and she earned her Ph.D. at the same University in 2020. Currently is a research fellow at the Industrial Engineering Department of the University of Florence. During her Ph.D., she carried out both research and consulting activities in the field of supply chain optimization and radio-frequency technologies (e.g. RFId, NFC). Moreover, she spent a period within a consulting company supporting them in the introduction of a new ERP in a fashion company.

Romeo Bandinelli is an Assistant Professor at University of Florence, Department of Industrial Engineering. He graduated in 2002 in Mechanical Engineering at University of Florence, where he earned in 2006 the Ph.D. title in Industrial Engineering and Reliability. He is the author of more than 80 publications on proceedings and international journals. He is member of the Editorial Board of the International Journal of Product Lifecycle Management and program chair of the scientific committee of the IT4Fashion congress. He is member of the IFIP 5.1 “Global Product development for the whole lifecycle".

Virginia Fani graduated in 2014 in Industrial Engineering at Politecnico di Milano and she earned her Ph.D. at the University of Florence in 2019. Currently is a research fellow at the Industrial Engineering Department of the University of Florence. During her postgraduate course, the issues she is dealing with are related to production processes optimization along the supply chain, with particular focus on the peculiarities that the fashion companies have to face with. She is the author of several blind reviewed papers on proceedings and international journal.

Margherita Emma Paola Pero, Ph.D. is Associate Professor at Department of Management, Economics and Industrial Engineering of Politecnico di Milano. She teaches Business processes re-engineering, operations and supply chain management at the School of Management of Politecnico di Milano. She is the director of Flex MBA program at MIP – Politecnico di Milano Graduate School of Business. She is the author of more than 100 papers at national and international level. Her main research interests are related to production planning, supply chain design and management and supply chain management-new product development coordination.

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A Case Study of Louis Vuitton

Louis Vuitton is the only brand in the world that has no TV commercial, no second product line, no promotion on sales, no free item to give away. Louis Vuitton also has no set of products for sales, no outlet, no license for any other third party. Pricing is the round number only. Since operating the business for 161 years, Louis Vuitton never gives any discount for a promotion.

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Louis Vuitton in Japan

By: Justin Paul, Charlotte Feroul

This case study deals with the opportunities and challenges of Louis Vuitton, the leading European luxury sector multinational firm, in Japan, taking into account the unique features of brand…

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• Publication Date: Oct 15, 2010
• Discipline: Marketing
• Product #: 910M67-PDF-ENG

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This case study deals with the opportunities and challenges of Louis Vuitton, the leading European luxury sector multinational firm, in Japan, taking into account the unique features of brand management, and integrating culture and consumer behaviour in Japan. In the last decade, Japan has been Louis Vuitton's most profitable market, but it seems that the global economic crisis has resulted in a decline in sales. Facing a weak economy and a shift in consumer preferences, Louis Vuitton has been adapting its unique strategy in the Japanese market. The days of relying on a logo and charging a high price seem to be gone as there is more interest in craftsmanship and value for money. To promote sales, the company has had to launch less expensive collections made with cheaper materials. The brand has also been opening stores in smaller cities, where the lure of the logo still works. Over the years, Japanese consumers have demonstrated fascination with and passion for the iconic brand. What have been the keys to Louis Vuitton's successful business model in the Japanese market? This case was written to help students develop their analytical and strategic decision skills. The case aims at helping in developing a business model, adapting to a new cultural environment, recommending a course of action for further strategic moves, identifying issues and eventually enhancing multidisciplinary decision making. This case can be used to discuss 1) the complexity of multinational business, particularly the issues of brand management, international marketing and marketing strategy for succeeding in East Asia 2) consumer behaviour in Japan and characteristic features of the Japanese market and 3) strategies to succeed in a foreign country.

Learning Objectives

This case was written to help students develop their analytical and strategic decision skills. The case aims at helping in developing a business model, adapting to a new cultural environment, recommending a course of action for further strategic moves, identifying issues and eventually enhancing multidisciplinary decision making. This case can be used to discuss: the complexity of multinational business; consumer behaviour in Japan and characteristic features of the Japanese market; strategies to succeed in a foreign country. This case brings insights on strategic decisions to survive and succeed in a foreign market. It can be used in a number of graduate and undergraduate courses such as: International business, to illustrate the complexities relating to managing global operations and the challenges and opportunities in a foreign market; Brand management, to illustrate how to build a "top of mind" brand in a key overseas market; International marketing, to illustrate issues surrounding consumer behaviour and product adaptation to local tastes and preferences; Strategic marketing, to illustrate the importance of product innovation; Strategic management, to illustrate the business strategy of a multinational firm; Marketing management, to illustrate how to achieve success in foreign countries with an export-oriented and product-oriented approach. The case is also meant for business executives or entrepreneurs looking for thoughtful insights on the strategy and development of a business model best applied to the luxury market in Japan.

Oct 15, 2010 (Revised: Feb 21, 2017)

Discipline:

Geographies:

France, Japan

Industries:

Fabrication and manufacturing

Ivey Publishing

910M67-PDF-ENG

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Louis Vuitton Case Study

Louis Vuitton : New product introductions vs. product availability In the spring of 2004, Mr. Marcello Bottoli, CEO of Louis Vuitton, the largest and most profitable subsidiary of LVMH (Louis Vuitton-Moet Hennessy), the #1 luxury goods company in the world, was called upon to arbitrate a ongoing conflict between Mr. Jean-Marc Loubier, the company’s vice president for marketing and sales, and Mr. Emmanuel Mathieu, the vice president for manufacturing and logistics.

For several months, these two senior managers had been bickering about how to solve the out-of-stock problem Louis Vuitton’s 300 company-owned stores around the world were increasingly frequently faced with. Jean-Marc Loubier blamed the situation on the lack of flexibility and responsiveness of the company’s supply chain while Emmanuel Mathieu faulted the recent increase in new product introductions, combined with very poor forecasting of demand. Marcello Bottoli had mixed feelings about the whole issue.

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On the one hand, close to perfect quality was critical in a business where customers might be paying up to €1000 for a pair of shoes and €3000 for a handbag, and he felt very reluctant to disrupt Louis Vuitton’s traditional and proven manufacturing process. On the other hand, the rapid pace of new product introductions had been a decisive factor in the company’s 20% average growth rate in the previous three years and, in a business like that of Louis Vuitton, it was very difficult to predict how customers would respond to new products, no matter how much money, time and effort were spent on market research.

Still, despite the advantages resulting from the snob-appeal attached to those products that turned out being hard to purchase, the opportunity cost of stores being out of products customers wanted had to be very high.

So Marcello Bottoli was determined to find an appropriate solution to the problem very rapidly. The Luxury Good Industry Luxury goods have alternatively been described as “products no one needs” or as “items that serve little purpose in the lives of consumers, except to fulfill dreams”.

With such a fuzzy definition, it was no wonder the precise boundaries of the “luxury goods industry” remained blurred, at best. While haute couture, perfume and jewelry unquestionably belonged to the universe of luxury, segments of many other industries such as the hotel business, the automobile industry, wine and spirits, or even the airline industry might also have qualified as luxury businesses. Very broadly speaking, products traditionally considered to be luxury goods pertained to two main categories: 1.

Products targeted at individuals, which were often derived in one way or another from haute couture.

This first category of luxury goods included such products as designer clothes, leather goods, shoes, eyeglasses, jewellery, watches, accessories, perfumes and cosmetics. Demand for fashion-related items was growing very rapidly. This growth was fuelled primarily by the ever expanding variety of accessory lines offered by luxury brands. In contrast, jewellery and watches were experiencing much slower growth. . Home furnishings and decoration, a more recent development in the luxury goods sector; this primarily covered china, crystal and silverware, and also included household linen, lighting and some furniture.

This second category was growing very rapidly but only accounted for a fraction of the whole sector. Overall, the luxury-goods sector had enjoyed very rapid growth for over 20 years. This was made possible by progressively opening up the market to a much wider range of customers.

Very wealthy clients had traditionally been the major segment targeted by luxury brands but, in more recent years, the market was opening up to a wider set of potential buyers. Luxury goods were no longer reserved to an elite, but had come within reach of an increasing number of people. These new customers were younger and made more occasional purchases.

Sales were very seasonal and purchases made during the holiday season accounted for a disproportionate share of the business. Customers of such expensive items were very demanding. And as luxury goods were by no eans essential, sales were very sensitive to the overall economic climate. Most top luxury brands originated from either France or Italy and, in more recent years, from a few other countries, Spain and the United States in particular.

Two major types of companies operated in the luxury-goods business: on the one hand, large conglomerates built-up through the acquisition of numerous specialized brands had emerged during the 1980s and 1990s. The three world leaders were LVMH (Louis-Vuitton-Moet-Hennessy), Richemont which owned such famous brands as Cartier, Lancel, Van Cleef ; Arpels, Montblanc,.

. and Gucci , owner of Yves Saint Laurent, Balenciaga, Stella McCartney and Boucheron among others. On the other hand, small, often family-owned companies such as Hermes, Lonchamp or Rolex had also managed to thrive in the luxury goods business. In recent years, the luxury goods sector had been hit by a wave of mergers and acquisitions, with over 100 brands being taken over in 2000 and 2001 alone. Western Europe, North America and South-East Asia were the three largest markets for luxury brands.

Asia, and most notably Japan, had accounted for a major portion of the growth of the industry.

But in the second half of the 90s, the economic downturn in Asia had led many luxury brands to focus their efforts on North America as well as on other emerging parts of the world such as South America, Eastern Europe or India. LVMH Formed in 1987, LVMH rapidly expanded to become the world leader in luxury goods. In 2003 it achieved €12 billions in sales with an 18% operating margin and a 6% net margin. The company employed 54,000 people worldwide (63% of whom were based outside of France) and owned over 1500 retail outlets throughout the world.

In 1999 and 2000, LVMH’s sales grew 23% and 35% respectively, with net profits in the range of 8% to 10%. In 2001 and 2002, LVMH registered lower growth rates (3. 8% only in 2002) because of the downturn in the global economy, of unfavorable exchange rates, and also because of poor performance in several of its newly acquired businesses (in particular in watches, jewellery and retailing). It took Bernard Arnault, the CEO of the company, less than a dozen years to build up LVMH through the acquisition of numerous luxury brands, expansion into retailing and an aggressive globalization strategy.

LVMH was named after the first two companies that were merged in 1987 to create the company: the luggage and leather-goods maker Louis Vuitton and the Champagne and Cognac producer Moet-Hennessy. In subsequent years, many more famous luxury goods producers were taken over and added to the conglomerate’s brand portfolio: Christian Dior, Guerlain, Kenzo, Donna Karan, Celine, Dom Perignon, Tag Heuer, Loewe… LVMH also entered selective retailing by taking over DFS (Duty Free Shopping, the world’s largest chain of airport shops) in 1996 and Sephora in 1997.

LVMH’s expansion into retailing proved less successful than expected: DFS saw its profits drop 66% and its sales decline by 16% the year after it was acquired; this was blamed primarily on bad timing, with Asia, where most DFS stores were located, entering a deep recession shortly after the acquisition by LVMH was carried out. In 2003, LVMH owned over 50 well-known brands operating in five main sectors: Wines ; Spirits (which accounted for 18% of sales), Fashion ; Leather goods (35% of sales), Perfumes ; Cosmetics (18% of sales), Watches ; Jewellery (4% of sales) and Selective Retailing (25% of sales).

Appendix #1 lists the main brands controlled by LVMH. The two divisions on the basis of which LVMH was originally founded (Fashion ; Leather goods and Wines ; Spirits) were clearly the most profitable, with 2003 operating margins of 32% and 38% respectively. LVMH’s sales were fairly evenly distributed between their three main geographic markets: Europe accounted for 37% of total sales, Asia for 30% and the United States for 27%.

While each individual brand enjoyed a great deal of autonomy, LVMH nevertheless tried to leverage potential synergies existing within the entire company. For example, outlet locations were closely coordinated across brands in order to benefit from clustering effects (the idea was for customers to be attracted by one brand’s store and then drift on to other luxury brand outlets, which allowed for enhanced cross selling). Also, in ll countries except France, all the brands operating under the same corporate division would share the same vice president for finance and the same VP for human resources: “This allows us to transfer salespeople from one store to another or to appoint as managers of a new store people who have already demonstrated their abilities working for a different brand” explained one of LVMH’s senior managers. Louis Vuitton was clearly one of LVMH’s flagship brands.

Though the company did not disclose detailed figures on each brand[1], it was estimated that Louis Vuitton alone accounted for about 80% of the total sales of the Fashion ; Leather goods division. Also, according to most analysts, Louis Vuitton contributed close to 75% of LVMH’s total profit.

Louis Vuitton Set up in 1854 by a young trunk-maker by the name of Louis Vuitton, the company started out by designing and manufacturing innovative stackable trunks and by marketing them through a company-owned sales outlet located in Paris.

Then, in 1876, the company introduced luxury trunks with detachable frames. Initial success enabled the firm to set up a store in London as early as 1885. Louis Vuitton’s son, Georges, created the legendary Monogram design that incorporated his father’s LV signature that was to become famous the world around. In 1959, Georges’ grandson invented a new chemical process to produce a highly resistant yet soft coated canvas to be used for both stiff luggage and soft bags.

The Monogram collection still accounted for over 50% of the company’s global sales in 2003!

In more recent years, further classic leather-goods lines were launched and turned out being highly successful. In 1985, the Epi collection was introduced, first in black and brown shades then expanded to include new bright colors. The Taiga line was launched in 1993, followed by the Cuirs Exotiques line in 1995. The Damier line was manufactured on a large scale in 1996 for the Monogram’s 100th anniversary and was such a success that it soon became a permanent Louis Vuitton collection. Louis Vuitton’s major expansion occurred quite late, under the chairmanship f Henri Racamier, a retired executive and a graduate of HEC, who happened to be married to an heiress of the Vuitton family.

In 1977, when Racamier took over the family-run company, total sales were about €10 million; by 1987 they had increased to over €600 million. In 1987, Henri Racamier decided to merge Louis Vuitton with Moet-Hennessy to form LVMH. One year later, Bernard Arnault, who was then the CEO of Dior, made a takeover bid for the recently formed LVMH group; after a long and bitter legal battle, Arnault eventually managed to take over the company in 1990.

In 2004, Louis Vuitton was still the largest and by far the most profitable subsidiary of LVMH. 2003 sales were estimated to be around €3. 5 billion.

From 1987 to 2003, Louis Vuitton enjoyed an average annual growth rate in the range of 12%. Operating profit was estimated to be about 45%, way above the industry average of 25%. Leather goods, in particular the legendary Monogram collection of luggage and handbags, continued being the company’s main line of business.

In 2003, Asian sales accounted for 50% of the company’s business and Japan alone accounted for 30%. The company employed 9,500 people, operated 8 plants and over 300 stores worldwide. 60% of the workforce was based outside France.

Louis Vuitton’s lines of business Louis Vuitton organized its business into four major product lines: – “Leather goods”, essentially bags and luggage –most of which are in fact not made primarily of leather– were the company’s core business. This business accounted for an overwhelming portion of total sales.

Most leather goods collections were classic products with extremely long life cycles – several decades in many cases -, while fashion-driven products with a short life span only accounted for 20% of sales. – “Shoes” were a recent product line extension for the company. Shoe designs were highly seasonal and most models had to be renewed very frequently, at least twice a year. – “Designer clothes and ready-to-wear lines” came in two annual collections, one in the winter and one in the summer.

In addition, more specific lines of clothes were produced on special occasions, such as the Louis Vuitton Cup (a major ailing competition sponsored by the brand and considered to be the second most prestigious sailing event in the world, second only to the famous America’s Cup). – “Accessories”, that included watches, eyeglasses, perfumes, jewellery and writing accessories were a very diverse group of products, most of which had a very short life cycle. It was not until 1998 that Louis Vuitton departed from its exclusive focus on bags and luggage. That year, the company introduced for the very first time both a line of shoes and a collection of ready-to-wear clothes.

Watches were introduced in 2002 and it was not until 2004 that the first full line of Louis Vuitton jewellery was created.

Louis Vuitton outsourced the production of all its accessories and the manufacturing of its shoes. Despite all these various line extensions, leather goods still accounted for 87% of the company’s total sales in 2003. As it was the case with most luxury goods firms, Louis Vuitton’s cost of goods sold only accounted for a small fraction of total costs. According to most estimates, COGS was no more than 15% of total sales.

In turn, logistics accounted for 13% of COGS.

Despite very high design and marketing costs, Louis Vuitton’s operating margin was estimated to be at least 45%. Manufacturing and logistics Louis Vuitton relied on a limited number of highly specialized suppliers, most of which were based in France and in a few neighboring European countries. Major raw materials were leather and canvas. Louis Vuitton’s purchases were thought to account for over 50% of the global production of the grade of soft leather that the company used.

All other components, such as clasps and clips, were made to order and accounted for only a very minor portion of costs.

It took on average 6 to 8 weeks for major supplies to be delivered. As a consequence, Louis Vuitton maintained 2 ? months of raw material inventory. The only product line that Louis Vuitton manufactured in-house was its “leather goods”. The 1200 SKUs (stock keeping units) in this line were manufactured in 8 facilities (6 were located in France, 1 in Spain and 1 in the US) employing a total labor force of 3,600.

A major motivation for maintaining most manufacturing activities in France was the “made in France” label which was seen as very valuable by some customers, notably in Asia.

The plant located in the US only served that local market though many products sold in North America were still shipped from abroad. Louis Vuitton occasionally outsourced some manufacturing when production capacity was too tight. Production planning – as well as raw materials procurements – was scheduled based on volumes forecasted by the logistics department.

A tradition of craftsmanship continued to prevail within the Louis Vuitton manufacturing process. One facility still produced customized, made-to-order trunks; 100 such trunks, each requiring about 110 hours of work – and selling for about €12,000 -, were produced every year. And, strange as it may seem, this tiny market was growing by 20%! Even for more “standard” products, the manufacturing process was very labor intensive, required highly skilled employees and was aimed at ensuring very high quality standards.

It was estimated that over 80% of the tasks carried out in the manufacturing of a Louis Vuitton bag were done by hand; a team of 24 could make no more than 120 handbags per day. As a consequence, training was essential. In particular, workers were trained for months before new product introductions. Nevertheless, some tasks were highly automated and Louis Vuitton took great pride in how it was able to successfully combine sophisticated manufacturing technology with highly skilled craftsmanship.

Multi-tasking within the manufacturing process was widespread, allowing for a great deal of flexibility and responsiveness.

Average manufacturing cycle-time for bags was 10 days. Because of steady growth in sales, the number of manufacturing facilities increased dramatically after 1995. From 1999 to 2004, four new plants were set up to satisfy the rapidly increasing demand for Louis Vuitton products. A single warehouse located in Cergy-Pontoise, France, globally centralized the logistics function for all plants. Its capacity was doubled between 2000 and 2003.

Goods manufactured in Louis Vuitton’s European plants were forwarded daily to the logistics center.

On average, products remained for about a month in storage at Cergy-Pontoise. In addition to its leading role in organizing flows and managing inventory, the logistics center also handled returns (faulty, damaged, out-of-fashion and other unsold products). On average, 2% of all fashion-related, short-life-cycle products had to be disposed of every year. This was a heartbreaker and was perceived very negatively within a company that prided itself with manufacturing such high-quality –and expensive- products.

As Emmanuel Mathieu, the vice president for manufacturing and logistics put it: “if our marketing staff were better able to anticipate demand, or were in less of a hurry to stack stores up with products for which we have no sales record, I am convinced we could cut the number of returns in half”.

Louis Vuitton also operated 5 backup warehouses throughout the world. They provided the company with storage facilities in areas where operating out of the central logistics center would have proved too complicated because of distance or of difficult access. Distribution Louis Vuitton-owned stores handled a large share of the company’s sales.

Although Louis Vuitton products were available the world over, most company-owned retail outlets were located in Europe, the US and Japan. The total number of such outlets grew from 230 in 1998 to over 300 in 2003.

In addition, Louis Vuitton leased specific areas in department stores which were know as “shops in the shops” and covered about 45 to 50 square meters in shopping space. About 50 of the 300 Louis Vuitton stores carry all major product categories: leather goods, shoes, designer clothes and accessories; 100 of them carry leather goods and shoes while the rest only offer leather goods.

Louis Vuitton had been expanding its retail network into new regions of the world: in 2003, it opened its first stores in India and in Russia and created a 900 square meter store in Tokyo; in 2004, it opened its first store in South Africa, added new stores in China and Japan and expanded its Paris flagship store to 1,600 square meters. Once a month, all store managers had to draw up an estimate of their replenishment requirements and place an order with the company’s central logistics center in Cergy-Pontoise. These orders were then recorded and processed: availability of the requested products was checked and shipping organized.

All shipping had traditionally been by boat though, in recent years, the company had sometimes had to turn to air freight in order to speed up delivery on long overdue items. Indeed, lack of availability had become an increasingly frequent problem and had resulted in a sharp increase in transportation costs. Marketing, sponsoring and communication Luxury goods require significant investments in marketing, sponsoring and media coverage. In order to bolster its growth Louis Vuitton increased its marketing budget 20% in 2003. Still, advertising expenses accounted for only about 5% of Louis Vuitton’s sales that year.

0% of Louis Vuitton’s advertising spending was aimed at enhancing the overall image of the brand as conveyed by the highly popular classic products such as the Buckett bag or the Monogram, Epi and Damier leather goods lines. These marketing investments went to advertising campaigns featuring celebrities and to sponsoring prestigious events, such as the Louis Vuitton and America’s sailing cups or the Louis Vuitton Classic, a very upscale gathering of vintage automobiles. The remainder of Louis Vuitton’s advertising investment was specifically aimed at supporting new product introductions.

Shoes, designer clothes and accessories, as well as some special leather goods collections, were primarily seasonal products with a short life cycle, and required a lot of marketing in order to maximize sales during the first few months, sometimes even weeks, following their market introduction. For example, with their winter collection of designer clothes, Louis Vuitton introduced a little “week-end purse” called Upton, a Peonia bag for carrying around a camera and a Bloomington film case.

All these products were available in dark colors for men and in white or pastel shades for women.

These three products were not expected to be available for more than a few months. Because of their short life cycle, such products often needed to be discounted significantly if they were not immediately as successful as expected. 18% of all seasonal products had to be discounted, on average 30% below their list price; worse still, most products that ended up being disposed of were products that Louis Vuitton had not been able to sell despite heavy discounting. In addition to traditional marketing, Louis Vuitton spent about €8 million to fight illegal imitation of its products. Counterfeiting was indeed a critical and growing concern.

It was estimated that in the early 21st century, the market bought as many fake Louis Vuitton bags as it did genuine ones. Marcello Bottoli’s dilemma Because LVMH was so dependent on Louis Vuitton for its own profitability, Marcello Bottoli was feeling a lot of pressure from corporate headquarters. He knew he had to increase, or at the very least maintain, the high profit level Louis Vuitton had enjoyed over the past few years. With air traffic down post 9/11, the Sars crisis still lingering on in Asia and a lot of uncertainty about the future of the global economy, he knew it would not be an easy task.

Marcello Bottoli was particularly concerned by the issue over which Jean-Marc Loubier and Emmanuel Mathieu had been disagreeing for the last few months.

He felt that the intertwined problems affecting product availability, new product introductions and escalating logistics costs could seriously affect Louis Vuitton’s growth and profitability. On the one hand, product availability was down, there was no doubt about that. This was sometimes good news, when a product was so successful that it was impossible for the company to meet demand.

In 2004, a new bag in the Monogram collection, designed by Japanese artiste Takashi Murakami, had created such a frenzy and was generating so much interest that customers had to sign up on a waiting list to eventually be able to purchase one. All too often though, customers were not able to purchase the item they wanted because the store was out of their size, out of the color they wanted or out of a particular model. It had been estimated that, on average, out of a total of 100 customers who intended to make a purchase in a Louis Vuitton store, 8 found that the item they had wanted to buy was not available.

0% of these dissatisfied customers ended up buying a different item from the shop immediately; 20% postponed their purchase and returned at a later date. The others either turned to other luxury brands (about 40% of dissatisfied customers) or went for a totally different gift idea than what they had originally intended; in both cases, the sale was forever lost for Louis Vuitton. In Tokyo’s recently opened store, those lines that most suffered from availability problems were newly-introduced, fashion-related products.

Stores faced even greater shortages during the holiday shopping season; sales during the second week of December were almost always below expectations, not because of lower than anticipated demand, but because of too numerous out-of-stock problems. According to Mrs.

Osakei, manager of the new Tokyo store: “One out of every 5 customers that steps in to buy a new, fashion product, cannot find what he or she came to buy. With our classic lines, it is only 2 out of every 100 customers that cannot get what they want.

If stores could be supplied much more often, on the basis of actual sales, rather than on demand forecasts, I am convinced we would be able to satisfy at least 75% of those customers that we currently disappoint by not holding the item they want, and who walk out without making a purchase”. Marcello Bottoli was also concerned that these availability problems might have a negative impact on how customers perceived service in Louis Vuitton stores. In order to address the problem, stores were increasingly placing larger orders for those goods they believed would be in high demand.

This only confounded the problem.

For one, it moved the problem back one step to the logistics center and to manufacturing. With tight production capacity, plants were not able to respond adequately, unless they curtailed production of other product lines. Also, it was creating problems within the stores themselves. Given the limited space available for storage in the stores, larger orders for some products led to displacing others and, at best, resulted in moving the availability problem around; in most cases, it ended up making matters worse because new products with uncertain demand were displacing more classic items for which demand was very stable.

In addition to these shortage issues, Louis Vuitton was facing rapidly increasing logistics costs. Freight costs had risen steeply over the past couple of years because when out-of-stock problems became too critical at a particular store, goods were flown to distant destinations as an emergency response. Storage costs were also rising because inventories tended to grow, in particular with retail outlets expanding the amount of store space allocated to inventory. The table below lists the average share of store space allotted to shopping areas in Louis Vuitton stores in different areas of the world: | | | | | | | | |France |Europe |Japan |Asia |South America |North America | | | | | | | | | |Shopping area / | | | | | | | |total store space |66. % |95. 0% |78.

0% |81. 9% |78. 8% |91. 0% | Merchandising consultants had recommended that Louis Vuitton stores convert some of their current storage space into more shopping area, in order to make better use of the overall store space available. This was predicted to allow for a 3% increase in sales, keeping store surface constant, and provided there were enough demand.

The Cergy Pontoise logistics center had also seen the volume of inventory increase by an estimated 20%.

By 2004, goods spent an average of 4. 5 months in warehousing, with some references lying around in storage for 6 months or more. Finally, manufacturing costs were also on the rise with outsourcing and overtime becoming more widespread.

While Jean-Marc Loubier and several other managers in the marketing team had suggested generalizing air freight to all distant destinations in order to shorten delivery times, better stick to demand and be much more responsive in terms of store replenishment, Emmanuel Mathieu had responded that such a decision would double the company’s logistics costs and erode its profitability significantly. Marcello Bottoli wasn’t quite sure what he should make of all of this but knew he had to make a decision fast in order to solve the problems Louis Vuitton appeared to be having with its supply chain. Appendix #1 : LVMH brands and lines of business | | | | | |Wines ; Spirits |Fashion ; Leather goods |Perfumes ; Cosmetics |Watches ; Jewellery |Selective Retailing | | | | | | | |Moet ; Chandon |Louis Vuitton |Dior |TAG Heuer |DFS | | | | | | | |Dom Perignon |Celine |Givenchy |Dior |Miami cruiseline | | | | | | | |Mercier |Loewe |Guerlain |Ebel |Sephora | | | | | | | |Veuve Clicquot Ponsardin |Kenzo |Kenzo |Zenith |Le Bon Marche | | | | | | | |Canard Duchene |Givenchy |Hard Candy |Omas |Solstice | |Pommery | | | | | | | | | | |Krug |Christian Dior |Fresh |Chaumet |La Samaritaine | | | | | | | |Chandon Estates |Christian Lacroix |Bliss |Fred | | | | | | | | |Cloudy Bay |Marc Jacobs |Urban Decay | | | | | | | | | |Cape Mentelle |Berluti |Make Up For Ever | | | | | | | | | |Newton |Fendi |BeneFit Cosmetics | | | | | | | | | |MountAdam |Thomas Pink | | | | | | | | | | |Hennessy |Emilio Pucci | | | | | | | | | | |Hine |Donna Karan | | | | | | | | | | |Chateau d’Iquem | | | | | Appendix #2: Financial data on LVMH |2001 |2002 |2003 | |LVMH Consolidated Profit | | | | | |1560 |2008 |2182 | |Operating profit (€ million) | | | | | | 13 | 16 | 18 | |Operating margin (%) | | | | | | 10 | 556 | 723 | |Net profit (€ million) | | | | | | | | | | |2001 |2002 |2003 | |Sales by Business Line (€ million) | | | | | |2 232 |2 266 |2 116 | |Wine and Spirits | | | | | |3 612 |4 207 |4 149 | |Fashion and Leather Goods | | | | | |2 231 |2 336 |2 181 | |Perfumes and Cosmetics | | | | | | 548 | 552 | 502 |Watches and Jewelry | | | | | |3 493 |3 337 |3 039 | |Selective Retailing | | | | | | 113 | (5) | (25) | |Other Businesses | | | | | |12 229 |12 693 |11 962 | |Total | | | | | | | | | | |2001 |2002 |2003 | |Operating Profit by Business Line (€ million) | | | | | | 676 | 750 |796 | |Wine and Spirits | | | | | |1 274 |1 280 |1 311 | |Fashion and Leather Goods | | | | | | 149 | 161 |178 | |Perfumes and Cosmetics | | | | | | 27 | (13) |(48) | |Watches and Jewelry | | | | | | (213) | 20 |106 | |Selective Retailing | | | | | (353) | (190) |(161) | |Other Businesses | | | | | |1 560 |2 008 |2 182 | |Total | | | | | | | |Source : 2003 annual report | Appendix #3 : Transportation alternatives | | | | |Length |Cost | | | | | |Sea/Surface Freight |3 weeks |€300 / ton | | | | | |Air Freight |1 week |€1500 / ton | Appendix #4: Sample products of Louis Vuitton [pic] ———————– [1] As a consequence, all figures on Louis Vuitton presented in this case are analyst and case writer estimates ———————– [pic] Logistics center (Cergy-Pontoise Number of manufacturing facilities n Few retail outlets Many retail outlets [pic] 1 1 6 [pic] CERGY Appendix #5 : Louis Vuitton’s Global Presence

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Fondation Louis Vuitton: A dream come constructable

Looking at the very first sketches by Frank Gehry for Fondation Louis Vuitton, a new museum of contemporary art near Paris, the challenge of the endeavor is apparent. This is the kind of building that would not have been possible to construct without a comprehensive approach to BIM.

Drawings only for fabrication

“This was a unique BIM project, as the only actual drawings produced were those for the fabrication of parts and assemblies; all other information was provided between each project party from the 3D modeling process,” says Ian Belcher , UK Manager of BDS VirCon. “Our knowledge of how to get the most out of Tekla software, along with a client willing to work with us in providing the right information to all parties involved, was what made this project a success.”

Information for automation from the model

”The nature and intent of the project setting meant that the 3D interfacing between software tools had to be the only way forward,” says Belcher. Even with the supply of intricate drawings for fabrication, they had to be supplemented with electronic files and 3D data exchange files. On top of the CAM files for part fabrication via automated machines, BDS supplied 3D drawing files to aid in setting out and quality-controlling the node points.

"The Fondation Louis Vuitton project exemplifies how BIM can enable design, fabrication and construction excellence." Andrew Witt, Director of Research, Gehry Technologies

Maintaining tolerances from the model

BDS VirCon imported the Digital Project data into Tekla via the industry standard IFC format for all items, and in addition, the drawing files for the centreline of all curved items. These files also indicated the change in radius of each member, with a point at the start, middle and end of the radius, which they were able to replicate into the Tekla model and onto fabrication drawings. Rolling drawings were dimensioned accordingly, but BDS also supplied CAM files for the rolling process.

Into the workshop, in addition to the normal CAM and 2D information, BDS supplied 3D drawings of all node blocks so that during fabrication, the surveying equipment could be utilized in maintaining tolerances required for the project. Files were also supplied to the glulam manufacturer for use in shaping and drilling the timber beams.

"The only items that did not come directly from the Tekla model happened to be the twisted or corkscrewed glulam beams, which were supplied directly from the Digital Projects software,” Belcher explains.

Structural core of concrete and steel

The museum’s structural core consists of a series of solid volumes called icebergs, which support the floating glass canopies covering the entire building. Structurally, the icebergs were designed as concrete and steel frameworks. The façade is covered with ca. 16,000 ceramic tiles. Every single element has a unique geometry in order to follow the smooth lines and various facets of the façade.

Automated production of panels

In order to keep the process for the aluminium cladding panels fabricated by Iemants Staalconstructies acceptable, both economically and technically, detailer company POUMA developed specific software tools, which resulted in a highly automated production process.

"A unique BIM project; information was provided between each project party from the 3D modeling process." Ian Belcher, Manager, BDS VirCon

Starting with the input derived from the designers’ 3D models in Digital Project, all relevant geometrical data was imported into Grasshopper/Rhino. This software environment allowed the detailer to develop tools that could be used to semi-automatically generate each individual panel, including a large amount of detailing. Geometrically correct panels with joints and all necessary detailing were imported from Grasshopper into Tekla using open API, causing almost no additional fine-tuning for each unique panel.

"Through this automated approach, different teams on different locations were able to collaborate simultaneously, following equal standards,” said Ilka Mans , Project Engineer at POUMA.

"The supply of intricate drawings for fabrication, had to be supplemented with electronic files and 3D data exchange files." Ian Belcher, Manager, BDS VirCon

New model server system

Gehry stands for iconic architectural projects characterized by non-repetitive and complex geometries. In this project, Gehry Technologies implemented a new digital project delivery system for the 3D design and data exchange needed for BIM collaboration: the model server system was custom-developed with version control, concurrent distribution, and tracking.

This kind of implementation represents early steps toward a truly cloud or grid-centric approach to AEC collaboration. Beyond the project, these processes provide a sample set of services. The flexible use and development of tools for model collaboration break technological and organizational barriers and help accelerate design cycles.

Design, fabrication and construction excellence

”The FLV project exemplifies how BIM can enable design, fabrication and construction excellence,” said Andrew Witt , Director of Research at Gehry Technologies, in the fall 2012 issue of the Journal of Building Information Modeling. The project drew from building expertise around the world.

In recognition, Fondation Louis Vuitton was selected as the 2012 recipient of the prestigious BIM Excellence Award given by the American Institute of Architects (AIA). Part of the won the Special Rcognition in the Tekla Global BIM Awards in 2012 and another was a winner in the UK Tekla BIM Awards in 2013. The whole project won citation for BIM Excellence in the American Institute of Architects (AIA) in 2012.

Take control and deliver a common understanding with data-rich models to enhance efficiency in every phase of your project.

Project information

• Location: Jardin d’Acclimatation in the Bois de Boulogne, Paris.
• Construction timescale: 2011–2014.
• Contract value: ca. EUR 100 million.
• Project owner: Louis Vuitton Foundation / LVMH Moët Hennessy.
• Architectural design: Frank Gehry, Gehry Partners LLP.
• General contractor: VINCI Construction Grands Projects.
• Structural design: Eiffage Construction Métallique, Rice Francis Ritchie RFR (Engineering Gevelbekleding).
• Steel, structural, timber, mullions, transoms detailing: BDS VirCon.
• Steel fabrication: Eiffage Construction Métallique, Iemants.
• Aluminium panel detailing: POUMA / Iemants.
• Ceramic tiles: Ductal.
• Glulam beams: HESS Timber Limitless.

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Case Study | Inside the $7 Billion Dior Phenomenon

• Robert Williams

Key insights

• Since 2017, Dior has become one of fashion’s fastest-growing and most profitable brands, with estimated revenues tripling to €6.6 billion.
• This BoF case study breaks down how Dior overhauled its product offer and marketing strategies under a new CEO, Pietro Beccari, and designers Maria Grazia Chiuri and Kim Jones.
• In addition to creating a diversified menu of hit products, Dior rolled out multi-layered store experiences and raced into e-commerce, tapping pent-up demand from consumers outside the shopping capitals where it operates stores.

In 1947, mere months after its founding, Christian Dior Couture revolutionised women’s dressing with its post-war “New Look,” securing a place at the pinnacle of French fashion. Later, Dior became the cornerstone of the luxury empire of LVMH chairman Bernard Arnault, who has invested in the house with a “sky’s the limit” approach since the 1980s. But for many years, Dior’s brand, one of modern luxury’s most famous and prestigious marks, remained bigger than its business.

In 2017, LVMH took full control of Christian Dior, kicking off a series of moves that would radically accelerate the business. Under new chief executive Pietro Beccari and designers Maria Grazia Chiuri and Kim Jones, Dior’s business has grown rapidly, with sales roughly tripling since the deal. Its newfound scale has created a virtuous cycle, allowing it to invest even more in spectacular runway shows and sprawling boutiques, all while multiplying estimated profits by a factor of seven. As Dior edges closer to overtaking its historic rival, Bernstein analyst Luca Solca dubbed it “a homegrown Chanel within LVMH.”

This case study examines how Dior became one of luxury fashion’s fastest-growing and most profitable businesses. The company overhauled its product offer and communications: extending a culture of couture craftsmanship and innovation which had long animated its theatrical runway collections, and applying them throughout its commercial lines to create a diversified menu of hit products. The company also raced into e-commerce, rapidly extending its reach beyond the shopping capitals where it operates stores, and rolled out immersive, spectacular flagships to serve as a destination for a broad range of brand devotees, from aspirational tourists to top-spending “VICs.” As the coronavirus hammered sales for most fashion companies, Dior leaned into its momentum by continuing to stage major marketing moments that engaged homebound consumers watching online and fuelled post-pandemic growth.

The strategy appears to be paying off: Dior has rapidly scaled from around €2.2 billion ($2.5 billion) in revenue in 2017 to €6.6 billion in 2021, according to estimates, with the strong growth putting it closer than ever to overtaking mega-brand rivals like Gucci, Hermès or even luxury titan Chanel. With an operating margin above 35 percent of sales, the brand is likely now the fourth most-profitable listed luxury fashion brand, after LVMH stablemate Louis Vuitton, Kering’s Gucci and Hermès.

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Disclosure: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholders’ documentation guaranteeing BoF’s complete editorial independence.

Robert Williams is Luxury Editor at the Business of Fashion. He is based in Paris and drives BoF’s coverage of the dynamic luxury fashion sector.

• Pietro Beccari
• Bernard Arnault
• Maria Grazia Chiuri
• LVMH Moët Hennessy - Louis Vuitton
• Christian Dior Couture
• Dior Beauty
• Collaboration

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How Chopard Seizes the Red Carpet Spotlight in Cannes

The Swiss brand out-sparkles rivals with a strategy aimed at driving sales as well as image. This year the company dressed Greta Gerwig, Demi Moore and Bella Hadid as well as hosting clients to view (and purchase) its high jewellery range.

Chanel Defies Luxury Slowdown as Annual Sales Surge to $20 Billion

The French couture house reported revenues up 16 percent in 2023 and plans to increase capital expenditure by as much as 50 percent in 2024.

The Vampire’s Wife to Shutter Citing Wholesale ‘Upheaval’

Susie Cave’s cult purveyor of gothic glamour is set to cease trading this week amid a turbulent market for small designer brands.

Luxury Retailers Hope For Boost in London, Milan as Shoppers Avoid Paris Olympics

‘Paris will probably be slow,’ said Cartier CEO Cyril Vigneron.

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