The Luxury Goods market has witnessed exceptional growth over the decades. The extremely wealthy, for a long time, were the traditional customers of Luxury goods. However, on account of progressively opening up the market to wider audience, the luxury industry has witnessed exponential growth opportunities, resulting in unprecedented increase in the bottom-line of these luxury companies. Louis Vuitton has exemplified this over 20 years.
However, the company faces a lot of challenges with respect to optimizing its supply chain so as to ensure mitigation of losses on account of lost sales & stock outs. We have identified the following challenges:
The time for the raw ...view middle of the document...
This would improve the production planning by providing LV with more accuracy of the demand forecast. Doing forecasts and market analysis could help attaining this goal.
The company could create regional warehouses. This would reduce the price of shipping and the order time from the warehouse to the supplier.
Since the brand treats luxury fashion products, the estimate for inventory replacement should be done more often than only once a month.
Using new shipment methods, such as airfreight, would reduce the lead-time.
Multiple warehouses should be in place in strategic locations acting as back-up.
Having less product variety in stores, and more online, might help the LV inventory problems, however, this might also be a disadvantage for the customers who like product variety.
Implementing a made-to-order system would improve the production’s reactivity. However, this solution calls for fast shipping, which the airfreight solution would satisfy.
The warehouse supplies and delivery amounts should be directly dependent on the current and historical demand from specific geographical areas.
Stock Outs & Lost Sales
Louis Vuitton’s reliance on ships to distribute and deliver its products in the stores across countries has not only resulted in dissatisfying rich and extravagant customers, but also has resulted in revenue leakages and loss of prospective sales.
The tabulation below shows the loss incurred on account of delayed deliveries and non-responsiveness of its supply chain, and also the benefits / savings which arise because of implementing Air Freight...