Louis Vuitton : New product introductions vs product availability. Dussauge Pierre / Moatti Valérie. Paris : HEC, 2006.
In the spring of 2006, Yves Carcelle, CEO of Louis Vuitton, the largest and most profitable subsidiary of LVMH, the n°1 luxury goods company in the world, had been bickering about how to solve the out-of-stock problem Louis Vuitton's 340 company-owned stores around the world were increasingly faced with.
For several months, the vice president for marketing and sales blamed the situation on the lack of flexibility and responsiveness of the company's supply chain, while the vice president for manufacturing and logistics faulted the recent increase in new product introductions, combined with very poor forecasting of demand.
Yves Carcelle had mixed feelings about the whole issue. On the one hand, close to perfect quality was critical, 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.
Public :
Business school 2nd or 3rd year students, Masters in management, MBA, executives. Executive training : audience with initial education in management before or after business experience.
Objectifs pédagogiques :
The objective of this case is to have students discover and discuss the intertwined nature of manufacturing, marketing and supply chain decisions, making this a crucial strategy issue for most companies. Indeed, organizing the supply chain is highly dependent on both industry and firm characteristics. More specifically, the case illustrates the fact that organizing the supply chain in a "one-way fits all" fashion leads to sub-optimal outcomes. Instead, the Louis Vuitton case makes it possible to show that a segmented approach to supply chain management (i.e. distinguishing between "functional" vs. "innovative" products and setting up a "physically efficient process" for the former and a "market-responsive process" for the latter) yields very significant gains.