Introduction
Many organizations are fully involved to the application of Supply Chain techniques. Louis Vuitton-Moet Hennessy is one of the companies which enjoys advantages of these techniques according to the market requirements. However, the company is fully utilizing marketing and sales, logistics and manufacturing to fulfill and produce according to the market demand. Therefore, the company has been well performing over 20 years through provision of luxury products. Retail outlet are approximately 1700 distributed globally with net profit growth. The company is experiencing some challenges due to the product availability with the development of new product in the organization. As the company grows developed and implemented several brands, these includes wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jeweler and finally selective retailing. Additionally, some products brands are growing at high rate while others are experiencing slow growth rate.
Case Question 1
Louis Vuitton is one of the world largest company that deals with the sales of luxury goods. The company was doing well form the start. Still, after sometimes, some issues started to develop that lead to arising of conflicts between the department responsible for marketing and sales and the department of manufacturing and logistics. Yves Carcelle is the CEO of the company and was called upon to arbitrate on the current conflict between the two parties. Both the vice presidents of the two departments have been disputing over how to solve the problem of out of stock which has been highly increasing.
Another cause of nature of the conflict arises where the vice president of the marketing and sales blames the situation and says it occurs due to lack of flexibility and the responsibility of the company’s supply chain. This factor is related to the department of manufacturing and logistics; thus, the vice president in this sector is not pleased about the claim. The vice president of production and logistics also blames the situation and says that it is due to the recent increase introduction of new products which was combined with power forecasting on demand (Reddy, 2017. This situation is also related to the department of marketing and sales because it is there responsibility to carry the research in the market sales before introducing new products. The two factors lead to misunderstanding, which causes conflicts between the two teams.
The company faces various issues that have contributed to a decreasing in its productivity over recent years. The first issue that the company faces is the increase in the cost of logistics. Shipping cost has increased in past years, leading to the customer being discouraged about the problem of purchasing the products. At first, the company used traditional boats to ship the products. In every month, the store managers would replenish the requirements and place an order following the logistics set in place. The request was processed, and shipping arranged. Currently, the company may use the Airfreight for shipping products to speed up the delivery process. It has led to an increase in logistics cost due to the increase in the shipping fee.
The second issues that have been identified are that when managing the inventory, the logistics center handled returns from unsold, damaged, faulty, and out of fashion products which lead to a more significant loss in the company. Short-life-cycle products were disposed of every year. This made a more substantial increase in the associated logistics costs, where products cost raised significantly. The inventory was growing faster, and thus the storage costs were rising day by day where some particular retails were expanding and needed about 20 per cent for space for storage. Ass mentioned above, there was also a troublesome growth of unsold products.
Another issue was that the company out of stock problems where the costs of some products like the freight increased at a higher rate in the past few years. Some stores suffered this problem which leads to products being too distant destinations as a factor of solving emergencies. Manufacturing cost was also increasing because outsourcing of services was done.
The company also faced the problem of mismatch between demand and supply. Stores that were developed faced shortages during the holiday shopping seasons due to the out of stock issues. It was estimated that out of 5 people who visited the company’s stores no one could find what they needed. The company tried to solve the problems by placing more orders for the goods in high demand. The method only solved the problem so temporarily because it created production and storage problems within the stores. The mismatch between demand and supply resulted in the high cost of limited products.
Case Question 2
Out of stock is a significant problem that faces the company, and there is a need to address it well. The out of stock problems was too numerous where the demand for the products increased in some stores. As a short-term measure to improve on the issue is the company, should consider shifting goods from stores with plenty of the products to the ones that are out of the store. The suggestion could be used to solve emergency problems when out-of-stock has been realized. The long term means of addressing the challenge is to ensure that the company establishes proper means to monitor their stock. The whole process should be administered by the vice president of marketing and sales. For successful monitoring of the capital, the team should put means to ensure communications about the status of products available is done regularly.
The company should also seek to improve on the problems associated with the increased logistics cost. The company should have better logistics methods for ensuring that there are no damaged products, no out of fashion products, and the number of unsold goods has been decreased. As a short term method of solving the issue is that the company through the department of marketing and sales should ensure that proper sales records of all products as been put in place. The files could be used to monitor the demand for various products and thus reducing the overall number of return products and unsold goods (Marten, and Reddy, 2016). The long term option for solving the problem is that proper market research should be conducted regularly to ensure that appropriate logistics had been put into place.
Another issue that needs to be solved and be addressed is the problem of the mismatch between demand and supply. The company must reduce the gap arising between demand and supply by investing in specific products to locations that have constant market changes (Murthy, 2018). It will enable the command to have a continuous supply of the goods, thus meeting the amount.
Troublesome growth of unsold items is an enormous headache to the company, and appropriate solutions need to be identified. As a short-term measure, the company should liquidate unsold products so that the generated cash can be used to carry other business activities (Castañeda, Brennan, and Goentzel, 2019). The company should consider improving the forecast accuracy, reducing the order sizes, and addressing the capacity issues through proper conduction of research as a long-term measure.
Case Question 3
The company is experiencing economic issues which is required to be addressed by VP for marketing and sales. However, these challenges are making the company to have low growth rate within the market economy. The source of challenges is due to the airfreight of most outlet destination as they are considered to be far like US, India, Russia, South Africa, Japan, and Europe and the number of outlets keeps growing. Therefore, these problems are due to the increased transport cost whereby these stores need speed delivery. Due to airfreight distribution, the company has faced both positive and negative consequences. The company has expanded its network in the market through opening of new region outlets. New stores are opened in South Africa, Russia, Japan and China between 2003 and 2004. In 2005, open another one Hong Kong, Las Vegas and Okinawa. Finally, the largest store of luxury in the world was opened in France. Therefore, the company (Louis Vuitton) is gain more power economic due to full utilization of all market opportunities in the market. Productivity and profit level will increase since the area of operation also is increasing accordingly.
However, airfreight was additionally done since production of raw material was done according to the area of raw material and labor availability. The idea has economically affected the company since some regional market are growing with a rate of 20%. For the illustration, during 2005, only Morgan collection offered 50% of the sales round the global. The means was easily made though airfreight transport. Therefore, this encourages production of high quality and standards products in the market. The use of different techniques from different regions which finally distributed globally has automated and provision of technology and craftsmanship of the product. Increased sales are recognized from the company which raises the economy over the world of business.
Due to have central distribution center, the company is facing challenges of not delivering products on time. Many orders to be distributed in many outlets has increased transportation cost which lowers the profit level. After manufacturing, product is overstaying in the warehouse waiting for global logistics to take place. Almost a month before the product is distributed. On average, 2% of the product due to airfreight distribution and delay waiting for their turn, short-cycle and more perishable goods they are easily disposed affecting the economic factor negatively. The short-cycle products consume 7% expenses on advertisement while discounting the product price to attract global market, this has negatively affecting internal economic power of the company. Therefore, the company planned to open backup stores which will provide easy distribution and logistics, thus reducing distance, delay and transport cost to the market. If this is well implemented it will facilitate easy access and increase the sales of the company.
Case Question 4
Yves Carcelle as the CEO of Louis Vuitton, is required to improve the company’s situation through implementing as some changes. The changes should be developed and implemented using Supply Chain and Operations management techniques within the company. However, effective and efficient collaboration of production line of luxury products, market segmentation and other operations like warehousing, distribution, and manufacturing should focus on achieving the same strategies. According to the Yves Carcelle the organization profitability and productivity was decreasing as comparing with previous year. The identified reason is due to difference in new product development, logistic cost, and decisions from both marketing and sales and manufacturing and logistic departments.
Several recommendations are required to be made and implemented for the company to experience positive changes. One, the company is recommended to develop and implement missing Value Chain operations. Supply Value Chain operation always focus to have effective and common goal from all organization operations thus improving both productivity and profit level of the company. Beside that, the company will achieve all short-term and long-term strategies which will bring perfect competitive edges of the company in the market.
References
Castañeda, J.A., Brennan, M. and Goentzel, J., 2019. A behavioral investigation of supply chain contracts for a newsvendor problem in a developing economy. International Journal of Production Economics, 210, pp.72-83.
Marten, M., and Reddy, A.A, 2016. Commercial cultivations and making profits in firms from the demand of products. Research review 23 125-34
Murthy, K.N., 2018. Structural shift of demand for products. Working paper no. 184, Indian research on international economic relations, New Delhi
Reddy, A.A., 2017. Supply and demand constrains in production of goods in India. A case study in supply chain, 23 129-36
