Luxury Goods : Supply Chain Re-engineering

From the supply chain vision to the deployment of processes and the implementation of a supply chain planning information system
Case study
07/17/2015

Context and challenges

This strongly growing brand is a member of one of the world leaders in the luxury goods sector. It is faced with sustained growth of sales in a complex manufacturing and commercial context (a broad product range, low volumes per product, a mix of internally made and outsourced products with poor respect of commitments, long procurement leadtimes and import restrictions of certain materials, worldwide distribution of stock, etc.).

In this context, the general lack of trust between the sales regions and the supply chain resulted in high stock levels in the sales regions, a high risk of obsolescence and sudden surges in the supply chain, made worse by the historical open-to-buy processes and the lack of visibility and crossfunctionality of the supply chain planning processes.

The company plans to make significant progress in the quality of interactions between the commercial zones, the recently created central supply chain team and the workshops, subcontractors and suppliers of precious materials, in order to improve the visibility and quality of end-to-end planning and to keep the working capital requirement under better control throughout the season.

The goal is to find the right level of industrialization of the control processes, while taking account of the specifics of the company, the lightweight structures and a strong artistic culture.

Approach and methodology

To begin with, we defined the target vision of the supply chain using a sequential and structured
approach :

  • A quick diagnostic of the supply chain processes and performances, through focused 360° interviews, allowed us to rapidly reach a cons ensus on the priorities for progress, while drawing up a case for change based on an assessment of the stakes
  • A supply chain segmentation that compared the nature of the products, the way they are managed (make to order, assemble to order, push, make to stock), their life cycle (new products, mature products, phase-outs) and their sales level, allowed us to adopt a simple approach to the complexity of the product portfolio and to identify the main performance issues and levers for improvement in each of the segments: alignment of purchases with budgets, assessment of potential sales, command of assortments and the depth of stock in the shops, balancing of production and supplies in line with the stock policy, control of sales flows
  • We then structured the different target macro-processes and the supply chain governance model (target roles and responsibilities in these processes in the commercial zones, the supply chain, international marketing and manufacturing). The level of maturity of the company meant that it was essential that these new working principles were adopted by all the operational players, up to the company CEO
  • We then defined the key principles of each process, on the basis of best practices in the luxury goods industry and applied them according to the specifics of each segment of the supply chain :
    • Input data and product results
    • Horizon, working mesh, fixed horizons
    • Main management rules
    • Process kpis

We then defined a change roadmap that took account of the priorities identified in the diagnostic, the time constraints related to the group’s projects (in particular, the deployment of an ERP), the need to strengthen the supply chain team and realistic deadlines for the implementation of new supply chain planning processes and the supporting information system.

This road map was drawn up together with the customer’s teams and validated by the Management Committee.

The selection process did not take long. The goal was to choose a renowned market solution that met the identified functional requirements, was simple to implement and only demanded a lightweight maintenance structure. Three-party discussions between the customer, the publisher and Argon Consulting resulted in a reciprocal commitment to make key resources available during the implementation phase.

The first two phases involved 12 weeks of fast-track collaborative design work with the customer, supported by multi-functional workshops.

The third phase consisted in implementing the target processes and the selected APS solution.

We recommended a precise organization of working practices, especially in the central teams.

Thanks to our specific implementation methodology, we completed the deployment in the 6-month window allowed by the Group projects.

We applied the fundamental principles of the macro-processes to the processes and detailed functional needs, while taking the functional and technical potential of the selected APS into consideration, right from this early stage. Consequently, it was easier to validate the functional needs and the technical architecture through well organized dialog with the publisher.

In view of the significant changes in responsibility between the zones and the central supply chain, we paid especially close attention to change management, in terms of culture and of other more conventional aspects : communication, assessment and development of skills, training, etc.

Finally, we succeeded in gradually obtaining the buy-in and adoption of the customer’s teams using conventional dual-command, gradually decreasing coaching and brief-action-debrief methods.

Results

After a ramp-up that lasted a few months, the project teams and key players were able to measure the
progress made and the results in terms of quantity.

Product availability and respect for commitments to supply the zones improved significantly. The working capital requirement dropped in accordance with the initial business case.

This was all the result of a substantial improvement in the quality of the planning processes between the zones, supply chain and manufacturing, which allowed for greater visibility, more instructive and rational exchanges and arbitration that was accepted more readily.