Catching up on articles from the past few weeks, this originally ran front page Wall St. Journal.
A year ago, it took 20 to 30 craftsmen to put together each Louis Vuitton “Reade” tote bag. Over the course of about eight days, separate workers would sew together leather panels, glue in linings and attach handles.
Then, inspired by car maker Toyota Motor Corp. and egged on by outside management consultants, the venerable French luxury-goods house discovered efficiency. Today, clusters of six to 12 workers, each of them performing several tasks, can assemble the $680 shiny, LV-logo bags in a single day.
The factory-floor changes are part of a sweeping effort by Louis Vuitton to serve customers better by keeping its boutiques fully stocked with popular merchandise – to operate, in other words, more like a successful modern retailer. Its supply-chain overhaul includes changes to its distribution system and to the way salespeople serve customers in its tony stores
The “clusters” of workers sound like lean production cells.” If the old method took “8 days,” it was surely a batch system where large stacks of material would be moved from production department to department.
There's a marketing perception about how the expensive bags are made?
Tampering with Vuitton's production poses a risk to the brand's image. Customers pay hundreds of dollars for its logo canvas bags, for example, partly because they have bought into the notion that skilled craftsmen make them the old-fashioned way. Although the company has been modernizing gradually for some time, that reputation is still vital to the company's success.
Well, that old-fashioned way was expensive, adding cost. Knowing the lean business mindset that Price is set by the market (even as crazy as the high fashion market is) — the bags are expensive because they are expensive to make. Being expensive to make, under that old batch system, was just adding cost and hurting profits. Likewise, cutting production costs doesn't mean that LV will suddenly start charging less. Remember this — prices don't have anything to do with costs, prices are set by what the market will bear.
That said, will people criticize the bags as “assembly line” bags, implying they are poor quality? That's the irony of it — if anything the new bags will be of BETTER quality (at least production quality — ignore the materials quality and design quality) because they aren't made in huge batches. Huge batches, as we know, lead to defects being passed along and massive rework at the end of the process (or a lot of costly inspection). Funny how a better quality process might be perceived as worse quality, because people don't understand factories. I hear the same thing in hospitals — they don't want “assembly line medicine” when, in fact, LEAN assembly lines have far more quality controls and error proofing built in than your typical healthcare process does. But, the perception is there that “assembly line” means shoddy, rushed through, and cheaply made. Were the “skilled craftsman” really that skilled under the old method? They were doing the same thing over and over in large batches, that's hardly “craft production.”
The lean system allows LV to be more responsive to its retailers and customers:
The new factory format is called Pegase, after the mythological winged horse and a Vuitton rolling suitcase. Under the new system, it takes less time to assemble bags, in part because they no longer sit around on carts waiting to be moved from one workstation to another. That enables the company to ship fresh collections to its boutiques every six weeks – more than twice as frequently as in the past, according to one Vuitton official.
There's a funny dynamic in the high fashion industry — stockouts aren't necessarily bad. These products have a certain amount of scarcity, making them hard to get and somehow more valuable to the customers. So the goal of a perfect supply chain might somehow hurt the customer value, thereby lowering the price (see — told you prices have nothing to do with costs).
A waiting list for the Paddington bag made by French fashion brand Chloe created such an aura of desirability last year that it became a cult item – and established Chloe as a hot brand.
The industry has begun to rethink that approach. French fashion house Hermes International has hired another 300 factory workers to reduce waiting lists for best sellers like its $7,000 Kelly bag, named after the late actress Grace Kelly. Hermes craftsmen still stitch most of its bags by hand, signing them when they finish.
Anyway, there are many more good details about their lean transformation in the second half of the article, which you can read on your own. One final thing that jumped out at me was the involvement of their CEO, actually visiting the shopfloor workers:
The production changes left some workers concerned that efficiency improvements would eventually lead to job cuts, workers say. “Pegase has caused job insecurity,” says one worker. “Already they are limiting hiring.” Vuitton currently employs about 12,000 people world-wide, 4,000 of them in production. Mr. Carcelle, Vuitton's chief executive, has met with hundreds of factory team leaders to explain the company's efforts to improve efficiency and quality.
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