Ann sends word of an article in this morning’s Wall Street Journal (sub req’d) entitled Louis Vuitton Tries Modern Methods On Factory Lines. It’s gratifying to see that LV has discovered that quality product design and craftsmanship doesn’t necessarily require long lead times.
For years, high-end fashion houses like Louis Vuitton…paid far more attention to product design, craftsmanship and image than to the mechanics of keeping their stores stocked. When new designs caught on, they often sold out and the companies were often ill-prepared to speed up production and distribution.
As is often the case, after careful analysis, LV found that the greatest cause for long cycle time was waiting, the work in process was mismanaged, being held as inventory on the factory floor.
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.
Ever wary that some will decry their recent industrial engineering advances in lean manufacturing, Mr Vuitton says “When the first electrical sewing machines arrived 30 years ago, people saw it as the devil”. The article explains:
Each factory had about 250 employees, and each worker specialized in one skill such as cutting leather and canvas; preparing, gluing and sewing it; making pockets and stitching the lining; and assembling the bag. Specialists worked on one batch of bags at a time. Half-completed purses would sit on carts until someone wheeled them to the next section of the assembly line. Because craftsmen were specialized, it was nearly impossible for Vuitton to quickly switch workers from one type of handbag to another.
The new system relies on cross-training, reducing the need of specialization by increasing skill levels among workers. Another key element is work organization itself, forming U-shaped cells typical of TSS strategies.
The factory floor was reorganized accordingly. Mimicking the small-team format used by Japanese electronics makers, Vuitton organized workers into groups of six to 12, depending on the complexity of the bags or wallets they are making, according to Vuitton officials and company documents. For maximum efficiency, Vuitton arranged the groups in clusters of U-shaped workstations that contain sewing machines on one side and assembly tables on the other. Workers simply pass their work around the cluster.
Implementing the lean initiative has increased product quality as well. Doesn’t it always?
The system also has enabled workers to detect flaws earlier. At one factory, under the old production system, one of every two $1,240 Tikal shoulder bags had frayed inside seams and needed to be repaired, according to a company document. Under the new production system, those flaws are recognized earlier and can be fixed more easily. Stitching problems on the credit-card pocket of Vuitton’s Viennois wallet used to mean that 4% of each batch of pockets had to be discarded…
According to the article, returns of defective products fell by two thirds last year. The company hopes to reduce returns by another 50% next year. If you are interested in similar initiatives, read an introductory post I wrote last year on becoming a lean manufacturer.
But the point of a Louis Vuitton bag is scarcity! If you can just walk into a store any time and buy the one you want at your own convenience, then owning one becomes less special.
Maybe this will mean that LV will become more efficient and higher quality and will need to resort to just stowing their complete and perfect bags in a warehouse for two months before shipping them out.
Or maybe it will mean that the LV brand drops in prestige.
cluster manufacturing has been around for a while, no?
I think i read that Levi’s tried this in their domestic plants — just before they were all shut down.
I think the old-line sewers were upset because their piece-rate (and income) fell as they were slowed down by newbies in their cluster — but that’s just a recollection, not a fact and I could be wrong.
I think Land’s End was also using this in their ‘custom” khakis that are ordered from the catalog or internet, the pattern made by a computer, automatically cut, then cluster-made in Mexico and shipped to the customer direct — again, I’m not 100% sure, but I think that’s what I recall.
I agree with comment 1. The LV will lose its meaning if it is readily available
I humbly disagree with comment 1. I highly doubt that the market will suddenly become flooded with authentic Louis Vuitton handbags, driving down their prestige and image, or that they would sit on excess stock to preserve their cache. This initiative is clearly resulting in an even higher quality product, and with better stocking of their stores, better customer service. It is presumeable that the more efficient production methods will have the most impact on the availability of their “classic” models, ones that you are likely to find year after year. The highly desireable bags that are introduced for a few seasons at most won’t suddenly become as easy as pie to obtain; more pieces will be produced, but Arnault and others at LVMH know the importance of preserving their prestige and making consumers/customers wild for their product.
I also disagree with Alison (rare, I know). Consider how much the expense of reworking and returns is costing them. The price of LV bags is derived in part through their wasteful practices. Why should customers be compelled to pay for waste? Being lean and producing better products can only enhance the company’s reputation. You need look no further than Toyota to see that.
Kathleen, yes, the better, more consistent quality is a very desirable outcome for LV. I’m not arguing against good production practices! I’m just puzzled that LV would posit keeping their products consistently available as an issue for them: if their products are not scarce, why should the price be high? What else is the point of their brand?
Amy’s thought that they want to keep the classic products consistently available while maintaining mystique and scarcity around the fashion-driven items makes sense. But still, if they can double their output by simply not having to discard half their bags, will they really double their output? Or will they make and discard fewer bags and send the same number to market?
Oh, and Kathleen: this is one of the very few times I’ve disagreed with you, but I don’t think that saving their customers money is one of LV’s goals. By owning an LV bag, you signal to other people that you can afford one. If the price of the bag goes down, then this signal becomes less useful.
From an article about Hermès bags:
“The immutable laws of supply, demand and merchandising are also at work here. Make something fabulous, in fabulously limited quantities, and people will clamor to own it. At Hermes in Fairfax — where just a handful of objects cost under $150, such as those itty-bitty leather holders for Post-it notes — 200 people fervently await the arrival 60 Birkins in any given season, said manager Sams-Manning. Their names are entered onto what she calls “a wish list.”
Such controlled scarcity explains why the resale market is so strong. idwesterner put 11 Hermes bags on the auction block at Doyle New York, including a 2002 black crocodile Birkin she had customized with 484 small diamonds set in the white-gold hardware. The presale estimate was $25,000 to $35,000, but when the hammer fell, the winning bidder ponied up $64,250.”
Somebody paying over $64k for a handbag isn’t trying to save money. They are boasting that they are rich enough to buy whatever they want. They are paying a premium for exclusivity – either they are they only one who has that thing, or they have something that only the ‘right people’ own.
Now, LV is not Hermès. Their handbags are much less expensive at under $5,000. But still, when you’re buying the LV brand you want to know that it’s a brand that the right people own and can use to identify one another. The high cost is perversely what people are paying for: it’s what keeps the riff-raff out.
You’re probably right Alison. Still, idly, one can only imagine how the retail landscape would change if lean manufacturing became more common. Imagine, quality brands across the board would suddenly have more competitive prices. I think it’d really raise the bar on quality execution. Maybe then, attitudes would change? Imagine, a Lexus for everyone! :)
I agree with Alison that LV would not want its prices to go down, and certainly doesn’t want everyone wearing it. However, lean manufacturing still makes sense for them. If they can save 20% on their costs, there’s no rule that says they have to pass that savings on to the customer. They can keep charging the same price and call that 20% profit.
Absolutely, Marnie!
Or shove that 20% margin into reserves so they are better equipped during the mean times of business.
Better yet, they could peel of 5%, distribute 1% to the project manager, and distribute the remaining 4% to the workers who endured the implementation of the system.
But, I suppose I’m an idealist…