The Wall Street Journal had an interesting article on how Louis Vuitton is relying on operations to support its growth (At Vuitton, Growth in Small Batches, Jun 27). The brand has grown significantly and is now significantly bigger than rivals such as Gucci. That raises some interesting challenges as it tries to keep up its growth while maintaining its exclusivity. Part of the way it is meeting that challenging is opening a new factory in Marsaz, France, and trying to optimize all of its operations.
The site is part of a strategy to eke out small quantities of growth throughout its operations, starting with the factory floor. Vuitton’s size means it has fewer unexplored avenues to tap for growth than competitors. …
Vuitton’s growth over the years means it is constantly bumping up against its full production capacity. The company owns 17 factories that manufacture bags and accessories. Marsaz is the twelfth in France; in addition, there are three factories in Spain and two in California. Last year, Vuitton was running so low on inventory that it closed its French stores early in the day. The company only manufactures components such as zippers in Asia.
How is Vuitton getting more out of its existing factories? Lean operations.
During the years it took to build Marsaz, Vuitton had to find other ways to increase its production. Mr. Carcelle implemented a lean production process, inspired by Japanese car makers.
By reorganizing teams of about 10 workers in U-shaped clusters, Vuitton was able to free up 10% more floor space in its factories. “We were able to hire 300 new people without adding a factory,” Mr. Carcelle said.
Each step of production was analyzed for potential gains. At Vuitton’s shoe factory in Italy, robots now fetch the foot molds around which a shoe is made instead of workers walking back and forth from their workstation to the shelves. The use of robots resulted in a “considerable” time gain, Mr. Carcelle said. …
Vuitton remains known for high quality, but the work isn’t all artisan. Indeed, last year two of its ads showing workers making things by hand were banned by Britain’s advertising watchdog for potentially misleading consumers.
(For more on lean operations at Vuitton see here.)
So is it surprising that producing luxury goods should benefit from rationalized production? Adherents of lean operations will obviously not be surprised by the gains at Vuitton. Lean can bring benefits to pretty much any kind of service or process. If anything, using lean to rationalize producing luxury goods is not that different from using lean to improve healthcare. Healthcare is highly personalized but much can be gained from making sure that assorted support functions run well and that caregivers are coordinated. Luxury bags are similarly low volume and “special” but can benefit from recognizing the common features across items and making sure that work is coordinated.
The challenge, I suspect, is that no one wants to think that there $3,000 purse came off an assembly line. Buyers want to believe that old-time craftsmanship lies behind every item even if old-time craftsmen could never be as good at some tasks (e.g., cutting leather) as modern equipment. On the other hand, the increased productivity from lean operations may be what allows Vuitton to keep so much of its production in high wage locations and “Made in France” may be enough of a signal to the market about the brands inherent quality.