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LOGISTICS MANAGEMENT

Louis Vuitton Moët Hennessy (LVHM) is the leading luxury brand, known for its strict supply chain control and in-house manufacturing to maintain high-quality standards. The company employs vertical integration and a formalized procurement process to ensure exclusivity and quality, while avoiding the risks associated with outsourcing, such as loss of quality control and supply chain disruptions. To uphold its brand image and heritage, LVHM must continue its focus on in-house production and strong relationships with trusted suppliers.

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30 views3 pages

LOGISTICS MANAGEMENT

Louis Vuitton Moët Hennessy (LVHM) is the leading luxury brand, known for its strict supply chain control and in-house manufacturing to maintain high-quality standards. The company employs vertical integration and a formalized procurement process to ensure exclusivity and quality, while avoiding the risks associated with outsourcing, such as loss of quality control and supply chain disruptions. To uphold its brand image and heritage, LVHM must continue its focus on in-house production and strong relationships with trusted suppliers.

Uploaded by

Kenji canuel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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LOGISTICS MANAGEMENT

Mhaerie Ly Dwine L. Disu


BSBA OM – 22A

LVHM, also known as Louis Vuitton Moët Hennessy is the largest and most successful
luxury brand in the world. Ever since its formation in 1987, LVHM has set the benchmark
for quality and exclusivity in the luxury industry. The company works hard to maintain its
reputation by ensuring that its products meet the highest standards. However, if LVHM
considers outsourcing some of its operations it may encounter risks such as loss of quality
control and hidden costs.

Louis Vuitton has built its reputation by maintaining strict control over its supply chain.
One of the strategies used by Louis Vuitton is Vertical Integration, which enables the
company to retain control over various stages of production. It also involves owning and
managing the entire supply chain, from sourcing raw materials to manufacturing and
distribution. Louis Vuitton sources high-quality leather and exotic skins from a small
number of trusted suppliers, to ensure that the materials used in its products are rare and
of the finest quality. Additionally, Louis Vuitton manufactures its leather goods in
company-owned factories located in France, Italy, Spain, Germany, Switzerland, and the
United States. By keeping production in-house, the more the company can closely monitor
the stages of the manufacturing process and it can ensure that its product meets the quality
it wants or meets its high standards. Their next strategy is working or connecting with a
few trusted suppliers, instead of partnering with many different suppliers, the company
builds long-term relationships with a small group of vendors who share its commitment to
excellence. In addition, Louis Vuitton practices Near Sourcing, which involves placing its
factories and suppliers close to its key markets, it helps the company by reducing
transportation costs, shortening delivery times, and improving overall supply chain
efficiency.

Exclusivity is imperative for a premium brand such as Louis Vuitton and the company
attains this by applying a very formalized procurement procedure. Procurement entails
obtaining raw materials and resources necessary for producing the company's handbags
and leather products. Louis Vuitton's procurement process, Direct procurement targets
acquiring crucial materials such as leather, exotic skins, and hardware utilized in the
production of the end product. Indirect procurement is the process of obtaining
operational resources like equipment, tools, and maintenance materials needed to
maintain the smooth running of the production process. Louis Vuitton is always keen to
identify and review its procurement requirements to make sure that all of them are of the
required standard. The company has a carefully defined set of requisites concerning the
quantity, price, and use of the materials required. Such specifications help avoid excess
supply from commoditization and consequently ensure that the products remain scarce.
Louis Vuitton also makes sure that high-quality materials are procured from suppliers at
reasonable prices and thus does not lose control over the cost of materials. The company
evaluates potential suppliers in terms of technical competence, production capacity,
dependability, and post-sales service. As Louis Vuitton wants to have limited suppliers that
it can rely on, the company is cautious to examine the credentials and performance of
prospective vendors. In order to make sure that procurement is in line with its brand
objectives, Louis Vuitton employs a combination of cost-based and market-based pricing
strategies. A cost-based model takes into account the cost incurred by the supplier to
produce the product, whereas a market-based model considers the current market price
for the product. In order to ensure that it adheres to its high standards, Louis Vuitton
collaborates with its vendors closely and performs vendor certifications to ensure that all
materials are thoroughly quality-checked. This way, Louis Vuitton is able to uphold its high
standards of quality and ensure that its leather goods and handbags remain the epitome of
exclusivity and luxury.

If Louis Vuitton outsourced the manufacturing of its signature handbags, it would


encounter some risks that would damage its brand image and devalue the uniqueness of its
products. Perhaps the largest risk is losing quality control. Louis Vuitton's brand name has
been established on high-quality products that are crafted precisely and carefully.
Offshoring the manufacturing process to outside companies may lead to differences in
quality because third-party firms might not use the company's high standards. By
outsourcing manufacturing, Louis Vuitton subjects its own designs, methods, and
manufacturing secrets to third-party suppliers. This raises the risk of counterfeiting, which
is a major issue in the luxury industry. Counterfeit goods not only undermine customer
confidence but also dilute the exclusivity that Louis Vuitton strives so hard to preserve.
Supply chain disruptions and delays are also typical outsourcing risks. In outsourcing
production, Louis Vuitton would have diminished control of the delay and efficiency of
operation. Production or delivery delays may lead to late deadlines, which would
consequently impact the capacity of the company to fulfill customer needs. Cultural
differences and communication barriers are another challenge of outsourcing. In
collaboration with businesses from other regions or countries, there may be differences in
work ethics, quality, and communication, leading to misunderstandings and mistakes. A
mismatch between Louis Vuitton's brand philosophy and the values of its outsourcing
partners may lead to products that do not satisfy the brand's high standards. Given such
risks, it is apparent that outsourcing manufacturing would not be a viable option for Louis
Vuitton. In order to remain a sector leader in the luxury market, Louis Vuitton should
continue emphasizing in-house manufacturing, vertical integration, and having close
relationships with its reliable suppliers.
Louis Vuitton's enduring success as a luxury brand is the result of its strong control over its
supply chain, a closely monitored procurement process, and a commitment to maintaining
exclusivity. By maintaining in-house manufacturing and closely collaborating with an
exclusive pool of reliable suppliers, the company guarantees that its offerings are of the
highest quality and craftsmanship. Producing its products overseas, although potentially
cheaper, would bring risks like loss of quality control and supply chain disruption. To
safeguard its brand image and retain its heritage, Louis Vuitton must remain committed to
in-house production and retain its established strategies that have made the brand a
byword for luxury and exclusivity.

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