Going Lean Is In The Bag

[David Blanchard]

In my book (http://www.amazon.com/Supply-Chain-Management-Best-Practices/dp/047178141X/sr=8-1/qid=1160512230/ref=pd_bbs_1/104-0401364-0125538?ie=UTF8)on best practices in supply chain management, I look closely at the application of lean manufacturing principles as practiced by the automotive industry (especially Toyota), aerospace (Boeing) and high-tech companies (Dell, IBM). Lean, quite simply, is one of the most popular topics in manufacturing circles these days, though there sometimes seems to be more talk than there is action.

There are indications that lean is migrating to other industries, including one that you might think would NEVER go lean -- high-end fashion. In a Page One article in the Oct. 9, 2006, edition of the Wall Street Journal (if you have a subscription to WSJ.com (http://www.wsj.com), go to the article titled, "Louis Vuitton Tries Modern Methods On Factory Lines" by Christina Passariello).

The thinking in fashion circles had long held that running out of high-end products like purses and bags is a good thing. (By "high-end" I mean bags -- empty bags -- that cost hundreds and sometimes thousands of dollars. Personally, if I'm going to spend $700 on a Louis Vuitton bag, there had better be at least a new computer in the bag, but then again, I don't think I'm part of the demographic that they're trying to reach.) These ultra-chic bags are sewn by hand, and in some cases even signed by the craftsmen. As the article explains, "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."

However, bottom-line thinkers at these apparel companies are now having second thoughts about limiting the amount of products they can actually sell. Louis Vuitton executives liked what they'd seen of the lean manufacturing techniques used by Japanese automakers, and hired McKinsey consultants to help reorganize the factories so they could shift production to the best-selling product lines.

It took something of a cultural shift: Instead of having specialists work on just one task at a time, McKinsey helped train the craftsmen to handle multiple tasks. "Gluing, stitching and finishing the edges of a pocket flap, for example, became the job of one worker, not three." By de-specializing the workers to some extent, Louis Vuitton can now make more types of bags. A corollary benefit is that the new system makes it easier to detect quality problems and defects. The company is now rolling out its continuous improvement program to include its distribution centers and retail stores.

[Jaybird]

I understand the reasons the company would adopt TPS or Lean, but I'd think their customers wouldn't want it that way. The LV value proposition hinges upon the quality and hand-made nature of the bags -- which limits the quantity of production. These three things over time have built up the brand to command the prices it does.

To me, adopting these techniques throws all three of them into jeopardy. If an experienced worker is redeployed to do 3x the work, including tasks he/she is not an expert in, it seems to me that quality could be a real issue. And, while they may still be hand-made, it's debatable how much of that exists anymore or will exist in the future going down this path.

The worst part is the availability -- simple supply/demand economics tells us that the limited numbers create much of the value for LV products. Flooding the market with them does not guarantee that all will sell, and again seriously endangers the cachet of their wares. It's not unlike BMW moving downmarket with the 1 series -- if everyone can have one, are they special anymore?

I'm all in favor of reducing waste, cutting costs, and speeding things up behind the scenes, but there is a very fine line here, with the company's livelihood at stake.

[sdl]

While I agree the industry has a very delicate balance of demand to maintain, lean is not just about pumping things thru as fast as possible. It is also about material ordering and presentation. In shops that focus upon highly specialized products, material flow through the shop is often ignored. So materials could be damaged after much specialized labor because lean was not considered. I think it is great they are looking into it, but feel they will find flow and reorder points for specific items are where the benefits will be found.

[rusdysetiawan]

I think lean is not needed in high-fashion industry like LV.It's true that lean could make the manufacture flexible enough to quickly adjust in changing market,reduce cost,and speeding production time,that will result in more products with competitive price.
LV has already had its market place-middle to highclass people that is loyal and willing to spend their money for its handmade&quality&limited products.
If LV implemented this technique, the quality gap between false product which produces massly in china with lean technique and usually sell in hongkong with the genuine LV will become more closely.
So..what's the point of buying the genuine one?and flooding the market would only make LV brand become "non exclusive".

[TERRITECH]

In my forthcoming book (http://www.amazon.com/Supply-Chain-Management-Best-Practices/dp/047178141X/sr=8-1/qid=1160512230/ref=pd_bbs_1/104-0401364-0125538?ie=UTF8)on best practices in supply chain management, I look closely at the application of lean manufacturing principles as practiced by the automotive industry (especially Toyota), aerospace (Boeing) and high-tech companies (Dell, IBM). Lean, quite simply, is one of the most popular topics in manufacturing circles these days, though there sometimes seems to be more talk than there is action.

There are indications that lean is migrating to other industries, including one that you might think would NEVER go lean ? high-end fashion. In a Page One article in the Oct. 9, 2006, edition of the Wall Street Journal (if you have a subscription to WSJ.com (http://www.wsj.com), go to the article titled, ?Louis Vuitton Tries Modern Methods On Factory Lines? by Christina Passariello).

The thinking in fashion circles had long held that running out of high-end products like purses and bags is a good thing. (By ?high-end? I mean bags ? empty bags ? that cost hundreds and sometimes thousands of dollars. Personally, if I?m going to spend $700 on a Louis Vuitton bag, there had better be at least a new computer in the bag, but then again, I don?t think I?m part of the demographic that they?re trying to reach.) These ultra-chic bags are sewn by hand, and in some cases even signed by the craftsmen. As the article explains, ?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.?

However, bottom-line thinkers at these apparel companies are now having second thoughts about limiting the amount of products they can actually sell. Louis Vuitton executives liked what they?d seen of the lean manufacturing techniques used by Japanese automakers, and hired McKinsey consultants to help reorganize the factories so they could shift production to the best-selling product lines.

It took something of a cultural shift: Instead of having specialists work on just one task at a time, McKinsey helped train the craftsmen to handle multiple tasks. ?Gluing, stitching and finishing the edges of a pocket flap, for example, became the job of one worker, not three.? By de-specializing the workers to some extent, Louis Vuitton can now make more types of bags. A corollary benefit is that the new system makes it easier to detect quality problems and defects. The company is now rolling out its continuous improvement program to include its distribution centers and retail stores.
You are right : lean manufacturing principles as practiced by the automotive industry, aerospace (Boeing) and high-tech companies (Dell, IBM) is migrating to other industries. However, I would like to add two things :
- You should add Airbus to Boeing (in aerospace industry), not only because I live and work in Toulouse (the headquarters of Airbus !) but overall because through the new program POWER 8, Airbus is changing his supply chain management, introducing a lot of the "lean" philosophy.
- You might talk about the importance of power and asymmetry in the lean manufacturing principles : suppliers are obliged to adapt their methods and technologies and human resources etc. even if it costs too much ! To go lean is not a choice but a constraint that may kill the weakest suppliers...

[jsmercedes]

I think all comments put together make the best sense. Lean will help with the company becoming more flexible to change, more quality focused and more cost effective also to some extent it will reduce the gap between real products vs. fake everyday more rising products, but from a clients perspective LV will probably lose touch because of the market change from high mid class-high to mid class status. The question is? Is the volume increase going to compensate the price reduction needed to survive in a different market segment or will the increase of product mix be supported though out different segments with the same brand name? Being LV the strong brand it is I believe that true lean marketing strategies, product creation lean focus and lean customer oriented implementation will do the trick.

Lean Advice Panel
www.leansite.net (http://www.leansite.net)

[Brad Kenney]

I understand the reasons the company would adopt TPS or Lean, but I'd think their customers wouldn't want it that way. The LV value proposition hinges upon the quality and hand-made nature of the bags -- which limits the quantity of production. These three things over time have built up the brand to command the prices it does.

The worst part is the availability -- simple supply/demand economics tells us that the limited numbers create much of the value for LV products. Flooding the market with them does not guarantee that all will sell, and again seriously endangers the cachet of their wares. It's not unlike BMW moving downmarket with the 1 series -- if everyone can have one, are they special anymore?

I'm all in favor of reducing waste, cutting costs, and speeding things up behind the scenes, but there is a very fine line here, with the company's livelihood at stake.

While I agree with your discussion of the "simple supply/demand economics" in theory, in practice you've got LV and Fendi bags being counterfeited on a large scale and sold everywhere from the shadiest streetcorner on Canal Street to the brightest aisles at Wal-Mart (not to mention suburban living rooms at "purse parties") resulting in losses of hundreds of millions of dollars for manufacturers in 2006 alone. If an unscrupulous company could counterfeit and ship a BMW 1 series, I'm sure we'd see a whole lot more of them than we do now...

Perhaps an old-guard company like LVMH (Moet Hennessy Louis Vuitton) just decided a process upgrade was finally in order, or perhaps they found it necessary after hearing stories like the one about the tourist who returned her perfectly legit, $500 Fendi handbag and went and bought two of "the same bag" for $100 bucks down the street. Sure, it wasn't the same bag, but when the only differentiator is the much lower price, who can tell once it's "in the bag"? Obviously not many potential customers, or customs agents, and so maybe a top-shelf luxury brand like LVMH is looking to lean to make up for this hit on their bottom line.

It does make you wonder what may happen if LVMH has a successful enough lean experience to justify expansion of similar practices to all their brands...

Six Sigma Champagne? Kaizen Cognac?

[leanpoison]

Lean is just another term of "JIT", US CEOs want to copy from Japanese manufactures to maximize profits.
Looking at Japanese manufactures, it seems Lean is the key of the success -- GM/Ford/Chrysler are dying while Toyota/Honda are taking over.
However, another key difference between US and Japanese manufacture is culture, such as Union in US vs. no Union in Japan, and Japanese are yes-people (always follow commands)

Lean followers have not recognized the key difference and will certainly create chaos in US manufactures (now into some high tech companies such as IBM). This is a good opportunity for Chinese/Indian companies to catch up and take over market shares.

[Dwayne Butcher]

Lean is just another term of "JIT", US CEOs want to copy from Japanese manufactures to maximize profits.
Looking at Japanese manufactures, it seems Lean is the key of the success -- GM/Ford/Chrysler are dying while Toyota/Honda are taking over.
However, another key difference between US and Japanese manufacture is culture, such as Union in US vs. no Union in Japan, and Japanese are yes-people (always follow commands)

Lean followers have not recognized the key difference and will certainly create chaos in US manufactures (now into some high tech companies such as IBM). This is a good opportunity for Chinese/Indian companies to catch up and take over market shares.

Perhaps the reason you think lean fails in the U.S. is because companies are doing what you say... using it to "maximize profits." If they (and you) think that's what lean is about, they're wrong and would be better off NOT implementing lean. Lean is more than a tool. More than a cost saving device. It is a business strategy. One that requires full immersion, not cursory implementation by lower and mid-level managers.

Your stereotype of the Japanese workforce being "yes men" is COMPLETELY innaccurate. When a line worker has the RIGHT to STOP production, that's not a yes-man, it's an empowered employee! I saw a Hummer plant, one that is unionized, and workers were literally running from station to station because they were empowered and motivated. It's about the people, stupid! That's what many U.S. companies don't get.

...End Rant...

[Brad Kenney]

just a quick followup from my earlier post about grey market goods:

Sam's Club agreed to pay Fendi an "undisclosed amount" to resolve a dispute over 12 types of counterfeit bags and wallets (http://home.businesswire.com/portal/site/home/index.jsp?ndmViewId=news_view&ndmConfigId=1000001&newsId=20070606005844&newsLang=en) sold at Sam's under the Fendi label.

Doug McMillon, CEO of Sam's, said this:

"We recognize the importance of enforcing intellectual property rights. We expect our suppliers to respect these rights as well, and we will not tolerate deviation from that high standard."

A fine sentiment for sure, but you can't tell me that the Sam's club buyer who was offered bulk bags with the Fendi label at a big box price point by an overseas wholesaler didn't know what the deal was on such a "steal".

It reminds me of the time in high school when I was visiting New York for the first time and I bought myself a genuine, bona-fide "Bolex" watch...