Supplier
LVMH has set control procedures for its supplier and employees. The most typical part is its Alert
line and its regulation of supply chain.
LVMH Alert line
Suppliers which become aware of violations (or risk of violation) of the LVMH Code of Conduct,
guidelines, principles and policies and/or of applicable laws and regulations are invited to raise their
concern to their contact person(s) in the entity(ies) within the LVMH Group with which they have
a business relationship. In addition to this channel for raising ethical and other concerns, suppliers
have access to the LVMH Alert Line, an online interface that provides a confidential and secure way
of reporting in good faith violations (or risk of violation) of the LVMH Code of Conduct, guidelines,
principles and policies and/or of applicable laws. A supplier’s relationship with the LVMH Group
will not be affected by a report of potential misconduct made in good faith. The LVMH Alert Line,
which is also open to LVMH Group’s employees and other external stakeholders, can be accessed
through LVMH.com
LVMH independence and compliance
Though they are independent brands, LVMH Group reserves the right to control compliance
Control: Each of the entities within the LVMH Group reserves the right to control compliance with
the principles set forth in this Code by Suppliers. These controls will be performed by such entities
of the LVMH Group or duly mandated third parties. Any control or audit will be related to the
business relationship between the relevant entity within the LVMH Group and the Supplier. If a
Supplier is subject to specific professional obligations pursuant to law, any control or audit will be
carried out taking into consideration these professional obligations. Suppliers must commit to
improving or correcting any deficiencies identified. The entities of the LVMH Group may also
support Suppliers in implementing and applying best practices in order to resolve non-conformity
issues.
Logistics
Logistics usually plays an important role in whole supply chain management, especially for those
big companies. If a good logistics system has been built, it could be costless and add value to other
parts of its supply chain. Below is the initiative of LVMH.
Louis Vuitton relies on a restricted number of highly specialized suppliers for most of their raw
materials. They are mainly based in France, and few of them are from neighboring European
countries. The key raw materials are leather and canvas. The time needed to deliver the raw materials
varies from 6 to 8 weeks depending on the distance to be covered.The company avoids delays caused
by long transportations by maintaining a 2 ½ month supply inventory of raw material. Most of the
manufacturing is retained in France because of the label “made in France,” which is thought to be
considered as very valuable by some customers, especially those who reside in Asia.The factory in
the US caters for the domestic market (Moatti, & Dussage 2007, p. 52). However; most of the Louis
Vuitton products sold in the US are still imported. The company occasionally outsources when
capacity is exceedingly tight.
Integrated platform for online operations and warehousing operations
Due to the rising demand for luxury goods in recent years, there is an urgent need to establish
distribution centres across the country because of the need to improve omni-channel sales
capabilities. However, LV insisted not to find an agent, because they thought it would damage their
brand image. They just build regional distribution centres in major cities of each country, for
example, like Florence or Shanghai.
Recently, LVMH build their first distributing factory in Shanghai. As the biggest perfume and
cosmetic distributing center in Asia, it aims to integrate the entire business process of online sales,
commodity warehousing and sorting, packaging, and delivery to stabilize the marketing network
and logistics system.
Comprehensive Inventory management
LVMH is a comprehensive company which owns lots of brands, they have many SKU but limited
quantity of each SKU. And because LVMH has spread its business around fashion industry, which
means seasonal demands varies, they need to forecast their sales during each season. And as it
manufactures their products mainly in Europe and needs selling to Asia, the shipping takes about 68 weeks, the comprehensive inventory management should be applied. "The cycle is too long, so
we have to set up more safety stocks, and the inventory pressure is easy to increase." For this reason,
LVMH has begun to implement a supply chain rapid response and comprehensive inventory
management plan. According to Lin Zhengdi, this plan mainly Involving China's general warehouse,
import links, procurement and supply, and sales-end inventory management, etc.
In the general warehouse link, the Shanghai company has launched measures to optimize warehouse
operations, mainly by merging counter orders. It is understood that in the past, orders placed at
department store counters were relatively sporadic, and the time was not fixed, which brought
pressure on the main warehouse from peaks and valleys in order volume, supply chain reactions,
and inventory. To this end, the Shanghai company developed an automatic counter replenishment
system, and comprehensively used the sales forecast system to set import time parameters, inventory
parameters, new parameters, offline parameters, etc. according to historical sales records, and merge
multiple orders at the same counter Ship for one order. "Big brands are combined to ship once a
week, while small brands ship once every two weeks." In the general warehouse, the Shanghai
company will also set counter order days (distribute the delivery days of counters across the country
reasonably and evenly, " The model also frees the time of sales staff from frequent logistics receipts,
which is also conducive to reducing the transportation costs of logistics carriers."i
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https://www.logisticnet.com.tw/newsCaseRunDetail.asp?id=309