Lmvh Case Essay

593 WordsFeb 21, 20133 Pages
Increase in new product introductions Very poor forecasting of demand Rapid pace of new product introductions leading to 20% avg growth in 3 years Unprecdictability of customers inspite of market research Opportunity cost of stores being out of products customers wanted had to be very high 20% operating margin 10% net margin 1987-2005 the annual growth rate of 12% operating profit45 % above industry average 25% Estimate COGS 15% of goods sold Logistics 13 % margin 14 % Countries raw materials were purchased – France and neighbouring European countries 1200 SKU – Stock Keeping Units 8 Facilities – 6 – France, 1 – Spain, 1 – US 3600 labour force 6-8 weeks supply to be delivered 2.5 month of raw material inventory Made to order trunks - 110 hours each -12,000 euro /each 24 people – 120 bags / day Avg cycle time for bags – 6 days In France the products remained in the storage for a month at cergy-pontoise 2% of all fashion related ,short life cycle products had to disposed every year Senior manager view – Anticipate Demand Should have less hurry to stack stores up 5 back up warehouses across the world Distribution: 230 stores in 1998 / 340 stores in 2005 Each store size – 450-500 square feet 1600 sq feet store in paris champs elysees 6th most visited monument in france Every month the store manager draws an estimate of their replenishment of of requirement. Ship and Arifreight to avid long delivery overdue Marketing budget – 20% in 2005 Advertising -5 % Problems: Air traffic reduce after 9/11 Product availability / new product introductions Takashi Murakami – japanse design Customer behaviour : 8 /100 did not find what they were looking for 10 % dissatisfied bought something else immediately 20 % postponed their purchase 40%

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