Feedback notes on the Gucci case study
Question 1: What are the unique features of a luxury goods supply chain in terms of demand characteristics?
Product design and innovation drives demand
Low visibility of future demand leads to order based rather than forecast based replenishment High value & margin products
High level of new product introduction
Short campaign cycles with high level of new product introduction
Question 2: Analysing Gucci’s Supply Strategy
Gucci supply strategy is focused on local sourcing: the supply network is located in the leather district around Florence, a tight-knit & high quality capability region - but also very expensive.
Give that the market is willing to pay a premium price which has to cover high-cost production in Tuscany, Gucci supply strategy is based on local sourcing with three major strengths:
This allows Gucci to be both fast and reliable in developing & introducing new collection.
High level of quality. The local supply base allows Gucci to maintain a strong control on quality, starting from the quality of the raw materials that are forwarded to Gucci, inspected by Gucci and then sent to its suppliers. The set up of any new model can be strongly supported by Gucci technical staff to allow the suppliers be quick to attain the high standards company requires. Gucci’s traditional suppliers in the Florence region are basically craftsmen. So in addition to the product specification, they are able to maintain the ‘craftsman touch’ that is a key element of the Gucci offer. High level of responsiveness. The local supply base allows Gucci to be fast and reliable in developing the prototypes and later in managing changes to product design. Changes in production planning can be handled much faster and more effectively with a local supplier - informal procedures can work more smoothly than formalised contracts. In general, keeping raw materials...
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