The SCOR framework by the Supply Chain Council (SCC) has been effective in the design and evaluation of the supply chain for most industries, though the focus has been generally skewed toward the discrete manufacturing and CPG industries. We do see that the luxury goods fits well into this framework but with the necessary customiztion to take into account the peculariaties of SCM-luxe
The SCOR framework encompases not only the nucleus company (Your Company) but also extends it to both the suppliers and customers value chain. For design and performance of say Cartier’s supply chain would include their suppliers of polished gems in India and the suppliers of rough to these Indian suppliers in India. Similarly the supply chains of the distributors of Cartier’s products in the form of stores and the end customer would be also be part of Cartier’s supply chain. Its only by the effective management and coordination of the entire supply chain from supplier’s supplier to the customer’s customer by the nucleus company that will enable it to optimize the supply chain and realise the twin contradictory objectives of controlling costs and achieving customer delight
The supply chain for each of these entities in the SCOR framework would consist of 5 processes:
Lets now look at how these processes would need to be customized for SCM-luxe:
Plan/ Complaince:
The role played by planning in the supply chain in SCM-luxe is not to be under-estsimated. The Planning for each element i.e planning on “Source” of goods, “Make” of goods, “Deliver” of goods and its “Return” need to be carefully executed to ensure that the high levels of quality is maintained but costs are controlled to the extent possible. In SCM-luxe another important facet of “Plan” not commonly considered in other industries is “Compliance”. This would entail ensuring that sourcing happens in complaince with both legal and “soft” requirements to maintain brand image (Eg: your suppliers don’t use blood diamonds), make or manufacturing is complaint with labour laws (not in sweatshops in China), Deliver or logistics is compliant with customs requirements (high value luxury goods need to pass through tough tax/customs laws) and finally ensure planning for return of goods (again high value goods need to have different return and reimbursement policies and maybe even insurance)
Thus Complaince plays a starring role in the Plan process for SCM-luxe and must be a separate element in addition to the 5 SCOR processes
Source
SCM-luxe demands the very highest standards of quality in its raw materials. However the cost of these materials would entails that stocks are kept as low as possible. In the jewellery industry for instance, stocks of precious stones and metal can block scarce working capital and reduce the number of finsished jewellary put on display in stores for sale. Is Vendor Managed Inventory (VMI) the answer?
Another factor to be considered (besides complaince) is vendor evaluation and quality control – regular audits to ensure quality (and confidentiality of designs etc if applicable) is being met by supplier is necessary. This would be inspite of “Generations of Trust” and “Faith and personal relationships which go back a long way” which dominates supplier management in the luxury industry.
The manufacturing of luxury goods is fragmented with some markets being niche (watches handcrafted Switzerland) while other have followed the China way, albeit with independent set ups in local markets.
The questions of make to order (pull) or make to stock (push) or a combination of both becomes less important considering the lower volumes in the luxury goods segment. However these startegies are heavily dependant on the type of product (functional, innovative, aspirational etc) and in some cases mass customization (a combination of modularization and postponement of “Make”) can be the answer (eg: functional luxury goods like the fragrances market)
Deliver
SCM-luxe looks more at the store and display end of the “Deliver” process than just the transportation and logistics though this may contribute to significant costs considering insurance, premium freight etc that will be required for some products. However managing the brand and its successful order handling at the customer end is of high significance and a make or break for most luxe brands. Order handling is again much more personalized (with almost no inside sales) and hands on. Customer experience management will play the key role here and metrics to monitor these factors will be crucial in determining the efficacy of the “Deliver” process
Return
SCM-luxe would have two components in the return process which would very much differ from other supply chains:
· Returns would not be due to end of life or repair (imagine the impact on your brand if you claim it requires repairs after the customer has paid through his nose for it!) but more changes in style and fashion (resetting existing jewellery or its exchange for newer styles). Hence the retuns process like the deliver process would have to be far more personalized and involved rather than the online or store pick and drop off facilities offered in other industries
· After Sales Services such as maintainence, warranty etc would need to be executed with minimal disruption to customer. i.e say a Porche that needs to be buffed/ repainted (after a skirmish with the papparazzi?) needs to have the technician discretely handle it in the customers absence or at his home without inconvenience of any sort. A mechanical Rolex watch must have facilities across the world (even in Brunei) to service the watch in time
Though the SCOR framework can and should be customized for SCM-luxe, we do see that due to large range of luxury goods, no single framework can capture the diversity of the industry. It will depend on the type of luxury good (premium organic yogurt or high end jewellery?) and the market it operates under
