Critical Success Factors for SCM-luxe

The supply chain for luxury goods has a unique set of critical success factors as opposed to traditional industrial supply chains or consumer products. Factors like Fill rates, supply chain costs etc are of less importance. Let us look at some CSFs for SCM-luxe (please note we are looking at CSFs for the supply chain and not brand or marketing mgmt here)

1. Quality:
• The numero uno CSF for SCMluxe - we see that the product quality, finish and packaging is of prime importance for luxury goods (vis a vis the cost say for a consumer product). Hence we would need to look at return rates, defective % of goods/parts etc in assessing the performance of this CSF
2. Country of Origin:
• We've all heard of champagne from Bordeaux and sparkling wine from everywhere else. But country of origin decisions include sourcing strategy for raw materials, assembly, local vs. overseas suppliers, design location etc besides location of manufacture or production
3. Supplier Relationship Mgmt:
• Given the low volumes and high costs, supplier management becomes crucial. Unlike the supply chain for industrial goods where SRM indicates establishing uninterrupted supply lines, negotiating favourable costs and credit terms - SCMluxe would need to focus on getting supplier buy in on the ethos of the brand and value of the product. This means having fewer or sole suppliers who agree to stand by the standards of quality in production of the luxury good
4. Design:

Leonardo Da Vinci's custom design
 for flying machine circa 1490

• The actual design of a luxury product takes into account lifestyle, aesthetic needs and brand consciousness very much unlike the product design for a consumer good or engineering product which is all about functionality, ease of use and technical features. Hence the design function of SCMluxe must be particularly geared to these parameters (customer lifestyle, brand, etc) and work closely with the marketing team
5. Distribution and Sales:
• The sales process including display of product must be strictly controlled (showcased in premium packaging with the right display and messaging on prominent high streets - not shabby cul-de-sacs in an undesirable part of town). Similarly decisions on distribution channel will also impact the performance of SCMluxe - do we go for separate counters in department stores or multi brand boutiques or mono brand boutiques?
6. After Sales Service:
• Sale and After sales service is important for a luxury customer. The experience of buying and getting repairs (yes! a Rolex mechanical watch would require annual maintenance as much as all antique furniture) should be premium and of high calibre
7. Production methods:
• Here we look at decisions on mode of production - hand crafted vs machine made, limited editions vs. higher volume products, individually made vs assembled. All these parameters are interlinked - for instance a limited edition luxury product (say a silver dinner service) would benefit from handcrafting the product with moulds being destroyed after production of set volume rather than setting up expensive machinery and permanent moulds to manufacture the product whereas a longer running product may require setting up a more permanent or mechanized manufacturing process

 These are some of the critical success factors for ensuring the superior performance of a luxury goods supply chain. Ideas or factors to be included in this list would be appreciated and added to SCMluxe - so feel free to write in...