Supply chain "Make" strategy

SCM-luxe operates on mostly local manufacture with a high component of artisan suppliers in its make strategy. A part of this has been covered in SCOR framework for SCM-luxe and Upstream SCM-luxe management. Here we will quickly summarize some of the "Make" or production imperatives for SCM-Luxe

Supply Chain “Make” Strategy	Supply Chain Imperatives	Information & Communication Req	Type of Products
Make to Stock	·  Based on Forecasts incorporating POS (Point of Sale) data ·  Low cost country production	·  Automated and highly accurate forecasting technologies ·  Vendor Quality Control	·  Functional premium products which are cost sensitive but still command a premium tag
Make to Order	·  Based on POS data ·  More local manufacture for quick shipment to markets	·  Direct connectivity and up to the minute links with production and POS	·  True Luxury products with lower volumes, high prices and margins
Assemble to Order	·  Ability to modularize design of product ·  Good network of assembly suppliers	·  Connectivity between upstream and downstream supply chains	·  Luxury products with higher volumes
Purchase to Order	·  Based on ability to manage brand and control distribution	·  Licensing of brands ·  Connectivity with brand owners	·  Large distributors of luxury brands through multi brand boutiques

We need to note that the location of manufacture is a different model and is discussed in detail in “location, location, location”.

It is to be noted that in SCM-luxe, the design phase of a luxury product is typically much higher than industrial or consumer goods, ranging from 6months to a year. Also the design phase restarts almost every season since product lifecycles are shorter or require to be updated frequently. Hence the “Make” phase is preceded by a long Design phase

·         Make to Stock: involves producing the product based on forecasts which are generated from historical demand and current point of sale figures. Usually a very sophisticated and advanced forecasting system is used for Make to Order production plans. Vendor quality control is important since costs are important criteria here and it is important that quality is not sacrificed at the altar of cost. Making to stock also results in higher inventory levels and more working capital being locked up in inventory. Thus inventory control and management has to be taken seriously and frequent Ageing analysis, stock level setting etc have to be done to prevent run away inventories

·         Make to Order: Products with lower lead time benefit from “Make to Order” strategy. Here data from the Point of Sales is used to drive production. The supply chain needs to be very agile to enable quick delivery of product to customer (and thus maintain C-SAT). Local manufacture is thus a good option. True luxury products with low demand volatility can be considered for this mode of manufacture

·         Assemble to Order:  Designing products so that they are modularized, can be used to develop a strategy of “Mass Customization” (Please see details on mass customization for SCM-luxe). Here close cooperation between the designers and vendors is critical to ensure optimal design and effectiveness of this strategy. Products with large volumes and significant variety in product range benefit from mass customization

·         Purchase to Order: Some luxury companies operate as holding companies which specialize in brand management and distribution. These companies do not own brands but license them and act as distributors and brand managers. A purchase to order strategy is adopted in this case

It is also to be noted that information systems in SCM-luxe currently are very mature in downstream processes. For example most supply chains would enable re-sellers to place orders online, track the status of their orders etc. However upstream processes are less mature in implementing technology solutions. This is because suppliers, assemblers are mostly smaller players or are artisans who have lower economies of scale and financial muscle to implementing high end SCM technology suites or products.