Subcontracting at LVMH (Part 1 of 2)

Supply of raw material and production of goods for a luxury product is the key to maintaining quality and brand value of the product. The sources of supply and the level of subcontracting in SCMluxe will hence differ from the traditional retail supply chain. One difference which is obvious is the high level of subcontracting that can be envisaged in the supply chain of mass produced goods. The sources of supply are also far flung with little semblance to the country of origin. SCMluxe on the other hand would have local suppliers and lower levels of subcontracting (Refer Sourcing the Zara Way). However what surprised me was the wide difference in each of the product categories with respect to subcontracting. A study of LVMH showed the below figures

Product or Brand Category	Subcontracting as a % of Cost of Sales
Wines and Spirits	N.A
Fashion and Leather Goods	45%
Perfumes and Cosmetics	9%
Watches and Jewelry	10%

 What makes the level of subcontracting in the fashion and leather goods business so much higher than other product categories? Is it due to the larger volumes, nature of production or simply volatility of demand that makes it easier to subcontract than product from one’s own facilities? Any suggestions or answers from SCMluxe experts? Send across your thoughts and let’s incorporate it in a more detailed investigation of LVMH’s supply chain in the next few posts