Recycling luxe raw materials

Every supply chain has waste reduction and recycling as a major area of focus. The recycling of finished goods returns, either due to end of life or due to dissatisfaction with the product has been well established with sophisticated returns and reverse logistics value chains in place. However in this blog post we will look at how waste raw material is managed. Raw material or Work in Progress (WIP) stocks are generally marked out for removal due to:

·         End of life or obsolete items

·         Non-moving stock which has to make way for newer fast moving inventory

·         Waste generated from the manufacturing process (left over pieces or by-products of the process which are not required in the end-product)

The methods used to manage this waste are similar to that of finished goods and in order of priority are:

·         Reduce the production of waste: Either by better manufacturing processes (eg. Make the leather cut outs for handbags designed to cover maximum area of the leather swathe through software programs) or simply better inventory management (again maybe through the use of demand and supply forecasting tools and technologies – inventory optimization software such as MEIO or Multi-Echelon Inventory Optimization tools such as SmartOpps, Toolsgroup, etc. are becoming increasingly popular in the luxury goods manufacturing process)

·         Re-Use: By ensuring raw material is utilized across product ranges, the reuse %s can be increased and obsolete inventory reduced. Delayed production and mass customization are some of the strategies which are used to increase re-use of material

·         Recover: Either recover raw material through refurbishment of the material or recover energy from the product. Luxury goods industries regularly refurbish material or use raw material to convert to energy

·         Dispose: the last option will always be the landfill and luxury goods supply chain is more prone to use this option to ensure the twin ideals of SCMluxe – Quality and Brand image are not sacrificed at the altar of frugality

 

Recycled leather at petit h

The house of Hermes has bucked this trend and come up with an interesting alternative to the above – in the creation of the Petit h atelier. The basic premise of Petit h is to create beautiful objects (just as desirables as Hermes products) out of the waste and leftovers of its parent company/ateliers or in its own words “The Petit h project sees discarded Hermès materials 'upcycled' into new objects of desire, building on the Japanese concept of wabi-sabi – were imperfections of nature are viewed as assets of beauty”. Pascale Mussard (a sixth generation member of the Hermes founding family) starts off by inviting artists to the Petit h workshop at Pantin (Paris) where all Hermes discarded products are piled up for the artists to indulge their creative spirits. The outcomes are as diverse as porcelain cups are refashioned into light fittings, mirrors finished with silk ties, crystal bowls becoming lamp shades and leather scraps (from Birkin bags?) forming patterns on blouses. Thus typical Hermes waste such as discarded animal skins from the "Kelly" and "Birkin" bags, other leather wear, and various elements, such as handles, hardware, and discarded ceramics, are being recycled into highly desirable products for sale under the Petit h metier.

Carbon Footprint Labels for luxury goods

Labels drive the luxury industry. But are more tactical labels such as carbon footprint labels of any consequence to the luxury goods industry. Let’s first take a look at what such labels mean and what their contribution is in the consumer goods industry.

Carbon footprint labels basically indicate the quantity of carbon dioxide emissions associated with the production and transportation of a product, mainly food products and initially was designed to move customers to more local products and reduce the environmental impact of transporting essential goods across the globe with a view on reducing costs.  Standards for carbon printing are defined by various agencies like France’s AFNOR and Britain’s PAS 2050, though it is the latter that is gaining prominence. PAS 2050 requires that  carbon footprint  to be tracked not only in its production and manufacture but also in its use. This definition has posed problems for manufacturer’s who will now have to estimate the “use phase” emissions for a product such as a shampoo which will depend on other things, the consumer’s bathroom fixtures (boiler) and how long he takes to have a bath!

From a consumer point of view carbon labels as expected have had limited success – fewer than 20% of British consumers recognized a carbon label, leave alone change their buying behavior because of it. The benefits from carbon labeling come not from the “sell” side but curiously from the “buy” side of the supply chain. Manufacturers need to investigate their supply chain and buying process (and suppliers J) to get their carbon footprint. This investigation provides ample scope for improvement as shown by this company manufacturing potato crisps. Walkers bought its raw material from potato farmers  and paid for it by gross weight. Farmers in a bid to increase the value of their potato’s stored them in special humidifiers to increase their gross weight. Walkers also ended up having to fry them for a longer period of time to drive out the moisture and get a perfect crispy crisp! The unusually high carbon footprint sent supply managers on an investigative path which ultimately resulted in Walkers procuring its potatos in dry weight. This was a win-win situation since the farmers saved on the costs of humidifiers and Walkers on the extra costs of procurement and frying them for longer times. An added benefit was a reduction in carbon footprint by 7%



Carbon footprint averages for Timberland footwear



This very same investigative nature of mapping the carbon footprint will help the luxury goods industry reduce costs or in some cases justify them. Location has always been one of the major contributors to a luxury goods brand value (more of this in another post). By having a carbon footprint show your leather was sourced and finished locally rather than halfway across the world will provide additional brand value to your designer bag or shoes.  For an interesting article on Timberlands quest to map the carbon footprint of its shoes and the contribution of leather from its Chinese suppliers, please see link to Wall Street Journal http://online.wsj.com/article/SB122304950601802565.html

Food sourced from specific areas also add value – beluga caviar, kobe beef etc. Who know what might be uncovered when a carbon footprint is being mapped out for high fashion Marchesa gown or a Phantom Rolls Royce. Though currently the costs of mapping the carbon footprint for a single product  at around $30,000 is very high for industrialized consumer products, its not a high proportion of the product costs for most luxury goods with their smaller product portfolios. Therein lies the opportunity for luxury goods industry to explore their carbon footprint and benefit from improving their supply chains.  Besides labels such as “conflict free” diamonds and “fair trade” coffee has helped the industry and this is one way of the luxury industry doing its bit for the environment (and adding a larger bit to its bottomline!)