Even the Best Have to Get Better

Louis Vuitton is a French manufacturer of high-end handbags, wallets, and suitcases. Its reputation for quality and style allows it to charge extremely high prices-for example, $700 for a tote bag. But often in the past, when demand was hot, supply was nonexistent-shelves were empty, and would-be buyers left empty-handed.

Luxury-goods manufacturers used to consider stockouts to be a good thing, but recently Louis Vuitton changed its attitude. The company adopted "lean" processes used by car manufacturers and electronics companies to speed up production of "hot" products. Work is done by flexible teams, with jobs organized based on how long a task takes. By reducing wasted time and eliminating bottlenecks, what used to take 20 to 30 workers eight days to do now takes 6 to 12 workers one day. Also, production employees who used to specialize on a single task on a single product are now multiskilled. This allows them to quickly switch products to meet demand.

To make sure that the factory is making the right products, within a week of a product launch, Louis Vuitton stores around the world feed sales information to the headquarters in France, and production is adjusted accordingly. Finally, the new production processes have also improved quality. Returns of some products are down by two-thirds, which makes quite a difference to the bottom line when the products are pricey.

What steps should be taken by Louis Vuitton in order to ensure that production meets demand?