DDMRP in the Supply Chain Fashion Industry: Louis Vuitton Case Study

The sale of fashion products has been a leading driver of the world economy for decades. Led by the likes of French fashion brand Louis Vuitton, one of the most iconic and well-known brands in the world, known for its high-quality luxury products, fashion has become a critical aspect of global trade. The demand for a brand name and designer products has grown steadily over the years, and the desire for consumers to get the latest news before anyone else has increased. However, fashion buyers have been reticent in integrating technology into their supply chain management for a long time.

In recent years, Louis Vuitton has used a new supply chain management system called DDMRP. DDMRP is a demand-driven, inventory-based system that helps to optimize inventory levels and ensure that products are always available to customers. It has been proven to be very effective in the fashion industry, where demand varies significantly from season to season.

What Is DDMRP?

DDMRP stands for Demand Driven Material RequirementPlanning.The next-gen planning and execution strategy strives to regulate a company’s or enterprise’s supply chain. This approach is centered on the preservation and control of critical information flow.

DDMRP is concerned with minimizing changes and absorbing potential supply shortages in the production process. Customer demand constantly drives the supply chain, and shortages are often unavoidable, even in tiny enterprises.

By introducing buffers to the supply stock and changing them as needed, it can regulate replenishment effectively and on schedule by utilizing the demand-driven material needs planning technique (DDMRP).

DDMRP allows businesses to plan their supply chain more flexibly and adaptively, ensuring they have the right amount of stock.

How does DDMRP work?

DDMRP drives supply order creation and management throughout a supply chain by utilizing key decoupling points.

• Strategic decoupling: The only way to eliminate the bullwhip effect, decrease unpredictability, and shorten lead times is to decouple the supply chain.
• Buffer sizing: Buffer sizing acts as a shock absorber, reducing or eliminating supply and demand unpredictability and reducing or eliminating the bullwhip effect.
• Dynamic adjustments: A dynamic adjustment of the buffer profiles calms the supply chain and smooths operation for all variations within a specific time frame.
• Planning based on demand: Demand-driving planning entails producing supply orders based on actual inventory, ordered but unreceived stock, and qualifying sales order demand.
• Visible and collaborative execution: When workers have visibility into inventory through notifications that track consumption, ordering lead times and material delivery may be linked.

Louis Vuitton and DDMRP: Case Study

Louis Vuitton is a leading fashion brand using DDMRP in its supply chain for several years. The main benefits of having DDMRP in place are improved inventory visibility and reduced stockouts. Louis Vuitton has achieved a significant improvement in inventory turnover and a reduction in the amount of stock held at any one time.

This has resulted in a more efficient and streamlined supply chain, which has helped to improve customer service and reduce costs.

How Did Louis Vuitton Implement DDMRP?

You are probably wondering how well Louis Vuitton implemented DDMRP and what benefits they have gained.

Louis Vuitton, in partnership with Anaplan and Bemyapp, organized a Hackathon at an Information Technology School in Paris called Ecole 42. The purpose of the hackathon was to develop a new and better supply chain model so that Louis Vuitton could implement it globally on its supply chain. There were 50 participants in the hackathon divided into ten teams. Each team was provided with dedicated coaches from Louis Vuitton, and support from Anaplan for implementation was also given. The teams had to follow while developing the new supply chain model.

One of the criteria was that the model should be based on DDMRP. This methodology made the supply chain react according to the customers’ demand, and also, they should use Anaplan to develop the model. The team which won the hackathon was Plan!T. Students handled complicated problems such as supply, distribution, and manufacturing. They also dealt with unforeseen circumstances inspired by real-life occurrences, such as monetary swings, factory productivity influenced by a flu pandemic, and increased orders following social media promotions by various fashion fans.

After that, Louis Vuitton started using DDMRP in its supply chain in 2013. The change in the supply chain control was real and visible. They planned buffer stocks and built decoupling points that helped them manage the supply better. Since the implementation of DDMRP, it has seen a number of benefits, including increased inventory accuracy, reduced stockouts, and improved customer service.

DDMRP has allowed Louis Vuitton to become more agile and responsive to changes in the market, and it has helped to improve the flow of information and communication within the company.

What Benefits Has Louis Vuitton Seen Since Implementing DDMRP?

Louis Vuitton has seen significant benefits from using DDMRP in its supply chain. For example, it has reduced inventory levels by 30% while ensuring that products are always available to customers. It has also improved delivery times by up to 50%.

DDMRP has allowed Louis Vuitton to become more agile and responsive to changes in the market, and it has helped to improve the flow of information and communication within the company.

The company has seen a reduction in stockouts and improved customer service. In addition, implementing DDMRP has resulted in a more synchronized supply chain and reduced lead times.

How Can Other Fashion Brands Benefit From DDMRP?

Other brands in the fashion industry can benefit from DDMRP in a few ways.

First, by using DDMRP, brands can improve their forecasting and inventory management. This will help them reduce excess inventory and ensure they have the right amount of stock on hand at all times.

Second, DDMRP can help brands to manage their supplier relationships better. By collaborating with suppliers on forecasting and inventory management, brands can create a more efficient supply chain and improve lead times.

Third, DDMRP can help brands to manage their products more effectively. By planning production and collaborating with suppliers, brands can ensure that they produce the right amount of products at the right time.

Fourth, DDMRP helps to lower order management costs. All the costs are reduced as there is less last-minute, frantic reordering of production. Planners, for example, do not need to spend as much time revising and readjusting the plan (leaving more time to work on things that provide more value to the organization.) Because less expediting is required, material costs and administrative costs like shipping frequently fall.

Fifth, DDMRP helps in maintaining higher margins. When manufacturers have to decrease their prices to obtain business or when overhead expenditures such as the cost of expediting orders grow, margins collapse. DDMRP often allows manufacturers to dramatically reduce lead times, allowing them to compete without lowering pricing. Many have even been able to charge a premium for their services. Furthermore, as previously said, a more predictable, less variable production plan reduces overhead expenses, which can eat into profits.

The Future of Fashion and DDMRP

Looking to the future, it’s clear that fashion businesses need to adopt DDMRP if they want to remain competitive. This innovative methodology has already proven its worth in the supply chain management industry, and there’s no reason why it can’t bring the same success to fashion businesses.

With DDMRP in place, fashion companies will be able to streamline their supply chain, reduce inventory costs, and improve responsiveness to customer demand. So if you have a fashion company in need of a more effective way to streamline your supply chain, start implementing DDMRP today and see the benefits for yourself!

Conclusion

The fashion industry is a cutthroat business. Brands are always looking for ways to set themselves apart from the competition, and one of the best ways to do that is through efficient and effective supply chain management.

Fashion leader Louis Vuitton turned to DDMRP to help them streamline their supply chain. And the results have been impressive. Thanks to DDMRP, Louis Vuitton has been able to reduce inventory levels, improve stock accuracy, and shorten lead times.

So if you’re looking for a way to improve your supply chain management, DDMRP is worth considering.

Interested in knowing how Patrick Rigoni can step up the game of your supply chain? Contact us today and get a free consultation.
Patrick Rigoni also offers in-depth DDMRP courses; if you are interested to know more about DDMRP for the supply chain for your company, here is the link to the NEW DDMRP Page.