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The Strategic Role of Supply Chain Management in the Luxury Fashion Sector Gernot Brugger The strategic role of supply chain management in the luxury fashion sector Gernot Brugger Dissertation written under the supervision of Laure Leglise Dissertation submitted in partial fulfilment of requirements for the MSc in Management with a major in strategic marketing, at the Universidade Católica Portuguesa, 08.01.2020 Table of contents Abstract ..............................................................................................................................................5 1. Introduction ................................................................................................................................7 2. Literature Review ........................................................................................................................9 2.1 Forecast of the luxury fashion market ........................................................................................9 2.2 Concept and characteristics of luxury ...................................................................................... 10 2.2.1 Definition of luxury .............................................................................................................. 10 2.2.2 Heritage of luxury brands ..................................................................................................... 13 2.2.3 Definition of brand image ..................................................................................................... 14 2.3 Supply chain............................................................................................................................ 14 2.3.1 Supply Chain Management ................................................................................................... 15 2.3.2 Types of production outsourcing used by luxury brands ........................................................ 16 3. Methodology................................................................................................................................. 18 3.1 Research design ...................................................................................................................... 18 3.2 Data collection ........................................................................................................................ 19 3.3 Data analysis .......................................................................................................................... 22 4. Empirical setting ........................................................................................................................... 23 4.1 Burberry ................................................................................................................................. 23 4.2 Financial analysis of Burberry ................................................................................................ 24 4.3 Gucci ...................................................................................................................................... 25 4.4 Financial analysis of Gucci ..................................................................................................... 26 4.5 Luxury market & competitors .................................................................................................. 27 5. Findings ........................................................................................................................................ 29 5.1 Planning ................................................................................................................................. 29 5.2 Sourcing .................................................................................................................................. 30 5.3 Production .............................................................................................................................. 31 5.4 Delivery .................................................................................................................................. 32 5.5 General Findings .................................................................................................................... 34 6. Discussion .................................................................................................................................... 39 7. Conclusion .................................................................................................................................... 41 8. Bibliography ................................................................................................................................. 42 List of tables Table 1:Characteristics of luxury ....................................................................................................... 11 Table 2: Data sources and use in analysis .......................................................................................... 19 Table 3:Summary of the findings ...................................................................................................... 36 List of figures Figure 1: Revenue luxury fashion segment ..........................................................................................9 Figure 2: Supply chain management process ..................................................................................... 14 Figure 3: Burberry’s key numbers ..................................................................................................... 24 Figure 4: Burberry’s revenue by channel ........................................................................................... 25 Figure 5: Gucci’s revenue ................................................................................................................. 26 Figure 6: Gucci’s revenue by channel ................................................................................................ 26 Figure 7: Gucci’s revenue by region and product category................................................................. 27 Figure 8: Burberry’s revenue development ........................................................................................ 35 Figure 9:Burberry’s brand value development ................................................................................... 35 Figure 10: Gucci’s brand value development ..................................................................................... 36 Abstract Title: The strategic role of supply chain management in the luxury fashion sector Author: Gernot Brugger Key words: luxury, fashion, supply chain, performance This thesis examines how supply chains within the luxury fashion sector impact the business performance of luxury fashion brands. Hence, this thesis is going to examine two case study examples of companies that have undergone strategic changes regarding their supply chain strategy. In particular, the emphasis of the analysis will lie on the impact that supply networks and distribution channels have on the performance of the discussed luxury fashion brands. Our findings suggest that both examined cases successfully adapted their supply chain strategy in order to improve business performance. This implies that core elements of supply chain management can have a significant impact on business performance. Moreover, our findings show that the sample companies adapted their supply chain strategy across three main dimensions (sourcing, production, and distribution). Companies reversed their production and manufacturing strategy from outsourcing back to insourcing. By providing insight on how a luxury fashion brand can improve its performance by adapting its supply chain strategy, our study enriches the understating of the luxury fashion sector. In addition, our research adds value to existing literature on supply chain management in the luxury fashion sector. 5 Resumo Título: O papel estratégico da gestão da cadeia de fornecimento no sector da moda de luxo Autor: Gernot Brugger Palavras-chave: Luxo, moda, cadeia de suprimentos, desempenho Esta tese examina como as cadeias de fornecimento dentro do setor de moda de luxo impactam o desempenho comercial das marcas de moda de luxo. Assim, esta tese vai examinar dois exemplos de empresas que passaram por mudanças estratégicas em relação à sua estratégia de cadeia de abastecimento. Em particular, a ênfase da análise estará no impacto que as redes de abastecimento e canais de distribuição têm sobre o desempenho das marcas de moda de luxo discutidas. As nossas conclusões sugerem que ambos os casos examinados adaptaram com sucesso a sua estratégia de cadeia de fornecimento com o objetivo de melhorar o desempenho do negócio. Isto implica que os elementos centrais da gestão da cadeia de abastecimento podem ter um impacto significativo no desempenho do negócio. Além disso, as nossas conclusões mostram que as empresas da amostra adaptaram a sua estratégia da cadeia de abastecimento através de três dimensões principais (fornecimento, produção, e distribuição). As empresas inverteram a sua estratégia de produção e manufatura, passando da reversão da terceirização de volta à internalização. Ao fornecer uma visão sobre como uma marca de moda de luxo pode melhorar o seu desempenho ao adaptar a sua estratégia de cadeia de abastecimento, o nosso estudo enriquece o conhecimento do sector da moda de luxo. Além disso, a nossa pesquisa acrescenta valor à literatura existente sobre a gestão da cadeia de fornecimento no sector da moda de luxo. 6 1. Introduction Luxury itself is almost as old as humanity. In the past, luxury was a privilege for a limited circle
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