Subcontractors’ management in the luxury industry: the optimisation of inventory management and production losses monitoring in outsourced production

This work describes the two projects carried out during my internship within a L’Oréal factory belonging to the Luxury Division, in particular in the service in charge of the subcontracting unit, where the short-term planners manage the subcontractors’ production and material flows. In the first chapter an analysis of the luxury industry is presented, which forecasts a growth in the coming years but also an intensification of competition. Customers become always more aware and demanding, thus flexibility, extra-high quality and customisation are the main success factors and are more likely to be reached by subcontracting a part of production. A successful subcontracting practice also passes through trust and collaboration that allow to ease and speed up the interactions. However, externalisation entails a complication of production control, as in the case analysed in this study. The second chapter, indeed, explains the starting situation and the problems addressed during the study. The factory has issues in the management of two processes involving subcontractors: their inventory updating and their production losses monitoring. As for the inventory, the procedure is entirely done manually with a substantial time waste; in addition, there is no standard methodology to carry it out, which complicates the reliability of the process. With regard to the external production losses, they are not monitored, therefore the subcontractors’ performance and the financial impact of these losses cannot be evaluated. The methodology and the results of the work are described in chapter 3. Both projects are subdivided in four phases, namely Definition, Analysis, Improvement/Design, and Control/Verification; the methodology also involved process mapping and the establishment of a follow-up procedure trough planned interviews with the stakeholders. The first solution developed consists in the automation and standardisation of the inventory procedure through Excel macros that ease the data extraction from SAP, their treatment and reintegration in the ERP. The second solution is the put in place of a standard procedure for production losses monitoring through the automated creation of forms to be filled by the subcontractors with their loss rates and the creation of a database for the storage and analysis of historical data. The fourth and last chapter explains the impact of the two solutions under three perspectives: the organisational impact that shows the improvements brought to the internal work procedure and to the interaction with the subcontractors; the technical impact to evaluate the effect of the procedure automation on people and their skills; finally, the financial impact, to estimate the benefit deriving from the implementation of the new tools.