In the spring of 2006, Yves Carcelle, CEO of Louis Vuitton, the largest and most profitable subsidiary of LVMH, the n°1 luxury goods company in the world, had been bickering about how to solve the out-of-stock problem Louis Vuitton's 340 company-owned stores around the world were increasingly faced with.
For several months, the vice president for marketing and sales blamed the situation on the lack of flexibility and responsiveness of the company's supply chain, while the vice president for manufacturing and logistics faulted the recent increase in new product introductions, combined with very poor forecasting of demand.
Yves Carcelle had mixed feelings about the whole issue. On the one hand, close to perfect quality was critical, and he felt very reluctant to disrupt Louis Vuitton's traditional and proven manufacturing process. On the other hand, the rapid pace of new product introductions had been a decisive factor in the company's 20% average growth rate in the previous three years and, in a business like that of Louis Vuitton, it was very difficult to predict how customers would respond to new products.