As one of the world’s largest sunglass manufacturers, Luxottica, dominates the eyewear market with few major competitors. Headquartered in Milan Italy, the company was started in 1961, but over the past 20 years has been key to transforming the entire industry to eyewear. Currently, Luxottica has more than 45 brands under its control, manufactures and sells its products in more than 130 countries and has net sales of more than $12 billion.
It wasn’t long ago when wearing glasses was looked down upon and one would only do so if they absolutely needed to. Now, close to 100 million pairs of glasses are sold per year. A few of the major catalysts to this growth have been: continuous growth of premium and luxury segments, massive entry of designer fashion brands, transition from function to fashion, and eyewears implication as a key strategic lever for luxury brands. Luxottica has positioned itself to capitalize on these changing trends in a variety of ways. Their vertical integration of design, manufacturing, distribution, sales, and retail keeps their hand in every part of the market. In addition to the brands they control end-to-end such as Ray-Ban, Oakley, and Perosol, Luxottica also has exclusive licenses to produce eyewear for dozens of other high-end luxury brands like: Burberry, Armani, Bvlgari, Dolce & Gabbana, Polo, Prada, Tiffany, Tory Burch, and many more. For some of these brands, Luxottica even owns the rights to design so brands will send their seasonal collection, and Luxottica’s team of designers will create and manufacture a product that fits within their client’s upcoming line. Luxottica also owns the two largest international eyewear retailers for both sunglasses and prescription eyewear, Sunglass Hut and Lenscrafters. Overall, this has helped them diversify their operations while having multiple different supply channels for production.
Each year, Luxottica produces more than 90 million pairs of glasses in more than 2000 designs. Production in Italy, and China and India each account for approximately 43% of global production while the US accounts for approximately 10% and Brazil 4%. With such large-scale production, Luxottica has managed their supply chain with great efficiency and competence. Their order processing system is highly automated with computer generated stock reallocation based on the demand in local markets. One of the choices Luxottica has made is to use the 3PL system (third party logistics). They claim this gives them the ability to focus more on core business and manufacturing so their role in the business cycle ends with warehouse operations when they make direct sales. Another aspect of their inventory management system that been key to their continued success is the implementation of STARS (superior turn automatic replenishment system) to their wholesale division. The system establishes effective partnerships with wholesale customers optimizing product choice management, supply planning and automatic assortment in stores.
Recently, Luxottica has recognized some areas for improvement within their business model. Lack of client service policy, excess user intervention in the planning process, and the same treatment for all products with to attempt to optimize product mix, were all challenges management sought to tackle. They chose to implement a tool to strategically analyze and optimize stock levels with s system called Service Optimizer 99+ in order to better position inventory, allow production to quickly adjust to market changes, reduce inventories and global logistics costs, and improve forecast accuracy. Optimizer 99+ is also able to manage all finished products in the distribution network across all sites to address many of the issues Luxottica was facing. The total result of this implementation was reducing stock levels by 10% while also reducing the need for manual intervention by 50% while progressively increasing service levels. Because of this success in the finished products implementation phase, the service was further applied to the companies spare parts operation and in less than three months from the start of their project, the service level had reached 98.5% and significantly reduced backorder levels without a simultaneous increase in inventory levels.
While being a powerhouse within their own industry, Luxottica makes continuous efforts to improve and lean down their processes. These efforts make significant impacts on profit levels in the long term and can greatly reduce waste in many ways.