Christian Dior, part of the global conglomerate, LVMH, is a well-known luxury brand that has a vast consumer following and presence in 75 countries. Their Perfume and Cosmetics division is especially popular, selling one lipstick per second globally. The North American branch of Dior partners with retailers such as Macy’s and Dillard’s, servicing them from a singular distribution center in Cranbury, New Jersey. Their Class A SKUs, which make up 43% of their business, are the main priority of this project.
Currently, Dior does not have a means of consistent inventory tracking which has resulted in a lack of visibility into their distribution. While they receive weekly inventory levels from retailers, this information has previously been under-utilized. Additionally, they are experiencing both stockouts and returns in high volume which is negatively impacting their business and resulting in lost sales. This can be attributed to inconsistent priorities between Dior and its retailers which causes a discrepancy in order quantities. Lastly, Dior is experiencing their worst supply shortage in history which has resulted in extremely high levels of unfulfilled orders and lost sales.
To mitigate these various issues, we created an Inventory Tracking Tool, Order Recommendation Report, and Shortage Allocation Optimization Model inventory allocation. To ensure these methodologies could be seamlessly integrated into their current system, they were built in excel and ipython notebooks.
The Inventory Tracking Tool implements newly developed KPIs into Dior’s existing tool with a supplementary Python code to provide increased analysis into inventory levels and measure Dior’s performance. With the Order Recommendation Tool, Dior planners can input their desired SKU and store information and the tool will pull in the inputs, along with historical data and current inventory, to give an output of order quantities to recommend to retailers. This aims to assist in minimizing return risk and maximizing sell out. Finally, the Shortage Allocation Optimization Model determines how inventory should be allocated in the event of a shortage in a method that is more effective in increasing service level for the retailers compared to Dior’s current First-Come First-Serve allocation method.
Value and Impact
Once implemented, all three deliverables will positively impact Dior’s visibility into their distribution and create stronger relationships with retailer partners. The first deliverable will save 21 Dior employees an estimated 2,600 hours yearly in their tasks by providing data-based tools that will replace extremely manual data mining. Dior employees are now able to identify stockout issues with ease, which has become a new priority as it had often been overlooked in the past. Dior planners will now be equipped with a personalized tool to aid them in ordering negotiations with retailers, with the expected result being fewer stockouts and returns in the future. Finally, the shortage allocation model increases retailers’ overall service level. This retains the brand loyalty of consumers as well as more sales for retailers, which in turn create increased future business between Dior and its retailers.