Contest

Many congratulations to Team HKG, who came first in the inaugural LV Supply Chain University Contest, amongst representatives from six top notched universities from Europe, North America and Asia.  Team HKG is made up of undergraduate and postgraduate students from The University of Hong Kong.  Its members include Ms. Tobey Ko (PhD), Ms. Stephanie Wong (IETM) and Mr. Horace Cheng (IETM) from the Department of Industrial and Manufacturing Systems Engineering (IMSE) and Ms. Tina Li from the School of Business. 

LV is a world class, premier luxury goods manufacturer and retailer.  It produces and sells goods ranging from luxury trunks and leather goods to ready-to-wear, shoes, watches, jewellery and accessories.  Apparently, LV excels in selling products desired by customers.  Another crucial factor lies in LV’s business success, however, is in its ability to manage a supply chain of luxury goods - day-in-day-out, and on a global basis.  It has to make sure that the products desired by its customers come to the retailing shops at the right quantity, in the right time, at the right condition, and not least, at the right cost.  Apparently, LV has successfully met all these challenges and accumulated enormous expertise in managing such a unique supply chain.  

LV’s purpose of initiating this Contest is to share its knowledge with the supply chain management communities in top universities worldwide.  At the same time, it aims at soliciting innovative ideas from those universities, especially from young students, who would be its recruits in the future.  To the participating students, it will be a valuable opportunity for them to tackle a real world problem, and to grasp the complexity of the data analysis and decision making processes - under the coaching of the LV supply chain experts and their professors.  

The contest:

The question posed to the contestants is on how to optimise LV’s global supply chain (or production-distribution system) by designing a suitable ‘distribution strategy’.  LV’s production-distribution system consists of a central distribution centre (CDC) in Paris; finished products are supplied from a number of production workshops located in Europe; products are distributed to eight regional distribution centres (RDC) (in Europe, Middle East, North America and Asia) and through these RDC, to several hundred retail shops around the world.  

To optimise LV’s supply chain means striking the best balance between its supply and custom demand.  It is unfortunately well-known that custom demand is uncertain and accurate forecasting is elusive.  On the other hand, supply is constrained by the capacity of LV’s production workshops and the production lead time required.  The latter includes the time taken for ordering of raw materials to the production of a finished product.  

Complementary to the production problem is the distribution or logistics problem, which aims at delivering goods, in a just in time manner, to the RDCs in the right amount using the right method (by air or by sea) at the right cost.  Also, being a socially and environmentally responsible company, LV would like the contestants to minimise carbon footprint incurred in the transportation processes.  Compared with sea transport, air transport is more responsive but more expensive and incurs more carbon footprint.  

The Contest is divided into two major phases.  In Phase 1, each team is given a set of trial data, which is derived from LV’s sales and production-transportation database, for initial analysis.  Then in Phase 2, the team will receive from LV, on a weekly basis, the forecast, inventory and production data (stock turnover) for it to make production-distribution decisions.  The team will then decide on the order quantity, the transportations modes (by air or by sea) of each product type, stock levels of individual products, demand forecast in coming periods, etc.  

At the end of the Contest, each team will submit a final report detailing the distribution strategy: on how orders would be fulfilled in face of uncertain demand and forecasting inaccuracies.  Further recommendations could also be made on more drastic changes in LV existing supply chain practices and resource allocation.  The making of all these proposals are based on extensive simulation, optimisation and result analysis.  

The moment of truth came, when on 7 May, Team HKG presented its work to the judging panel consisting of the director and senior managers of LV at the Paris head office and regional office at Singapore (through tele-conferencing), and also managers in the Hong Kong office.  The award presentation was held on 7 July at HKU’s University Hall – attended by the head of LV’s global supply chain and logistics, Mr. Vincent Barale, and Prof. Norman Tien, Dean of Faculty of Engineering.