Economic Consequences of Airfreight: Louis Vuitton Analysis Report

This report analyzes the economic implications of Louis Vuitton's airfreight practices, focusing on the trade-offs between speed and cost. The study examines the company's current logistics setup, where airfreight is used to address product availability issues, and the impact on transportation costs. The report considers the viewpoints of various company stakeholders, including the VP of manufacturing and logistics, who emphasizes the need to resolve internal issues before expanding airfreight usage, and the VP of marketing and sales, who suggests generalising airfreight to expedite delivery. The report references academic sources to evaluate the economic and environmental impacts of airfreight versus ocean freight, considering factors such as CO2 emissions and the potential for cost-effective shipping solutions. The conclusion aligns with the VP of manufacturing and logistics' perspective, suggesting that the company is not ready to bear the high costs of widespread airfreight adoption until internal issues are resolved. This report ultimately provides a comprehensive assessment of the strategic decision-making process surrounding airfreight in the context of a luxury brand's supply chain.

Running head: MARKETING LOGISTICS: LOUIS VUITTON
Marketing Logistics: Louis Vuitton
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1MARKETING LOGISTICS: LOUIS VUITTON
Question 3
Economic consequences of using airfreight for delivering goods at distant destinations
According to the distribution system of the company, all the store managers are
supposed to measure restocked requirements and newly placed orders with the company’s
central logistics hub. Executives record the orders and check the availability accordingly
before proceeding with the shipment by boat. However, due to the product availability issue,
LVMH occasionally opt for airfreight to deliver long overdue products or to deliver in distant
locations. As the availability issue is increasing rapidly, the company confronts with an
escalated transport cost due to more frequent use of airfreight.
As suggested by VP for manufacturing and logistics, internal issues must be solved
first by clearing up the previous stocks and arranging for local manufacturing hubs to make
the situation stable. In case, considering the views generated from McKinnon (2014), the
CEO wants to opt for the suggestion given by VP for marketing and sales, to generalise
airfreights for all distant destinations with the purpose of shortening delivery timings and
satisfy the market demand. On the contrary, according to Reinhold et al. (2013), VP for
manufacturing and logistics has highlighted the potential increase of transportation costs and
disturbed profitability.
Apart from this, using airfreight to resolve above-mentioned issue will affect financial
balance of the company. Marketing and sales department must consider the company’s
current situation before suggesting such things, which involves such big monetary figures.
Although, as per the study of Kontola (2014), as a businessperson to make the operation cost
effective, it is convenient to choose ocean freight over air fright. Yet to make best decision, it
helps to be aware of the current charges of both the shipping medium. Although, as described
in Pomfret (2014), airfreight has several advantages like delivering long overdue items as

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early as possible and it is more reliable medium than others are. However, on the contrary,
the rate of co2 emission is much higher than ocean freight as compared to the air carriers.
Being environment and cost friendly too, ocean freight can be considered as a medium to
deliver items in nearer destinations to balance to operational cost. By opting for this solution,
the company can present themselves as environment friendly too.
Further, according to the current company needs and considering these factors
together decisions must be made regarding cargo shipment. In a nutshell, as stated by VP of
manufacturing and logistics, the company is not ready for taking up the cost of generalising
airfreight for delivering goods in distant destinations as there are several internal issues to
resolve with highest priority and the it will affect the revenue on a large scale.

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References
Kontola, H., 2014. Design-To-Cost from the perspective of project logistics.
McKinnon, A., 2014. Options for reducing logistics-related emissions from global value
chains.
Pomfret, R., 2014. Expanding the division of labour: trade costs and supply chains in the
global economy. Australian Economic History Review, 54(3), pp.220-241.
Reinhold, A., Kuhlmann, A., Becker, A. and Phleps, P., 2013. Future Developments
Regarding the Air Cargo Market-A Scenario Based Analysis. Deutsche Gesellschaft für Luft-
und Raumfahrt-Lilienthal-Oberth eV.