LensCrafters 2005 Annual Report Download - page 48

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| 47 <
Having its origins in what has become the global center of eyewear manufacturing, Luxottica Group
has produced prescription frames and sunglasses since 1961, controlling every phase of the
production process, from raw materials procurement to manufacturing of the finished frame. Its
manufacturing process is the product of decades of careful honing, along a path of constant
research and development. This ensures that products are consistently of the highest possible quality
and made as efficiently as possible using cutting-edge technology and materials. Research therefore
covers all aspects of production, from materials to machinery, from product design to production
planning. Decades of experience, passion and never being content with its achievements have made
Luxottica Group’s manufacturing system probably the most efficient, flexible and creative in the
industry, able to consistently maintain the highest standards. The Group’s results over the years,
including in 2005, are the best endorsement of the investments and initiatives undertaken in this
absolutely key area of the business.
MANUFACTURING PLANTS AND PRODUCTION
Production is concentrated almost entirely in six plants in Italy, mostly in the north-east, a region that has
the highest concentration of eyewear manufacturing companies in the country. The other two (the second
of which started operations in 2006) are in China and are wholly owned by the Group. The decision to
manufacture approximately 80% of production in Italy springs from the commitment to creating a product
of the highest quality and with all the right Made in Italy connotations. This is only possible with the
experience and know-how built up over the years in Italy’s eyewear manufacturing centers. Each plant
has its own manufacturing technology to boost profitability and improve quality and the overall efficiency
of the Group. The opening in 2006 of a second plant in China, alongside the first one, was in fact to be
able to concentrate more of the Made in Italy production, which has very high value added for the world
optical market, in the Italian plants. That consumer demand for such products is strong is also due to the
work the Group carries out on premium and luxury products, both directly through its stores and indirectly
through its wholesale clients.
VERTICAL INTEGRATION
Over the decades Luxottica Group has vertically integrated every phase of the production process, as
it saw that was the only way to achieve the efficiency required by the type of products and services it
wanted to offer. Control of the various phases of production allows the Group to closely monitor the
quality of products and processes, maximize synergies and introduce new operating methods and
other innovations. It also makes it possible to control and minimize production time and costs, in order
to create the best possible product without compromising quality. Achieving vertical integration
involved the perfecting of every single process, rigorous quality inspections and, above all, ensuring
that each and every department understands and fulfills its role in attaining the final results. Ongoing
research and development ensures the manufacturing plants have the latest equipment and the best
manufacturing methods.
In addition to having efficient manufacturing plants, the Group utilizes a centralized system for monitoring
inventory and orders. Daily analysis of this information provides projections of demand, making it
possible to plan production and other necessary tasks in advance. Perfect coordination of supply and
demand reduces potential problems in inventory and in the supply of raw materials, which is a major
competitive advantage. Bringing together the speed and efficiency of the manufacturing plants with
precise monitoring of the market, places Luxottica Group in the best possible position to efficiently meet
customer requests and adapt to changing trends in the market and fashion in terms of both type and
quantity of products. Such flexibility gives vital competitive edge in such a multifaceted market, where
the ability to address the latest fashion trends is fundamental. Over the years, Luxottica Group has
brought both retail and wholesale distribution into its vertically integrated system. This enabled the Group
MANUFACTURING