From design to logistics

Luxottica’s vertically integrated business model and geographically diversified manufacturing footprint have led to greater efficiency and speed in product design, engineering, manufacturing and logistics, while maintaining uncompromising quality.

DESIGN

Emphasis on product design and the continuous development of new styles are key to Luxottica’s success. During 2015, Luxottica added approximately 2,000 new styles to its eyewear collections. Each style is typically produced in two sizes and five colors.

The design of the Group’s products is the focal point where vision, technology and creativity converge. Each frame expresses Luxottica’s core precepts: innovation in style combined with innovative materials, technologies and processes, and unparalleled craftsmanship.

The design process begins with Luxottica’s in-house designers who work in an environment that promotes innovation, originality and a creative process where eyewear is interpreted as art, as an object to put on display. They draw inspiration from both market trends and their own imagination and creativity. In addition, the design team works directly with the marketing and sales departments, which monitor the demand for current models, as well as general style trends in eyewear.

PRODUCT DEVELOPMENT

Product development is the next stage of execution.

The research and development efforts of Luxottica’s engineering staff play a crucial role in the development process. Engineers are continuously looking for new materials, concepts and technology innovations to apply to products and processes in an effort to differentiate them in the eyewear market.

During the initial phase of the development process, the prototype makers transform designs into one-off pieces, crafted by hand with meticulous precision. These frame prototypes are then shared with the product department, which analyzes the necessary steps to bring the prototype to mass production.

In the first phase of the cycle, the product department uses visual rendering and 3D software to design new models and the necessary equipment. The mold workshop then assembles the equipment needed to make the components for the new model. The very first samples are now assembled and undergo a series of tests required by internal quality control procedures.

After the quality certification, the sales samples are produced and subjected to a new intensive series of tests to verify the quality of the engineering and production. Finally, Luxottica determines which of its plants is best suited to manufacture the final consumer product and mass production begins.

By using a launch calendar that focuses on customer and geographic demand, the engineering department has been able to shrink product development timelines in recent years.

MANUFACTURING

In 2015, Luxottica’s manufacturing facilities located in Italy, China, India, the United States and Brazil, produced a combined total of approximately 93 million prescription frames and sunglasses. Ongoing R&D and innovation has allowed the Company to strengthen its manufacturing processes, upgrade its capacity at each of these facilities and improve the overall quality of its products. Automation is also key in boosting the efficiency of Luxottica's productions.

MANUFACTURING FOOTPRINT

Luxottica’s manufacturing footprint includes six facilities located in Italy, the center of Luxottica’s luxury eyewear production, all of which combine the tradition of Italian craftsmanship with the speed and efficiency of modern automation. These factories represent 41% of global production output. Five facilities are located in Northeastern Italy, where most of the country’s eyewear industry is based, and one near Turin.

Three manufacturing facilities in China and a small plant in India collectively represent another 45% of total production output. From 1997 to 2001, Luxottica operated the Dongguan plant in China’s Guangdong province through a 50%-owned joint venture with a Japanese partner. The Company later acquired the remaining 50% interest and in 2006, it further increased manufacturing capacity in China through the construction of an entirely new facility. In 2010, Luxottica began producing plastic sun lenses to be paired with frames that are manufactured in the same location. Soon after, the Company integrated a new state-of-the-art plant, primarily dedicated to frame details and decorations.

The Foothill Ranch facility in California manufactures high-performance sunglasses, prescription frames and lenses and assembles most of Oakley’s eyewear products. Oakley apparel, footwear and certain goggles are produced by third-party manufacturers.

In Brazil, the manufacturing facility in Campinas produces both plastic and metal frames for the local market. Shortly after Luxottica acquired the facility in 2012, they launched the first locally designed and produced Vogue Eyewear collection for Brazilians, followed by select Ray-Ban, Arnette, Oakley and Armani Exchange collections. In 2015, the Campinas plant produced approximately 50% of the eyewear sold by Luxottica in the Brazilian market.

INNOVATION AND DIVERSIFICATION OF MATERIALS

Over the years Luxottica has progressively diversified its technology mix from traditional metal, plastic injection and acetate slabs to include aluminum, wood, die casting, fabrics and the LiteForce material. This technology shift has reduced the weight of metal-based frames from 44% of total production output in 2010 to less than 30% in 2015.

The manufacturing process for all frames begins with the creation of precision tooling and molds based on prototypes developed by in-house designers and engineering staff.

Metal frames

Luxottica’s manufacturing process for metal frames has approximately 70 different phases, beginning with the production of basic components such as rims, temples and bridges, which are produced through a molding process. These components are then welded together to form frames over numerous stages of detailed assembly work. Once assembled, the metal frames are treated with various coatings to improve their resistance and finish, and then prepared for lens fitting and packaging.

Plastic frames

Plastic frames are manufactured using either a milling or an injection molding process. In the milling process, a computer-controlled machine carves frames from colored acetate slabs. This process produces rims, temples and bridges that are then assembled, finished and packaged. In the injection molding process, plastic resins are liquefied and injected into molds. The plastic parts are then assembled, coated, finished and packaged.

A GLOBAL “CULTURE OF QUALITY”

The satisfaction of wholesale clients and retail consumers is one of Luxottica’s primary and indispensable objectives. Achieving this objective depends on the continuous improvement of every phase of the production and distribution cycle. While increasing production capacity in both developed and emerging countries, the Company is pursuing a crucial goal: delivering the same ”Made in Luxottica” quality everywhere in the world.

Regardless of location, a single quality system is applied to product development, procurement, distribution, operational analysis and uniform and measurable performance management in the plants.

Luxottica manufactures a product of the highest quality. Most of the equipment is specially designed and adapted for the Group’s manufacturing processes. This facilitates a rapid response to customer demand and the observance of strict quality control standards. The teams regularly inspect semi-finished products, verifying the feasibility of prototypes in the design phase, controlling standards in both the product development and production phases, subsequently checking for resistance to wear and tear and reviewing optical properties in relation to type of use. The manufacturing processes and materials used by primary suppliers are also controlled and certified.

Luxottica designs products to meet or exceed relevant industry standards for safety, performance and durability. Throughout the development process, eyewear products undergo extensive testing against standards established specifically for eyewear by ANSI (Z.80.3), ASTM, Standards Australia Limited (AS 1067) and EU (EN ISO 12312 and EN ISO 12870). These standards relate to product safety and performance and provide quantitative measures of optical quality, UV protection, light transmission and impact resistance.

To assure its quality standards worldwide and the right support for quality improvement, Luxottica has four main labs in Italy, China, Brazil and the United States. Each lab is responsible for establishing and maintaining the quality standards in the region where it is located and supports activities in engineering, production and market feedback management. All of these labs conduct the same tests using the same equipment and procedures which are developed and approved in the central Italian lab.

In 2014, Luxottica’s Italian, Chinese and US manufacturing facilities were granted accreditation by the American Association for Laboratory Accreditation (A2LA) for performing ISO 8624 and ISO 12870 tests on eyewear. The A2LA accreditation program provides formal recognition of the technical competence and quality management utilized in performing these specific tests.

Every year, Luxottica enhances the performance criteria used in its standard tests and introduces new requirements. As a result, the return rate for defective merchandise manufactured by Luxottica has remained stable at approximately 1% in 2015.

LOGISTICS

The Group’s distribution system, which serves both the retail and wholesale businesses, is globally integrated and fed by a centralized manufacturing platform. The network linking the logistics and sales centers to the production facilities in Italy, China, the United States and Brazil provides daily monitoring of global sales performance and inventory levels to meet local market demand. This system, comprised of 18 distribution centers with eleven in the Americas, five in Asia-Pacific and two in Europe, is one of the most advanced and efficient in the industry and allows the Group to reduce worldwide logistic lead time year after year.

There are four main distribution centers (hubs) in strategic locations serving the Group’s major markets: Sedico (Italy), Atlanta (US), Dongguan (China) and Jundiai (Brazil). They operate as centralized facilities thanks to a highly automated order management system, servicing other Group distribution centers or, in some markets, shipping products directly to customers, thereby further reducing delivery times and keeping stock levels low.

The Sedico hub was opened in 2001 and is one of the most technically advanced in the industry. In 2015, it managed approximately 20,000 orders per day, including eyeglasses and spare parts. Sedico ships approximately 235,000 units daily to customers in Europe, the Middle East, Africa, select US markets and to the Group’s distribution centers in the rest of the world, where they are then delivered to local customers. In addition, Sedico manages customized services, such as Ray-Ban Remix, providing direct global deliveries.

The Dongguan hub was opened in 2006 and manages an average of 190,000 units per day. The growth in the Asia-Pacific region has made this hub a strategic part of the Group’s distribution network. Luxottica continues to invest in ways to improve services and increase capacity in order to create even greater efficiencies in the region.

The Atlanta facility, opened in 1996, has consolidated several North America-based facilities into a single stateof- the-art distribution center located close to one of the major airport hubs of the United States. It serves both Luxottica’s retail and wholesale businesses in the North American market. This facility manages up to 150,000 units per day.

In 2013, the Group opened a distribution center in Jundiai, close to São Paulo, which offers targeted distribution services to customers and serves the local market.

The Group has made strategic investments to build a new distribution center in China and to triple the size of the distribution center in Atlanta by the end of 2016.

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ANTI-COUNTERFEITING POLICY

Intellectual property is one of Luxottica’s most important assets and is protected through the registration and enforcement of its trademarks and patents around the world.

The Group’s commitment is demonstrated through its ongoing anti-counterfeiting activities. Trademarks and products from market leaders are increasingly copied and the implementation of a strong anti-counterfeiting program that leverages Luxottica’s global organization allows the Company to maintain the equity of its authorized distribution network and send a strong message to wholesale and retail infringers that the Group will work fiercely to protect its intellectual property.

Through a strong investigative network, especially in China, the Company has been able to identify key sources of counterfeit goods, to assist local law enforcement in investigating these sources and, when applicable, to file legal actions against the counterfeiters.

Additionally, the Group continues to consolidate and strengthen its cooperation with customs organizations around the world, which helps to stop, seize and destroy hundreds of thousands of counterfeit goods each year.

Luxottica is a member of the major global anticounterfeiting organizations, including the International AntiCounterfeiting Coalition (IACC), the International Trademark Association (INTA) and the Quality Brands Protection Committee (QBPC).

The Group dedicates considerable efforts to monitoring the trafficking of counterfeit goods through the internet, and works actively to remove counterfeit eyewear from certain popular online auction platforms and shut down the websites that violate its intellectual property rights through the sale of counterfeit products or the unauthorized use of Luxottica’s trademarks.

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