The beauty supply chain industry rakes in about $445 billion dollars a year, according to Forbes. What it doesn’t mention is the challenges faced in today’s competitive and agile environment. For the beauty supply chain to operate more efficiently and effectively, it is crucial to gain a competitive advantage.To do so they must employ a multi-step logistics function to manage retailer requirements which will help overcome the challenges caused by supply and demand inherent in the industry.
Let’s Look At Supply Chain Fundamentals
Because of the nature of the business, customers are persuaded by demanding items that are hot today, that may go out of style tomorrow. We see companies drive this consumer behavior by promoting the latest trends, and often using celebrities to endorse their products. Once demand is created, they need to ensure those items are accessible for sale. The process for handling products through to the final sale is critical. It requires reliable transportation, storage, and distribution. It requires dependable transportation, stockpiling, and appropriation. This is also important as managing the supply chain plays a pivotal role in driving customer satisfaction. By having the in-demand products available to purchase, the beauty company creates a competitive advantage.
Product development is completely driven by consumer demand and the quickly changing trends. This drive is forcing faster production and fulfillment. Trends can change in minutes with a celebrity photo or video. With one Instagram post, reality star Kylie Jenner’s lip kits sold out in 10 minutes. So the beauty supply change is constantly evolving just to keep up with demand.
The Challenges of a Beauty Supply Chain
“Beauty supply chains face unique challenges. Cosmetics and skin care companies have a lot of product to source and move with three new product launches every year including summer, winter, and the holidays. Cosmetic supply chains source organic materials that require certain temperatures, care, and quick transportation. Their logistics include getting source materials to manufacturing facilities, delivering the finished product to retailers, and then, picking up products that didn’t sell before their expiration dates.” As stated in the Kettering University “The Beauty of Supply Chain Management” article
Another challenge for supply chain managers is finding reliable sources that meet customers’ demands. Thanks to watchdog groups, environmental groups, and social media, customers are savvy about where their products are coming from and expect transparency from suppliers.
Customers now demand that technology must be part of their buying experience. This is good news for beauty supply chains. They can get real-time data on trends directly from customers using “try before you buy” technology. As noted in Euromonitor International, “From Sephora’s skincare IQ to Harrods’ Ioma machine and the Organic Pharmacy’s DNA test, consumers’ desire for customizing their skincare is stronger than in any other category.”
Beauty companies are offering customers the experience of trying on makeup and foundations through apps. Customers upload a selfie and can see their options in real time. All this data can go back to the supply chain.
Vendor-Managed Inventory
Adopting a vendor-managed inventory (VMI) strategy can help businesses reduce the risk of carrying too much inventory and respond better to changing demands. For example, a manufacturing facility running 100,000 SKUs three months out can be risky, as it carries a considerable amount of stock that may or may not sell. To help overcome this, charging suppliers with inventory management lessens tension by leaving the product in its least value-added form farther back in the supply chain. Companies can leverage this flexibility to rationalize packaging requirements for different retail channels closer to demand or even source all inventory from centralized stock points.
Conclusion
The beauty supply chain industry is always evolving with product demand which is constantly growing and innovating. Like other global supply chains, it faces challenges. The industry demands suppliers who can implement flexible supply chain solutions and who are not afraid of growing and innovation through understanding the importance of sourcing and procurement agility.
Resources:
Inbound Logistics – Cosmetics Logistics: The Beauty of an Optimized Supply Chain
Ketering University – The Beauty of Supply Chain Management
Uleached – Understanding the Cosmetic Industry’s Supply Chain
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by Elmer Diaz, founder and curator of the All Done 4U Outsourcing blog, a consulting agency specializes in business systems, automation, and project management with a unique focus on People, Processes, and Profits for your business.
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