The beauty industry rakes in about $445 billion dollars a year, according to Forbes. Consumers spent almost six billion dollars last holiday season on contouring kits, lip stains, and color-matched foundations. With this annual boom, supply chain managers at cosmetic companies are challenged to meet the holiday demand.
The Beauty of Supply Chain Management
The cosmetics industry is a great example of the move to a demand market that most supply chains are experiencing. Product development is completely driven by consumer demand and 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.
Rick Milligan, the director of supply chain solutions at Inmar, Inc. explains the celebrity effect. "When Jenner says she hates a product on social media, the company can't give it away…But when she says she loves a product, they can't make it fast enough," Milligan says. "For example, they had one nail polish shade that was hardly selling until Jenner tweeted about how much she loved it—then it sold out in two days."
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.
Another challenge for cosmetic supply chain managers is finding reliable sources that meet customer 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.
The Many Shades of Technology
Customers now demand that technology 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 skin care IQ to Harrods’ Ioma machine and the Organic Pharmacy’s DNA test, consumers’ desire for customizing their skin care 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.
Customers are pushing supply chains with their demand for same-day or next-day delivery. They see a product on social media where they watch and read reviews. Next, they try it on in the app. If it’s a go, they want to buy immediately and expect to use the product tomorrow.
The Price of Social Responsibility
Consumers also are demanding social responsibility from cosmetic companies. This adds pressure on supply chains to meet demands and be transparent. Some customers are choosing to pay more for products that market fair trade and ethical sourcing. They want to know that the ingredients are grown organically, workers are treated fairly, and that the packaging is recyclable.
Inner Beauty: Companies with Exemplary Supply Chains
Mary Kay is a prime example of what’s trending in the supply chain industry. The company is operating more efficiently thanks to digitizing its supply chain and process in 2012. This decreased its products' launch time by 30%. It also gave the company more visibility into how its products rate in different locations. Now, Mary Kay tailors its product lines by location. “We found that our customers in Asia, for example, had very different requirements for their skin care than our customers in Latin America or the United States,” says Deanna Fell, vice president of engineering and PMO at Mary Kay. “As part of our innovation strategy, we tailor products for different regions, and that has helped us meet market demands.” The company used Oracle’s Agile product lifecycle tools to help them focus on the products with the best ROI.
L’Oréal rates as one of the top supply chains in the beauty industry. Instead of focusing on technology upgrades, L’Oréal focuses on people and mindset. This beauty giant sells products in 130 countries with annual sales of 23 billion euros and employs 7,500 supply chain professionals globally. They hire local talent with a passion for beauty. Richard Markoff, L’Oréal’s Corporate Director of Supply Chain Standards describes the company’s philosophy. “The team for me is the most important thing. Our customers drive the design of our organization. L’Oréal’s organization shifts as customers morph... The more digital we are, the more information that people want on our products. The supply chain is integral to the business strategy.”
Be a Part of Something Beautiful
The cosmetics supply chain industry is growing and innovating. Like other global supply chains, it faces challenges. The industry demands leaders who can implement agile supply chain solutions and who understand the importance of sourcing and procurement. A Master’s in Supply Chain Management from Kettering University Online prepares you for a leadership role with some of the world’s most successful companies.