In today’s fast-paced marketplace, leading global brands are in constant pursuit of the right strategies to broaden their consumer base. As a result, omni-channel retailing and new product segmentation have been embraced by leading beauty and personal care companies as two of the dominant ways to penetrate new markets.

However, these strategies are also largely responsible for the increase in demand volatility that many supply chain practitioners are experiencing and struggling to manage. If viewed as an opportunity, these strategies offer a once-in-a-career chance for supply chain practitioners to create real, sustainable competitive advantage.

Key Challenges

To attract new customer populations, brands are motivated to develop more segmented products that can also vary widely across geographies. As brands bring new products—and bundles of products—to market, SKUs are in abundance, which can total in the thousands annually. This variety of market forces creates an environment ripe for demand volatility.

When faced with shorter product life cycles and demanding retailers, smaller and more frequent deliveries are preferred as long as the impact on supply chain performance can be managed. However, without the ability to connect highly volatile demand to supply, instances of “out of stock” merchandise increase. Many companies attempt to overcome this hurdle by adding more inventory closer to customers, which adds cost. In response, customer service levels vary and expediting costs inevitably increase, ultimately impacting financial results.

Five Opportunities to Succeed

Based on our experience working with customers, we have highlighted five game-changing opportunities for cosmetics and beauty companies to get in front of these challenges. These include:

1. Allocate the right products to the right channels based on actual customer demand and segmentation. Respect the channel priority when meeting customer commitments and account for the reality of what it costs to serve each order. Connect the demand stream to the supply stream.


2. Become more predictable using replenishment models that leverage workflows and advanced demand-driven strategies embedded within your core business processes. By maximizing in-transit visibility, you can project available inventory into the future and reduce inventory levels and stockouts. Now, you can commit with confidence to your retailers and channel partners with improved continuity of supply that meets your customers’ expectations effectively. Your promotion campaigns will sell through your new product introductions, giving you a competitive advantage.


3. Reduce lead times by making supply more visible, sharing vital metrics and managing exceptions collaboratively. Make inventory metrics, such as channel sell-out, sell-through and stock rotation by product segments, together with customer service metrics, lead times, and manufacturing service levels, readily available in order to enable collaboration across the trading partner community.


4. Make suppliers accountable by defining pricing structures that tie to service completions (i.e., contract manufacturers), monitor and audit spend against actual budgets, and continuously track service levels associated with service providers’ commitments (e.g., transportation, contract manufacturers, suppliers).


5. Begin your end-to-end supply chain journey in new product development. By taking manufacturing’s capabilities into account when designing new products, you are reducing new product introduction risk. Formulations, recipes, product regionalization, and packaging can all be included in your supply chain instructions, allowing you to monitor and manage by exception. Begin with the end in mind, and you will launch products more seamlessly into targeted markets more successfully.

Next Steps

The competitive landscape in the beauty and personal care industry is no longer brand versus brand nor is it company versus company. Today, it is network versus network. Instead of “growth at any cost,” businesses that focus on the effective planning and execution of an emerging market approach can play a strategic role within their organizations to globalize their supply chains. Only in this way can trading partners, procurement managers and C-level executives work in unison to deliver the right sets of products to the right destinations at exactly the right times.

ABOUT THE AUTHOR

Sean Rollings is vice president, product marketing at E2open. He has more than 25 years of supply chain experience. His areas of expertise are in global trading networks, cloud computing, S&OP, and software-as-a-service (SaaS) delivery and implementation for enterprise customers.