The Fascinating Supply Chain Behind Daily Beauty Care Products

To all make-up boycotters and proponents of natural beauty: Let me first reassure you that this article will not focus on the latest beauty trends and I´m not going to give you tips on how to create the perfect summer make-up look, even though I´ve heard you can surprisingly earn a lot of money doing so. Instead, this article highlights the great level of complexity in production and supply chain operations of grooming products.

The cosmetics industry is growing rapidly and manufacturers are becoming ever more dependent on sustainable, innovative and digitized processes. In this context, transparency is becoming more important as supply chains become more complex and distribution as well as sourcing processes expand globally. Furthermore, supply chain and production managers are feeling the pressure to expand their skillsets to include digital and integrated management skills – with the overall goal of decreasing costs and improving processes to ensure competitiveness.

But why is the supply chain of cosmetics amazing? The cosmetics sector is faced with a whole lot of these challenges: sensitive raw materials, complex production processes and rapidly changing environments with high customer expectations concerning variety, sustainability, flexibility, service and quality standards.

A closer look at the whole supply chain shows that companies within the cosmetics industry are confronted with:

Global sourcing challenges

Sourcing is getting more complex as the use of natural ingredients faces geographical constraints. Unstable weather, critical political situations or missing infrastructure are stumbling blocks in sourcing. Especially manufacturers of luxury cosmetic lines are often dependent on unique suppliers. Risks accompanied by transport disruptions therefore are high and purchasing is expensive.

Special storage requirements

Different ingredients require different climate and temperature environments. Moisture, for example, can make creams mouldy. Therefore, know-how in the sensitive handling of these materials is necessary and suppliers need to fit these requirements.

Low durability

Expiration dates make inventory management very complex and assume flexible and agile procurement processes. In the cosmetics industry, preservatives ensure cosmetics don´t spoil. Nevertheless, the use of grooming products is temporary and highly influenced by limited storage times. In case of an inadequate inventory management, this can lead to high waste levels.

Extremely volatile demand

The great variety of goods, short product lifecycles and constant innovations highly influence customers, factors that materialize in the form of volatile demand. The more unstable the demand situation, the more important sustainable and reliable supply chain planning methods and production processes become. Forecasts need to consider holding costs as well as market needs in order to find a good balance between tied capital and product availability.

Individualization

Mass customization has reached the beauty sector as well. The rising variety of products coming with individualized customer demand in the cosmetics industry creates the need for increased flexibility and agility to react appropriately to a changing environment.

Same-Day delivery

As with many sectors of the consumer goods industry, the cosmetics industry is also subject to the “I want it now” e-commerce culture we live in today. The whole supply chain, including distribution logistics and supplier management, needs to be integrated and processes along the chain have to mash optimally to cope with the speed today’s customer demands.

High quality expectations

Especially food and cosmetics are restricted to high quality expectations as bad quality can have a direct impact on a customer’s health. For this reason, quality management needs to be a consistent process in the end-to-end supply chain operations. Purchasing, merchandise control, climate, storage conditions, hygiene in the production process and the treatment of raw materials must be continually inspected. Transparency has to be ensured from the beginning of the chain until the finished product is sold.

Innovative products need innovative production processes

The manufacturing process of grooming products can be summed up in five steps: First the ingredients must be selected. This is critical for the strategic focus of the product and the company as it determines the message and pricing levels. The next steps include lab tests concerning, for example, skin tolerance and the creation of the product itself. Grooming products mostly require water- and oil-based emulsions. Every further treatment depends on the exact kind of product. One formula can include up to fifty different ingredients that are fused together with great heat. After being automatically filled in bottles, boxes or cases, cosmetics are distributed and mainly sold in retail and wholesale environments.

The cosmetics industry is typically a mass production that regularly brings forth new and innovative products and designs. Concerning production planning and inventory management, this leads to the need of a warehouse with a flexible management of stock levels and reliable production processes. The international provider of premium cosmetics, BABOR, uses an innovative method of scheduling master production simultaneously, with the goal of avoiding high manual effort in satisfying volatile customer demand. The application of an IT supported tool to optimize production planning is a step toward a digitalized process – inalienable for business success in today’s complex operating environment.

Conclusion

The amazing supply chain of daily grooming products is shaped by many external and internal requirements and restrictions. Nevertheless, demand within the cosmetics industry is rising and manufacturers need to continuously adapt supply chain and production processes to keep costs low and stay competitive. Having a sense for how the market is developing is important. A reliable information database and digitalized manufacturing methods can further support supply chain and production managers in their efforts to develop their businesses in a timely manner and tackle the challenges of these amazing supply chain processes.