Cosmetics
From managing ingredient shortages to finding a production plan that delivers the right amount of product when and where it’s needed, cosmetics companies face significant supply chain challenges. Many are turning to automation to meet these challenges. One example is Belcorp, a multinational beauty brand corporation operating for more than 55 years primarily in Latin America. The company sought a software solution that would both enhance inventory performance of more than 90,000 SKUs and elevate service. Reducing and properly positioning inventory across its network would help managers make agile decisions while minimizing environmental impact. But Belcorp also needed access to statistical and optimization tools that could calculate optimal stock levels. Its search led Belcorp to ToolsGroup, a Boston- based supply chain planning software provider. It implemented ToolsGroup’s demand planning, multi- echelon inventory optimization and replenishment solutions to help right-size inventory levels and improve stock positions. Since implementing the solution, Belcorp has reduced on-hand inventory while positioning available stock where it can best fill demand. INVENTORY MANAGEMENT GETS A MAKEOVER
THE LIPSTICK EFFECT ON SUPPLY CHAINS While much of the current U.S. economic news has focused on recession fears driven by inflation and geopolitical concerns, the cosmetics industry is sitting pretty because American consumers are still spending heavily on beauty products. To understand why, consider the lipstick eect. The lipstick eect occurs when consumers continue to spend money on luxury items during times of economic stress. The term was coined by Estée Lauder’s former chairperson, Leonard Lauder, who observed how lipstick sales soared in the wake of Sept. 11 and theorized that lipstick must be a contrary indicator of an economy. Recent data supports Lauder’s theory. The beauty category was “a rare bright spot” for retailers in 2022, finds the NPD Group, and the only discretionary retail category to enjoy rising unit sales in the first half of 2022. Makeup sales, including lipstick, were up 20%, skincare was up 12%, fragrance was up 15%, and hair care was up 28%. But greater demand for product creates greater strain on the supply chain. For example, the lipstick eect can make it tricky for cosmetics firms to predict economic downturns, so managing inventory levels can be a challenge. To leverage the lipstick eect and drive supply chain e ciencies, cosmetics companies do the following:
Prioritize supply chain stability Find the right pricing balance Diversify product oerings
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● Invest in technology that helps to predict demand
16 Inbound Logistics • March 2023
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