A Supply Chain With Beauty and Brains

A Supply Chain With Beauty and Brains

While selling beauty products may seem like a straightforward endeavor, “When you talk about cosmetics, it’s a world of complexity,” says Germán Ricardo Rodríguez Parra, operations strategic planning senior manager, supply chain, for Latin American direct-sales beauty firm Belcorp.

The Customer

Belcorp is a Latin American direct-sales beauty corporation, guided by its purpose: “We promote beauty to achieve personal fulfillment.” The 50-year-old company offers more than 2,000 SKUs across three commercial brands: L’BEL, ésika, and Cyzone. Belcorp provides an entrepreneurial opportunity to its more than 900,000 beauty consultants across Latin America and the Caribbean.

The Provider

ToolsGroup offers probabilistic demand and supply planning solutions used by retailers, distributors, and manufacturers to enhance supply chain resiliency and efficiency. The company harnesses AI and real-time data from various sectors of the enterprise to help companies facilitate agile and effective decision-making.

“Complex” might even be an understatement for Belcorp, which operates three brands:

  • L’BEL targets women aged 30 and older and employs advanced skincare technology.
  • ésika caters to women between 25 and 45 years old; this brand aims to inspire confidence and unlock the potential of Latin American women.
  • Cyzone targets members of Generation Z and focuses on affordable cosmetic products, while considering current digital market trends.

Belcorp’s network of beauty consultants offers the company’s products directly to potential customers.

Like many cosmetics companies, Belcorp leverages market trends to introduce new products every few weeks. While these evolving product lines are key to sales, they also require an agile and sophisticated supply chain planning and optimization approach, given the brevity of product lifecycles.

Additionally, Belcorp’s direct-selling business model operates with 18 commercial cycles, or marketing campaigns, per year. This creates higher volatility in customer demand and a need for greater flexibility and agility in the supply chain.

What’s more, it’s typically difficult to shift any unused materials or packaging from one brand to another, given their different focuses. “If you don’t plan well, you can end up with a lot of unused inventory,” Rodríguez notes.

A Supply Chain in Need of a Glow-Up

Belcorp works with about 200 suppliers located around the world. For most of the materials it sources, the company manages the logistics processes from the point of supply through to its plants, working with best-in-class fourth-party logistics (4PL) providers, says Nicolas Frasquet, corporate procurement executive director.

Belcorp produces its cosmetic products in four countries: Mexico, Peru, Ecuador, and Colombia, which is its most important manufacturing site. Belcorp also operates 12 distribution centers in Latin America and one in the United States.

While its primary markets are Colombia, Mexico, and Peru, Belcorp offers its products in 12 Latin American countries and in the United States.

All cosmetic products are approved under the Leaping Bunny Program by Cruelty Free International, which ensures that the company is committed to help end animal testing around the world. Along with cosmetics, Belcorp offers fashion accessories.

Beautifying Service, Inventory, and Distribution

“While a goal of Belcorp’s inventory management efforts is efficiency, the process starts by defining our service-level strategy, and then working toward it,” Frasquet says, noting that maintaining strong service levels is critical. Unlike traditional retail, there are no inventory buffers for a direct-selling model. If consumers order a product and don’t receive it on time, they have no immediate access to an alternative.

This can become frustrating for both consumers and the consultant, who loses the sale and profit. Moreover, if a consultant decides to stop working with Belcorp, the company essentially loses the capability to sell into that market.

“It’s best to secure the sales force and secure the consumer,” Frasquet says.

Because most of Belcorp’s products contain materials sourced from across the globe, and given the dynamic nature of the market, Belcorp runs and evaluates distribution scenarios every day. The goal is to adopt an inventory planning automation concept—that is, achieving the highest service with the lowest optimal cost and workload. This requires leveraging the right data, model, process, and culture, and ensuring the right inventory is in the right place with the right quantity.

“If we try to manage inventory and distribution with spreadsheets, we are dead,” Rodríguez says. Instead, Belcorp needs an inventory planning and optimization solution that enables the company to work toward an agile supply chain.

Belcorp management identified a handful of providers of inventory planning and optimization solutions. As they studied each one’s different capabilities, it became clear ToolsGroup’s approach best fit the company’s needs.

Its offerings are “more scientific, more data-based, and more driven by advanced mathematical models that can help inform decisions to guide inventory policies,” Rodríguez says.

Highlighting the Right Solution

With more than 2,000 SKUs and a constantly changing product mix, Belcorp needed best-in-class demand planning. By using ToolsGroup’s SO99+, the company optimized its inventory strategies.

Service Optimizer 99 (SO99+), ToolsGroup’s supply chain planning solution, which has been developed and refined over 30 years, leverages advanced probabilistic and optimization algorithms to optimize inventory levels, while factoring in a company’s desired service level at the lowest cost.

Achieving optimal inventory levels also requires mapping constraints, such as the amount of inventory the company can obtain from each supplier and at what time, as well as defining the amount of each product needed at each point in the supply chain, Rodríguez explains.

To achieve this, Belcorp began leveraging an advanced and automated multi-echelon inventory optimization (MEIO) model within SO99+. Among other functions, the MEIO model automatically calculates the optimal stock values at each node within a supply chain. This enables multi-level supply networks to meet their service-level goals, yet with a minimal inventory investment, says Angela Iorio, director, customer advocacy, partners and social, with ToolsGroup.

For example, MEIO software can recommend appropriate inventory levels for materials, components, subassemblies, and finished goods at any point in the supply chain.

The model, along with an advanced replenishment solution, also helps companies determine the ideal replenishment frequency for each product at each location. So, the solution could determine that one distribution center needs deliveries of red lipstick every two weeks, while another needs deliveries every three weeks.

Belcorp has consistently maintained a fill rate exceeding 95%. With the implementation of the ToolsGroup solution, management’s goal is to sustain or slightly improve this performance while simultaneously reducing total inventory value by 10 to 15%.

The ToolsGroup solution also empowers centralized demand planning, gathering overall requirements and dynamically assigning distribution priorities to each level, ensuring fair allocation logic to minimize stockouts at peripheral locations. This helps reduce costs across the supply chain and streamline operations.

Planners gain a centralized view of the company’s supplies across the network, with insights into inventory levels, service levels, and supplier performance. They can see both overall demand and the specific products most in demand.

With this insight, they can determine the optimal level of safety stock needed to achieve the planned service level for each product at a given location.

Getting Pretty in Phases

Belcorp’s supply chain leadership is handling its implementation of SO99+ in phases, which began in mid-2023 with a subset of products. This enables management to continually monitor performance and check that they’re not adversely impacting other supply chain KPIs.

Balancing inventory levels across Belcorp’s network likely will be completed in six to eight months, Rodríguez predicts. One reason is the phased approach Belcorp is taking with implementation and adoption. Lead times also come into play. For instance, the lead times for some materials, such as the glass containers for fragrances, can extend between five to seven months.

Information Offers a Better Look

Before implementing ToolsGroup’s automated MEIO model, it often took Belcorp six to eight weeks to optimize its inventory levels. The dynamic market and Belcorp’s need to continually introduce new products limited the usefulness of the information generated.

With the ToolsGroup solution, Belcorp can run sales and operations planning scenarios as often as necessary, and with a more sophisticated, data-driven approach. They can, for instance, make minor adjustments to the supply plan as needed and monitor the short-term evolution of demand and supply. They are able to plan ahead, avoid putting out fires, and work by exceptions.

“We now have more powerful insights to make data-driven decisions regarding the trade-off between service levels and inventory investments,” Rodríguez notes.

Before implementing SO99+, Belcorp had cut its airfreight costs approximately in half by implementing a push inventory strategy at select strategic distribution centers. However, this boosted inventory levels at the DCs.

“With SO99+, our goal is to optimize and reduce this inventory while maintaining air freight’s efficient performance,” Rodríguez explains.

Managing complex inventory requirements takes agility, advanced algorithms, visibility, and automated processes that enable companies to respond efficiently to market changes. For Belcorp, information about supply and demand variability is a must.

The less time Belcorp spends preparing information, the more it can dedicate to deciding how to take action. “The efficiency of our sales and operations planning process provides a competitive edge,” Frasquet says.

Through its partnership with ToolsGroup, Belcorp can automatically meet service levels, optimize inventory, automate processes, manage exceptions, and work smarter. Along with its goal of reducing inventory levels by 10 to 15%, it aims to improve service levels, decrease air freight use, and adopt inventory planning automation.

As it continues to define its supply chain digital roadmap, Belcorp plans to implement ToolsGroup’s lot size optimization module with price break constraints.

Case Study: A Demand Planning Makeover

The Challenge

Belcorp needed a more effective way to optimize inventory and service levels within its complex supply chain, where the universe of products changes every few weeks.

The Solution

The company partnered with demand and supply planning solutions provider ToolsGroup and implemented its Service Optimizer 99 (SO99+) solution. Belcorp also began using an advanced and automated multi-echelon inventory optimization (MEIO) model within SO99+.

The Results

Among other benefits, Belcorp gained the ability to automatically meet service levels, optimize inventory, automate processes, manage exceptions, and handle demand planning more efficiently.

Next Steps

Belcorp plans to implement ToolsGroup’s lot size optimization module with price break constraints.