Inventory Management Gets a Makeover

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.

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 effect.

The lipstick effect 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 effect can make it tricky for cosmetics firms to predict economic downturns, so managing inventory levels can be a challenge.

To leverage the lipstick effect and drive supply chain efficiencies, cosmetics companies do the following:

  • Prioritize supply chain stability
  • Find the right pricing balance
  • Diversify product offerings
  • Invest in technology that helps to predict demand

Ulta Ultra-Focused on Tech

Technology is changing the playing field for all industries, including beauty products. The larger players understand that the technologies that disrupt a process today can lead to huge efficiencies and profits tomorrow. They are investing more time and money in funding the development of technology that will drive their business forward.

Take Ulta Beauty as an example. The largest beauty retailer in the United States recently launched Prisma Ventures, a digital innovation fund that will invest $20 million in emerging tech startups with a particular focus on artificial intelligence, augmented reality, Internet of Things, and personalized data-driven technology.

The Ulta Beauty Prisma Ventures team evaluates these tech startups based on five key metrics:

1. Alignment with an Ulta focus area
2. Leadership and cultural compatibility
3. Diligence and risk assessment
4. Business plan and scalability
5. IP and differentiation

Early investments in start-ups that include, Adeptmind, Revea, LUUM, and ReStyle have enabled greater personalization and diagnosis within Ulta Beauty’s digital skin and hair experiences, the company says.

Applying a Better Foundation

While the benefits of robotics solutions in cosmetics manufacturing are solid, implementation can prove shaky. Packaging or picking products that come in a range of sizes and shapes creates unique challenges that have led many cosmetics companies to build processes that piece together a variety of solutions.

For example, because cosmetics products often deal with liquids at a variety of viscosities, liquid filling can be particularly troublesome for manufacturers with diverse product ranges.

There may be another way.

Shemesh Automation has developed a solution that the company says can handle feeding, filling, capping, labeling, case packing, and palletizing cosmetics products of all shapes and sizes. The company’s TKS-C60 solution consists of three ABB Delta Robots—one on the product unscrambling station, one for multi-capping, and one for case packing—and an integrated vision system. The solution is able to pack multiple product types with one line, according to the company.

Facing Supply Chain Challenges

While some challenges are common to every industry, others are unique to a particular market segment. The cosmetics industry will face at least four unique supply chain challenges in 2023, according to analysts at rfxcel, a part of the Antares Vision Group.

Combating counterfeit goods. Cosmetics are often pricey, which makes them attractive to counterfeiters. In fact, counterfeit products cost the cosmetics and personal care sector between $4.5 million and $5.6 million and created 10% of all customs seizures in 2019, according to a Statistica report.

“Traceability in a digital supply chain, including serialization and real-time environmental monitoring solutions, is the best defense,” the report advises.

Ensuring sustainability. While regulatory concerns drive sustainability efforts at many companies, cosmetics consumers continue to demand accountability, requiring suppliers to focus on sustainable sourcing, packaging, and manufacturing.

Minimizing product damage. Climate control that reduces the risk of damage during shipment is crucial. Cosmetics companies should make climate control part of a larger real-time environmental monitoring solution such as Integrated Monitoring, which uses Internet of Things devices to monitor conditions, including temperature, during transportation.

Addressing labor issues. Sourcing high-quality ingredients is essential, but the cosmetics sector has dealt with illegal labor issues. Sourcing requires vigilant monitoring of labor practices, making end-to-end traceability, visibility, and transparency crucial.