‘No Agility Without Capacity’: How L’Oreal Is Tackling Social-Driven Volatility
L’Oreal says it’s reinventing key supplier partnerships to increase the capacity that’s required for e-commerce growth.
Social media is driving demand into historic levels of volatility, particularly in cosmetics, and this unpredictability isn’t expected to abate, shared Damien Decouvelaere, L’Oreal global chief supply chain officer, on a recent Gartner podcast.
In order to better navigate the disruption, the CPG is doubling down on building upstream capacity, including with two new augmented fulfillment factories with smart automation in China. The first, in Suzhou, is expected to open in the next few months.
“There is no agility without capacity,” he noted.
L’Oreal, which is the No. 12 publicly owned consumer goods company, produces about 80% of sales units in its own 38 plants, said Decouvelaere, with most produced in close proximity to demand.
To further decrease lead times, the company is trimming SKUs and testing business continuity plans in real time with key factories to ensure faster activations.
They’re also accelerating demand signal transmission across the value chain — “from capturing consumer sales at the right frequency and granularity and qualifying the data, to propagating them upstream and up to our supplier and using them to react quicker to market evolutions,” he added.
L’Oreal Salon Centric, the company’s wholesale salon and beauty supply distributor business, is further being redesigned with new IT solutions and an agile distribution network to help ship products in less than two days.
Building CPG Supply Chain Resiliency
While much of the pandemic-prompted supply chain disruption has abated, CPGs remain confronted by a host of complications, including geopolitical tensions and transportation challenges. For beauty companies like L’Oreal, unpredictable social media trends can further wreak havoc on their ability to fulfill demand and maintain competitive customer service levels; as a result, companies show no signs of slowing their supply chain investments.
As part of their efforts to build resiliency and reduce risk, 79% of consumer product and retail organizations are diversifying their supplier base, according to a 2023 Capgemini survey. What’s more, 71% are investing in regionalizing and localizing, and 83% are investing in friend-shoring.
Similarly, In order to further assert more control over their manufacturing, investing in supply chain automation specifically remains a key CPG priority to decrease costs. For example, 80% of consumer product and retail orgs have implemented strategies to optimize supply chain costs through automation, including factory and booking automation, per Capgemini.
Looking ahead, organizations will invest not only in supply chain automation but also digitalization to increase agility — the latter of which the firm says took a backseat during the pandemic — with 39% reporting they’ll increase focus on it over the next 12-18 months.
