New product launches are notoriously stressful and lead to the most testing of times for any organisation. They place pressure on every part of the organisation’s structure and processes. Sales teams are waiting impatiently for the new lines and making early promises to customers; advertising and marketing teams have booked media space and committed to a launch date, whilst production teams are working frantically to complete production set up and finalise all the details of printing and packaging, let alone deal with all the issues surrounding quality and safety. And of course there are all the supply chain management issues to deal with; notably trying to interpret the sales forecasts and relate these to where to hold the inventory in what quantities and how to ensure that the customer orders are fulfilled on time and in full.
Under the Skin at L’Oreal
A key factor for success is the ability of an organisation to convert the energy burst of the launch itself into new sales orders that are manageable and deliverable. Processes are needed to ensure that the sales teams know well in advance what to expect and can be confident that the promises they make to customers can be supported by the supply chain as a whole. On the other hand production and supply chain teams need to know that sales are not making promises that cannot be sustained by production or supply chain capacity.
Nowhere is the success of a product launch more important than in the cosmetics industry, where companies rely on innovation to build competitive advantage and increase market share. That’s why cosmetics giant L’Oreal turned to The Logistics Business to help to ensure that its new product launch processes were robust and met the needs of every part of the business.
L’Oreal has been a leading light in the cosmetics industry for more than a century and owes its very existence to the excellence of its research and innovation. Founder Eugene Schueller developed the world’s first synthetic hair colorant and today, L’Oreal still invests heavily in research and development. The company creates up to 4,000 new formulae each year covering a wide range of products including skin care, sun protection, make-up, hair styling and fragrances. The result is that L’Oreal is constantly refreshing its consumer offer, listening to its customers and bringing new products to market to meet new demands. It’s a winning recipe, which results in the astounding statistic that around 67 per cent of UK women use at least one L’Oreal product.
In choosing a consultant to help with this work L’Oreal recognised the excellent track record which The Logistics Business has had in developing complete supply chain processes for FMCG manufacturers and particularly for other leading luxury goods and cosmetic brands. Hence, The Logistics Business was commissioned to undertake a complete review of the way in which the Luxury Products Division of L’Oreal UK launched new products and, particularly, the way that resulting sales orders were handled. There were a wide range of cross-functional issues to consider bearing in mind that all elements of the organisation had to be confident that any changes would be workable and would enhance rather than hinder their ability to meet targets from product concept through development and production all the way to the shelf in the retail store. Many of the issues were related to the speed at which sales orders were processed and to the flexibility and suitability of L’Oreal’s existing software tools. The overriding objective was to develop processes that would reduce to an absolute minimum any risk that the maximum benefit from new products would not be gained because of delays in processing orders.
The Logistics Business appointed a world class consultancy team to the project, headed by Senior Consultant, Graham Mawdsley. Graham’s operational and analytical experience in the development of FMCG international supply chains and department store operations put him in a ideal position to head up this project, where practical experience and an ability to gain the confidence of a wide cross section of L’Oreal’s team was as important as the ability to undertake detailed analysis and understand complex business systems.
The consultancy team worked with a range of key managers in L’Oreal and undertook a detailed process mapping exercise to understand how L’Oreal’s product launch process had operated in the past. The exercise involved gathering information from many different parts of the organisation including sales, marketing, logistics, customer service and finance. It also required an understanding of L’Oreal’s supply chain processes and product development lead times. The consultancy team got right “under the skin” of the L’Oreal organisation and delved deep into what really was driving the issues behind the product launch process. This “under the skin” approach was vital in order to ensure that the business was really well understood and to highlight those elements of the process that were adding value and those that were not. It was only by understanding the detail and limitations of current systems and combining this with the human element that it was possible to identify areas for potential efficiency improvements and then confidently provide recommendations for change.
The Logistics Business produced a series of recommendations for actions to improve the product launch processes. The key factors for change were to understand where in the processes communications were breaking down and where delays were occurring due to lack of data or appropriate feedback along the supply chain. The consultancy team identified unnecessary complexity in the processes and introduced changes to simplify and speed-up the communication process and the availability and transfer of vital data. The recommendations included the introduction of new software tools, which would be simple to use and would be seen as adding value for sales teams and others. The reasoning behind these tools was that they should help make information readily available and shared by all those elements of the organisation that had a role to play in the product launch. Visibility of and easy access to reliable data is the cornerstone of any supply chain process, product launch or otherwise.
The recommendations put forward by The Logistics Business were fully accepted by L’Oreal and some 18 months after the introduction of the changes L’Oreal has reported that its performance in planning and executing promotions and launches has “improved considerably”. It has also reported that those results have proved to be sustainable. Christophe Albenque Head of Customer Service and Supply Chain at L’Oreal Luxury Product UK, said: “The mapping of the processes helped to make all teams aware that the solution would not be found in a heavy IT tool to manage the complexity of the operations but in the simplification of our processes. As it was a cross-function approach, it was important to have someone neutral with no pre-conceived ideas. This was crucial to the acceptance of the conclusions by all parties”.
The cosmetics industry is perhaps special in that it depends on a regular supply of so many new products but the principles applied at L’Oreal are just as applicable to any other business where development, production, marketing and sales teams have to work together to launch new products on time so that customer expectations are fully met and sales volumes are maximised. Excellence in supply chain management is not just about the efficient movement of goods to market. It is of strategic importance to most organisations and is a means to gaining competitive advantage. Investment in good supply chains was always important in the economic good times but in the current economic climate it could well be the difference between success and failure.