SCE Helps a Leading Cosmetics Company Use Outsourcing and S&OP to Achieve Cost Savings and Competitive Advantage
A leading cosmetics manufacturer sought to overcome supply chain issues including long lead times, unpredictable demand, and shrinking margins.
Following an in-depth assessment, Supply Chain Edge identified approximately $20 million in potential annual savings.
SCE helped the company outsource distribution to a third-party logistics provider (3PL) and implement a sales and operations planning (S&OP) process as first steps, which has put the company on track to save $4 million in the first year.
A cosmetics manufacturer faced long, variable lead times for key inputs, uncertain consumer demand, and margin erosion. In addition, its sales force was not always aligned with customers' strategies and performance objectives, while its complex IT infrastructure hampered its efforts to understand and improve supply chain performance. In light of these challenges, the manufacturer approached Supply Chain Edge (SCE) for help identifying and prioritizing opportunities to improve supply chain performance.
SCE began with an end-to-end supply chain assessment, which included a benchmarking against 10 competitive cosmetics companies. This analysis revealed many opportunities to improve supply chain performance and generate upwards of $20 million in cost savings. However, the company could not feasibly pursue all the opportunities at once. Therefore, SCE helped identify the best initiatives to implement in the first year: shifting distribution and logistics to a 3PL and implementing an effective S&OP process.
To enable the client to forge a high-value relationship with a capable 3PL, SCE helped draft a comprehensive request for proposal (RFP) that contained in-depth information about the company itself and solicited comprehensive data on each potential provider's business and proposed approach. Ultimately, the company received several proposals in response to the RFP, which SCE helped assess using its proprietary vendor evaluation matrix. SCE also facilitated the transition to the chosen vendor, creating a scope-of-work document that specified the details of the company's relationship with the 3PL and ensured the company would avoid costly surprises as the transition unfolded.
Concurrent with the 3PL initiative, SCE helped the client develop and implement a fully integrated S&OP process that would enable the company to track and improve the alignment between strategy and operations. There were three major aspects of this project: helping the company select a collaborative sales forecasting solution to support S&OP, ensuring all key stakeholders had the training and knowledge needed to drive maximum value from the S&OP process in the long term, and boosting the accuracy and accountability of the forecasting process.
Today, SCE continues to support the company's full use of its new 3PL relationship and S&OP process. While the integration between the client and the 3PL is ongoing, to date the relationship is on track to generate nearly $2 million in annual savings. Likewise, through the use of S&OP the company anticipates saving nearly $2 million in the first year, plus an additional $3.2 million annually through additional operational improvements. Equally important, the cosmetics company now has the operational structure, accountability, and scalability it needs to confront supply chain challenges and maintain its competitive edge.