Supply Chain Visibility Cosmetics Idustry - Management Assignment Help

Assignment Task

Executive Summary

As globalization is constantly flourishing, organizations have realized there has been a necessity of maintaining supply chain visibility so that all stakeholders involved are informed with the changes involved in the supply chain. When you consider a cosmetic supply chain, it is multi-tiered in nature and hence it values maintenance of accurate data with respect to sourcing, inventory, management of product codes, assigning unit values and even tracking supplies from various suppliers. The raw materials used in making the cosmetic products are beyond measure and hence maintaining such data information is considered very crucial.

This report analyzes the major challenges cosmetic industry supply chain faces in terms of maintaining supply chain visibility. An in-depth understanding of the various methods that can be used in order to overcome transparency issues has been explained. Not just the advantages, but also some constraints have been mentioned to help the reader make a wellinformed decision on accepting new technologies.

1. Introduction

When a customer is trying to purchase high-end make-up products in the market, they are often disappointed by the price tag they come with. This has encouraged illegal producers to make the exact copy of the high-end expensive make-up products and it eventually affects the brand name as well as the society (Bush, Bloch & Dawson 1989). When a consumer checks for prices online on various sites and compares it with the actual retail price of the product, they are left with surprise as most of them are less than half the actual retail price of the original product (Zaichkowsky & Simpson 1996). Consumers are hence drawn to the cheaper fake options over the so-called “over pricey” authentic options. Sometimes this is a result of choices made unknowingly and most of the times the prices which are too-good-to-be-true, are still purchased (Nill & Shultz, 1996). Counterfeit makeup has reached common social media sites such as Instagram, Facebook and shopping sites such as Amazon and eBay.

When a customer buys a legitimate product, they have confidence that the product has been made by achieving certain standards, but a counterfeit item gives no guarantee (ABC Action News, 2013). As these counterfeit products do not follow quality standards, it has proved to be dangerous and lethal for consumption. City of London Police Det Sgt Kevin Ives says, “saving money can lead consumers ending up with products which can cause serious burns and you also are supporting global criminal illegal networks” (ITV News, 2018). It has also been researched that the products often used in manufacturing counterfeits are dangerous and cheap, hence causing serious allergies. As mentioned on CNN, 2018, animal waste was found in counterfeit makeup, also contains human waste and various dangerous bacteria. Consumption of heavy metals like arsenic, mercury, and lead that are used to manufacture counterfeits cause serious health issues like high blood pressure, a risk to fertility and sink cancer if used regularly (Good Morning Britain, 2015).

There are various methods that can be carried out to check the authenticity of cosmetics by performing various tests. These tests are more time consuming and hence prolong the process of investigating their potential threats. Cosmetics brands also need to understand that, elimination of counterfeits also involves the active participation of government and legal bodies (Stumpf 2017).

Cosmetics brands also face issued in their supply chain to maintain stability with respect to common information shared within the stakeholders. Several researchers have studied the importance of supply chain visibility in order to improve effectiveness in terms of data sharing and data storing (Caridi et al. 2014). Studies show that the link between two main factors of the supply chain i.e. responsiveness and sharing apt information is lacking (Williams et al. 2013).

Considering the facts and issues that come with supply chain working inefficiencies, my report focuses on the internal supply chain and post supply chain procedures to eliminate counterfeit based markets and focus on the ways visibility can improve supply chains in the cosmetic industry. It was necessary to focus on maintaining supply chain visibility in both internal and post supply chain procedures. Solving problems in the internal supply chain wasn’t enough and attention to the post supply chain was of prime importance, which can be done by achieving supply chain visibility. Visibility in supply chain mainly focuses on the process of maintaining a clear and coherent picture of the supply chain involving management of inventory, demand planning, customer feedbacks, risk assessment and even maintaining sustainability (Busse et al. 2017). Supply chain managers address the problem that every 6 supply chain needs to have end-to-end visibility in order to make the stakeholders aware of the risk that would affect it (Williams et al. 2013). Especially, luxury cosmetics companies need to focus more on taking efforts in maintaining clean visibility in their supply chain, minimizing counterfeits being sold in the market. The counterfeits also lead to decrease in the brand reputation as some counterfeits are sold almost to the same price of the original value.

Considering the above chain and the stakeholders involved, it is necessary to maintain traceability and transparency at every level to make sure the product manufactured is reaching the consumers with the right quality standards. Let’s consider a scenario in which there was no track record maintained by an X - cosmetic product. When that product reaches the customer via a retailer, the customer has no proof to believe that the X-product is authentic. If data is maintained in such a way that, all the stakeholders involved in the supply chain have access to the details which explains the story of the product, it would be easier and a trustworthy method of analyzing if the product was authentic. Hence maintaining a ledger of codes assigned to each product and uploading on a common data sharing platform will ensure that the product transparency. In the case at any point, if the product codes aren’t found on the common platform, it has been counterfeited. This can be followed in the internal supply chain using RFID (Radio Frequency Identification) and Block Chain coding system. This way the root of the supply chain is well monitored.

When focussing on the journey of the product after getting out of the internal supply chain and making its way to the consumer, it is necessary to make sure it is tracked, and its details are preserved. These details further can help the consumer gain more trust in the authenticity of the product. This report progresses explaining various ways a cosmetic product can be protected throughout the supply chain by using RFID and blockchain to solve the majority of the supply chain transparency issues. It also explains how these technologies can be implemented in the most effective manner to overcome cosmetic counterfeits, supply chain visibility, and traceability. On a bigger picture, this report will be slowly focussing on how cosmetic supply chain can be improved by improving visibility throughout all the processes.

2. Methodology

This report consists of research data gathered from various journals, research papers, newspaper articles and news reports which together are considered as secondary sources. With a detailed study of research papers, it can be deduced that Supply Chain Visibility is an aspect in which organizations are struggling to achieve. It is highly suggested to maintain supply chain visibility as organizations can manage to identify risk sectors and successfully solve it (Busse et al. 2016). This report also focuses on the various research papers that focus on ways in which different sectors of the supply can be improved. Visibility can help organizations get accurate data of their inventory levels, which can help accelerate the process of production planning and will also support improving delivery performances (Somapa et al. 2017). With the help of detailed study of the sources, I was able to ensure the report supports my recommendation for supply chain visibility issue faced by cosmetic supply chains.

3. Findings and Discussions

3.1. Overview of Cosmetic Supply Chain Industry

The process which involves various entities such as the creation of a product to making sure it reaches the right customer explains a supply chain network (Sople 2012). When we consider the way cosmetic supply chains are structured, the majority of supply chains follow a multi-tiered supply chain. The image below shows the various tiers which are involved in a cosmetic company which has a multi-tiered supply chain. OEM (Original Equipment 8 Manufacturers) refers to the parent company which manufactures the final product and are dependent on Tier 1 suppliers for their raw materials. These Tier 1 suppliers have other suppliers which help them give raw materials to make their products. A majority of the cosmetics companies follow multi-tier OEM (Deloitte 2018), visibility throughout the supply chain is hence challenging. The OEM makes sure they decide the factors such as the type of raw materials required, their quantities, packaging materials, labels and the suppliers from which these need to be sourced.

As cosmetic companies rely completely on external sourcing of chemicals to make their products, it is important to maintain supply chain visibility including all the tiers for ethical sourcing. The quality of the raw materials of the Tier 2 suppliers are decided by the Tier 1 suppliers and hence any differences in the quality must be settled at every tier before sending it ahead in the supply chain. Smooth coordination between all the Tiers will result in lesser supply chain risks.

3.2. Challenges Faced in the Cosmetics Industry Due to Lack of Transparency

Every cosmetic industry needs to be assessed based on the risks that affect them (Vtorushina et al 2017). Challenges faced by a cosmetic industry lie in every department from packaging, sourcing, logistics, waste management, inventory management, and even branding. In order to maintain high standards in the market, understanding the gravity of challenges and finding appropriate measures is of paramount value.

Managing Inventory

In inventory management, planning of inventory and controlling it are considered the most critical, to achieve the desired outcome of a supply chain (Jones & Riley 1985). Inventory is the most important factor to be maintained especially for the cosmetic industry. Cosmetic companies need to manage their stocks such that they have enough for the upcoming demand and do not have excess. In order to achieve this, they can study the fluctuations in demand for the previous years and understand sudden demand increases (Bailey and Helms 2007). When a new product is being launched it demands the procurement of new raw materials and packaging materials. The initial phase of planning the inventory for a new product is the most crucial part of the future success of the product is not known (Boone, Craighead & Hanna 2008). In this case, managing inventory by considering the risks involved and maintaining suitable amounts of inventory is extremely necessary. In such cases, it is important to focus on the Unified Inventory as it gives correct data of the inventory present in the entire supply chain, resulting in avoiding excessive ordering (Harrison 2016). Hence, the visibility of supply chain plays a major part in understanding where the inventory lies (Busse et al. 2017) if the inventory is good to be used and how it can be appropriately managed.

Ethical Sourcing

An industry is supposed to take vital step towards the improvement of inculcating transparency in supply chain and making sure it is traceable, aiming to satisfy the customer as well as help increase the consumer demands (Sustainability: How Cosmetic company is Greening Up 2014). It has been observed that female customers are more attracted to products that consider animal welfare, health and safety and environmental importance (Pudarut, Juwaheer & Seewoo 2013). When you consider ethical practices, you focus on every aspect of how things work in a supply chain. This involves making sure raw materials are sourced ethically without involving child labor or even law wage labor working in sourcing them. It is also important that health and safety measures are taken to achieve the desired product. Ethical sourcing also involves maintaining gender equality in companies from which materials are purchased. It has been found that 88% of consumers are more inclined to stick to brands that have stronger social and environmental commitments (Anonymous, Global Cosmetic Industry 2017).

Counterfeiting

Counterfeiting is making products by imitating the appearance of the original product in order to mislead the consumers (Sari, Soediro & Rochman 2018). There has been a significant increase of fraudsters who are selling counterfeit beauty products in the market and such products are affecting the health of the consumers thus putting the brand reputation at grave risk (McKeon 2015). There are brands which have achieved their position and reputation by providing a high service level through several years. Companies which make counterfeits take advantage of the popularity achieved by big bands and sell them under their name (Nill and Shultz, 1996). When the fake company imitates the brand in terms of their color, appearance, symbols, and shapes with lower price can shift the target market from the original brand to the new fake brand (Zaichkowsy and Simpson, 1996). This strengthens the market as the customers which have low income and cannot afford the original brand pricing, tend to be more drawn towards such counterfeits which strengthen their market (Bush, Bloch, & Dawson 1989). With the advancement in technology and globalization, the entire world has access to the details of a product and hence it has become easier for the counterfeit companies to make fake products.

3.3. Supply Chain Visibility

Supply chain visibility ensures strong supply chain relationships are formed and hence involved the interaction of all the stakeholders with the information that runs through the supply chain (Caridi, Moretto, Perego & Tumino 2014). It also is sharing data which is accurate and making sure is made available on a timely basis to all the stakeholders involved. There have been arguments made by researchers that suggest that the information related to demand and supply plays a crucial role in enhancing the capabilities and flexibility of supply chains (William et al, 2013). If the data has been made visible regarding stock levels, scheduling, supplier data, pricing of the products and demand planning, more accurate data will be shared which will result in a better supply chain functionality (Somapa, Cools & Dullaert 2018). Major benefits of supply chain visibility in the Cosmetic sector have been mentioned below.

Tracking Inventory Level

Managing inventory is the best way of achieving desired goals by making sure the consumer demands are fulfilled. When a product demand is set, if the inventory levels are enough for the production, the planned demand can be achieved. When effective handling of a supply chain is considered, it is important to track the exact amount of stock from the supplier to the manufacturer to the warehouse (Wei & Wang 2010). Maintaining such data is way more complicated and if misinterpreted can lead to production risk and supply chain disruption. Regular tracking of stocks at every level including warehouse, production floor, waste raw materials, and even excess production quantities, can help maintain transparency of the products manufactured. This data ensures that the stakeholders achieve real-time data of the existing stocks which will eventually help avoid any discrepancies (Wei & Wang 2010). By achieving smooth processing of the supply chains, high yields can be achieved, and successful results can be expected (Ader 2016).

Responsiveness and Agility

The market situation with respect to demand and consumer spending has too many fluctuations and is highly volatile in nature. With globalization rapid changes, it has been of paramount value to attain agile supply chains to make sure it does not affect the production on a large scale (Williams et al. 2013). Agility is nothing but the ability of any organization to make sure they overcome the fluctuations in the demand. This also involves maintaining the data so that if any variations, it can be swiftly addressed and changed. Sharing the information of the upstream and downstream partners to all the stakeholders in the supply chain can help organizations gain more agile supply chains (Syntetos et al. 2016). As cosmetic industries have more intricate supply chains with various departments, supply chain visibility can highly support the organization.

Utilization of Assets

Asset management can ensure the company can save production cost and avoid the idle time of production. Considering there is less supply chain visibility, the effects on assets utilization can directly affect hike in the production and usage of the capacity. In order to have appropriate planning of production, it is important for managers to have exact details of the assets. Considering a scenario where a manager needs to know the assets such as pallets, vehicles and the containers, they can make informed decisions for the transportation of the produced goods (Busse 2017). Supply chain visibility can help keep track of all the existing assets which can help make better decisions and ensure no economic loss occurs. It is also helpful when there are various departments sharing a variety of common assets and need to know what can be used without a clash of requirements (Boile & Sdoukopoulos 2014).

Accountability

When you consider an intricate supply chain, like that of the cosmetic industry, there are various stakeholders. These stakeholders need to be internally well aligned with the flow of information to avoid last moment hassles of accountability. Due to such complex supply chain designs, the possibility of errors to occur is higher than the accountability (Webster 2015). When a problem occurs, if there is a lack of accountability, there will be blamed on various stakeholders. With supply chain visibility, the right root cause can be figured out and future discrepancies can be avoided. It not only avoids unnecessary friction but also manages to point out the errors, hence avoiding any supply chain disruptions. This way, less time is spent on figuring what went wrong and who is supposed to be accounted responsible instead of finding out corrective measures to overcome them (Supplychain 2017).

4. Recommendations

As discussed in the above section about the effects of lack of supply chain visibility in various sectors of the supply chain like operations, sourcing, warehousing, logistics, stakeholder involvement and many more, the below recommendations will help overcome the issues.

4.1. Blockchain Technology

Blockchain technology maintains a tamper-proof ledger which can be shared with all the stakeholders to provide one common trusted flow of data throughout the supply chain (Chow 2018). This technology is completely based on the idea of maintaining all the inflow and outflow of data which passes through every stakeholder involved in a supply chain. In this case, a unique digital token number is assigned to a product (Kristoffer & David 2018). Blockchain technology maintains a ledger of the token numbers given to all the products and attributes the details to it at every stage in the supply chain, these blocks are then spread across different computers which are accessible by authorized members of the supply chain (Underwood 2016). When this product travels from the one stakeholder to another, the token number is first scanned and checked on the ledger of the stored token numbers. Once identified, it further travels to the next stakeholder in the supply chain. When blockchain is used to maintain a document of all the verified number of the products, a smartphone app can be developed which can help the consumer check the “token” given to the product and find it on the common platform of stored token numbers. If found, it would be considered as genuine and if not, would be counterfeit. This way the customer pays a price which is worth the genuine product and avoiding lethal health issues.

As this technology is decentralized, the data which is updated on the common platform is not done by a single party. When a piece of new information is stored, it is notified to all the stakeholders of the chain to ensure they all are aware of the changes being made (Pauka 2017). This is more transparent and keeps the stakeholders informed about all the minute data details of the supply chain. The below mentioned are the ways blockchain can overcome transparency issues in the cosmetic supply chain.

Fighting Counterfeiting

As most of the cosmetics supply chain have a linear flow of goods, maintaining tokens and assigning them to various milestones in the supply chain makes it easier to trace (Francisco & Swanson 2018). Details of a cosmetic product can be traced within the supply chain easily. The part after which the product is on a journey to reach the customer is crucial as the customer is the most important stakeholder, needs verification of the product is authentic and not fake. For the customers, traceability can be achieved by giving them information about the data which gives details of the sourced raw materials which are used in manufacturing the products (Francisco & Swanson 2018). As blockchain has different nodes at which authentic data is saved, customers can then access each node information without a centralized server for tracking and this then serves as a certificate of authentication for customers to believe in the product and brand (Alzahrani & Bulusu 2019).

Hence when a seller sells the product, they can also show the journey to the customer so that the customer can now make a well-informed decision before trusting the seller blindly. This does not just maintain traceability within the supply chain stakeholders but also involves customers in tracking the product they intend to purchase. As my personal recommendation to further ease the process of involvement of customers, the product journey data can be stored in a code which can be shared to the customer. This code can then be tracked by the customer through a mobile app which has access to only the authentic code holder. When customers spend a couple of thousand dollars on a cosmetic product, giving them more ease of accessibility can help support the brand reputation and help the customer trust the brand.

Information Accuracy

As the technology is in the form of interconnected chains involving all the stakeholders, it becomes more crucial to edit the data. This makes the stakeholders more aware and cautious of the data to be entered as every other member can access and question it, thus making it more accurate (Pauka 2017). This helps maintain more accurate inventory data on the system which helps the manufactures more confident of what inventory they have and how they can use it on the production lines. With this, when purchase orders are generated to maintain inventory stock, excess ordering can be avoided.

Traceability

When it comes to traceability, there is end-to-end visibility provided to the stakeholders and hence they can access every point of data is necessary. Large magnitudes of data can be stored which does not affect the accuracy of the chain. When assets come into the picture, the number of assets and their quantities can be assigned on the common platform which can be accessible to the authorized stakeholders (Nofer et al. 2017). It also makes accounting easier with the shared information of the accounting details and the supplier transactions.

4.2. Radio Frequency Identification (RFID) Technology

RFID is the process of tagging the product with a unique code or number which when scanned, with the help of software, can give details of the product that has been scanned. When data is entered on the system, the codes are assigned to that respective data by the host and this data is authentic (Muller 2011). As seen in the image above, every node in the supply chain is assigned with a reader. This node then receives a product with a unique code, it reads it and automatically updates the data at that node. This way, there is a constant updating data at every point of the supply chain which makes it easier to track the journey of the product. Real-time data is updated using RFID which helps benefit downstream as well as the upstream of the supply chain (Jun’e, Xiaocui, & Bingwu 2010). Below are the advantages of the RFID technology used in maintaining supply chain visibility.

Eliminating Counterfeits

RFID is considered one of the most trustworthy and promising technologies when it comes to distinguishing counterfeits from the originals (Gong et al. 2016). RFID enables tags when are attached to the product in a supply chain, it carries details of its process journey which can be tracked by RFID reading codes and hence an authentic story is generated (Bu & Li 2018). As the information tagged on the product is unique for every product, making fake replicas of such product becomes impossible as the scanner is also uniquely designed to read it. With immeasurable data stored, multiple data codes can be ready by one authorized scanner and hence no data can be leaked.

Enhancing Flexibility

In every complex supply chain, data plays a vital role in understanding the journey of a product and even the details associated with it. RFID not only stores the journey details but also maintains data with respect to its compositions, financial details, and even sourcing roots. Such data when accessed by the authorized host, they can make well-informed decisions later when there comes a time for making upgrades in the product. Competitive advantages can be gained by streamlining the processed depending on the details of the product (Leung et al. 2014).

5. Conclusion

With growing complexities in the supply chain due to globalization, it has been of paramount value to maintain transparency and easy flow of data throughout the chain. Supply chain visibility will help support organizations to be more agile and flexible towards making data accessible in order to avoid any discrepancies. With detailed research, several authors have realized how important can visibility be considered to help enhance the accuracy of a supply chain (Caridi et al. 2014). Research has also been done in understanding the relationship of supplier and buyer information sharing which has proved to be advantageous (Williams et al. 2013). Cosmetics supply chains need to focus more on their ability to be agile and flexible as it has proved to be highly beneficial in terms of end results. This can only be achieved if there is full involvement of the stakeholders in the supply chain which can be achieved by focussing on supply chain visibility. This will help eliminate the information barriers between stakeholders and the required data can be accessible, making them well informed about the updates (Scott 2015).

Though the implementation of blockchain and RFID have proved to be very advantageous, few drawbacks are also found. When we consider a large amount of data to be stored on the commonly accessible ledger, large data to be updated can be more time consuming (McCabe 2017). With the RFID tag reading systems, if there is a collision of another tag over the existing tag, the information received can be wrong and sometimes would not be well read (Yang et al. 2010). When considered as a bigger picture, Blockchain and RFID have greater advantages than limitations and with correct implementation, can help organizations gain higher benefits (Deloitte 2018). Hence, the implementation of such technologies in order to overcome the issues of supply chain transparency is highly recommended.

 

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