Balancing Inventory Stock in the Cosmetic Industry

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The ever-growing cosmetics industry comes with its own set of challenges regarding supply chain management and logistics. Along with typical supply chain issues of sustainability and quality, the cosmetics industry has to keep up with the quickly changing demands of customers, and stock a wide range of products to suit all consumers. The work put into marketing, packaging, storage, and forecasting of demand needs to run efficiently to allow a brand to thrive in this competitive industry.

The consensus of the cosmetics supply chain highlights the key role inventory stock management plays in the successful process of manufacturing to selling; this tricky balance requires skilled management and logistics.

Marketing and Manufacturing

Marketing plays an important role in every consumer-based industry, but many manufacturers undervalue this critical tool that can make or break an upcoming business. The tug-of-war game between manufacturing/logistics and publicity marketing can be used to a company’s advantage by integrating the two.

Manufacturing and logistics work with research and development to understand, execute and deliver to customer demands. On the other hand, marketing knows how to appeal to demands and current trends. By working together, these two can provide a quality product that sells.

The key to finding the balance between marketing and manufacturing is to create transparent communication between marketing efforts and manufacturing quotas. In terms of inventory stock, clear and real-time communication can offer key logistical indicators and production can be increased or decreased according to demand. This in turn can provide sales with information to offer product discounts, show which products aren’t performing, and ultimately reduce carrying costs.

Balancing Targeted and Mass Marketing

A distinct characteristic of the cosmetics industry is the need to provide for various target markets. Manufacturers can toss up between providing different products to particular target markets, or to sell to mass marketing. In terms of supply chain logistics and profitability, there is no ‘right’ option.

Target markets focus vary from stocking consumer products to mass retailers, luxury products to department stores, beauty supplies to salons, and active cosmetics to dermatologists. This obviously creates the need for more rigorous supply chain management as these products need to be manufactured and marketed in different ways. In terms of inventory stock, supplying target markets may involve stocking from multiple supply chain facets, and therefore managing inventory stock is key to success.

On the other hand, supplying to a mass market has its own logistical issues. By supplying all retailers and stores (and even online shops) with the whole range of available products, marketing of products may become strategically easier, but manufacturing to meet demand could increase. The key to successfully operating in either marketing campaign is to understand the needs of the end customer and to work within their boundaries. The balance between satisfying customers and realising the limits of manufacturing and business size and scope is key to successful management. Sourcing appropriate supply chains and consolidating inventory to create an efficient manufacturing process will aid your marketing needs and keep inventory stock at a manageable level.

Sustainability, Packaging, and Storage

The buzzword floating around consumer-based industries is ‘sustainability’. This pressure to acknowledge global impact is attractive to consumers, who see this as a measure of brand integrity. By allowing transparency in your supply chain and manufacturing processes, the goal of sustainability will flow from product to corporate culture to customer satisfaction.

A key part of sustainable business practice is manufacturing more eco-friendly packaging. Packaging plays a big part in the cosmetics industry, providing the dual purpose of protecting the product and conveying product information to consumers. Opting for less packaging, as has been the case in other industries, cannot draw away from product individuality or marketing appeal. The push for innovative packaging and sustainable material usage can be an attractive trait for potential customers. This also offers advantages to the business by cutting costs through lighter weights and smaller package sizes, ultimately improving transportation economy. Finding a balance between individuality in product shape and size and providing cube standardisation for ease of transportation is important for maintaining ease of inventory stock management.

The storage of some cosmetic products is important for guaranteeing the life of the product. Perishable goods and refrigeration needs are crucial for some warehouses, and ensuring compliance for general health of products, hygiene of staff and supplies, and correct licensing to handle certain materials is a must. Some major cosmetic manufacturers employ on-site pharmacists to assist with these protocols, although for smaller companies this can be managed through efficient management schemes. The key is to maintain shelf presence and avoid excess inventory stock, which is best managed by consolidating efforts of marketing and production through clear communication. Avoiding wastage is crucial in this industry, with some products requiring specific disposal techniques which run at an extra cost. For this reason, managing stock and avoiding overstocking is important in maintaining a sustainable business.

Managing cosmetics supply chains is no easy task, with various product regulations and logistical obstacles to overcome. Finding a balance between manufacturing and marketing needs, choosing how to best target a market, and enabling sustainability for packaging and storage of product is key to efficient management in the supply chain. Focusing on these early decisions in the manufacturing process will enable easier success down the line and ultimately meet your customer demands.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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