Detailed Abstract on Cosmetics Logistics

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Global Cosmetics Industry

The cosmetics industry represents one of the most profitable and fast growing market segments in the United States in the past 50 years with cumulative sales of over $32 billion in 2005. The top players in the industry are L'Oreal followed by Procter & Gamble, Unilever, Shiseido, Johnson & Johnson, Avon, Revlon, Estee Lauder, Coty Inc, and Elizabeth Arden. The industry product categories are identified as cosmetics, hair care, skin care, sun care and perfume, which are developed, marketed and manufactured by powerhouses such as L'Oreal. The five trends affecting the logistics operations of the cosmetics industry are centralization of distribution, innovation in packaging, evolution of new distribution channels targeted at men, search for suppliers of organic ingredients and information technology. The trend of centralized distribution is visible mostly in Europe where companies are consolidating distribution centers and warehouses to achieve increased efficiency. Innovation in packaging has allowed for better tracking of shipments and reduction in waste. Men now represent an emerging market; cosmetics companies will need to explore new distribution channels to take advantage of this. A market trend towards organic products has affected the way large cosmetics companies are securing suppliers of necessary ingredients. Information technology contributes to overall accuracy of forecasts, inventory tracking and loss prevention on the retail level.

Centralization of Distribution
The trend of centralized distribution is visible mostly in Europe where companies are consolidating distribution centers and warehouses to achieve increased efficiency. While centralization is still in progress, slowly consolidating distribution centers results in a decrease in total physical inventory, a reduction in backorders, improved delivery reliability, improved stock availability, and the standardization of inventory procedures. These characteristics are extremely important to the cosmetics industry because it helps manage and control finished products. Decentralization is great for products that need customization and fast delivery, but the cosmetics industry does not put a lot of weight on these two characteristics because they are in a commodity market. Consolidating distribution centers also lead to cost-savings. In such a saturated market, this is a huge advantage (Rodriguez). The trend towards centralization in the cosmetics industry covers both managerial and operational needs, beginning with the delivery of the merchandise and their storage, and ending with the order execution and their delivery to the customers. The delivered merchandise comes from various plants abroad, suppliers, products returned by customers, third party warehouses, etc. When the merchandise arrive, and after they have been checked quantitatively and accepted, labels are printed with the ID's of the pallets and put on the products. Next, the bar code of the pallet labels are scanned by the terminal at the entrance, which update the IT system automatically in real time as far as the quantity, the lot, production date, and date of entry. At the same time, storage orders are created for the imported pallets. In order to receive the delivered merchandise and to place them on the shelves, the storage system uses routing algorithms, aimed at minimizing traveling time and the time needed for storage. This is determined by delivery dates of the orders to customers, urgent orders, local orders, and must take into account limitations such as available transportation, volume and weight of orders, etc. The consolidation of distribution centers allows for more control and management of products—this is highly valued in the cosmetics industry (Theodoropoulos).

Innovation in Packaging/Reduction in Waste

A growing trend in the cosmetics industry is cutting expenses to create more profit. A way to do this is to create efficiency in...
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