Supply Chain Restructuring: Analysis of Avon’s success story
Ajay P Appukuttan (3966744)
Table of Contents
Summary of Findings4
Implementation & Evaluation10
The success story of Avon, the company for women and world’s leading direct seller for beauty products starts with a decentralized operation in 6 countries in 1980s to a centralized operation hub that serves 145 countries through 5.8 million independent Sales representatives which makes the company provide same quality product worldwide. The core of this success lies in the brave transformation that Avon attempted to bring throughout its Supply Chain network by smaller supplier base, longer supplier partnerships, strategy of sourcing locally and supplier collaboration, which are going to save nearly $50 million annually. The company manufactures majority of its products in house, while nearly 15% of it happens at third party manufacturers (TPMs) situated at 39 countries across 5 continents. While beauty products which include cosmetics, toiletries and fragrances rounded upto 73% of its business, the balance attributed to jewelry, gift products, lingerie and fashion accessories.
Summary of Findings
SWOT analysis Avon:
* Avon is one of the leading companies in the manufacturing of the beauty and home products around the world. * They are the largest organization who deals in direct selling. * Their manufacturing units around the globe are the strength for them. * This is one of the companies who banned the animal testing on their product line. * Wide range of products of the company captivates the interest of the consumer. * Avon doesn’t only deals in the beauty products but they also are the manufacturer of the non-beauty items like jewelries, watches and apparels. Weaknesses:
* Avon advertising cost kept on increasing as in 2005 it was $249 million to $368 million in 2009 and 14 % more on in 2010. * Declining north America operations which leads them to reduced sales Opportunities:
* They have opportunity in growing markets like India, china. These are the countries with high populations. * They are improving effectiveness of the organization through restructuring. Threats:
* Very competitive environment as there are very competitors. * Competitors have strong advertising and distribution network. Avon’s network is based on serving customers over 145 countries in Europe, Africa, and Middle East. 1. History of the evolution of Avon Supply Chain network: Their supply chain can be described in two phases: First phases during the 80’s, Avon Europe was mainly based on 6 countries with independent supply chains operating in their own local market. However, starting the 1990’s, a new strategy to optimize the supply chain as an overall entity started to be discussed in order to modernize the image of the brand, and to increase the market size to other countries. However, this strategy couldn’t be implemented using the old method of independent supply chain networks; consequently Avon had to re-organize their supply chain in order to meet the fast growing market efficiently and effectively. 2. Challenges Faced with the old Supply chain strategy:
Using the initial strategy, Avon had separate supply chain networks independent in their suppliers, manufacturers, and customers. The network was built as independent businesses that were managed independently. Consequently, when Avon decided to expand on more markets, the idea of building an independent supply chain for every market seemed like difficult to implement this idea as it is very costy and inefficient. Another reason is that Avon is investing in a fast growing market of beauty products and direct sales, which is a high competitive market that needs fast response to orders and...
References: * Shoshanah Cohen & Joseph Roussel(2009), Strategic Supply Chain Management, Avon Profile: Calling on Customers Cost Effectively.
* Supplier Code of Conduct, Available at:www.Avon.com
* Corporate Responsibility Report, Available at: www.Avon.com
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