Free Paper Sample: L'Oreal SA Cosmetics Company - Supply Chain Management

Introduction

L'Oreal SA is one of the largest global cosmetics companies that deal with high-quality perfumes, hair care and skin products, and cosmetics. The company currently enjoys a global reach, with its market spreading to up to 150 countries. Some of the notable names under the L'Oreal banner include Garnier, Maybelline, Lancôme, Redken, and Matrix. L'Oreal SA traced its history from the late 19th century when chemists like Eugène Schueller began to formulate various hair dyes for women. The company then experienced rapid expansion through the first half of the 20th century. The preceding years were accompanied by intense investment in acquisitions, research, and development. Due to the immense expansion through the later years of existence, L'Oreal continued to invest heavily in supply chain and operations management. As of 2018, the company had won the Supply Chains to Admire award for an enviable fourth consecutive time. Such supply chain excellence has prompted researchers to investigate the cosmetics giant's strategies in an effort to study the scalability of such success in various production-based multinationals. The present writing shall intend to follow in the course of such analyses in learning the success of L'Oreal's supply chain network. The author hypothesizes that such success is built on continuous investment in digitized and highly networked operational systems that guarantee swift and timely communication and logistics through the supply and operations network.

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Competitive Strategy of the Company

Since the 1960s, L'Oréal SA has continued to foster strategic partnerships with a diverse array of industry players (Armstrong, 2020). As a result, the company has a massive network of conglomerates that push different brands in strategically placed regional markets. L'Oréal SA uses acquisitions and mergers to increase its asset base and supply chain as a competitive strategy. Furthermore, they get increased access to better production and communications resources through mergers. Recently, for instance, the company acquired ModiFace. This Augmented Reality and Artificial Intelligence entity proved to be a game-changer in revolutionizing beauty through technology. Since the acquisition of this transformative technological innovation by Professor Parham Aarabi, L'Oréal SA left their competition grappling for alternatives to the augmented reality invention. This strategic acquisition is the critical approach often used by L'Oréal SA to stay ahead of the competition. According to CEO Jean-Paul Agon, the company's model "has been (for 50 years) to buy a brand at an early stage because we think it can become a globally successful player" (Schulz, 2017).

Competitive Priorities

In addition to acquisitions and mergers, L'Oréal SA has set high-quality standards for all the brands they produce. It is, thus, unsurprising that the company is an Industry leader in cosmetics and body care. The intense focus on quality standards prompted the creation of a strong R&D department among all the conglomerate members. The immense concern for quality production has pushed the organization to develop a globally leading operations and supply chain network.

According to Awwad and colleagues (2013), quality, cost, flexibility, and delivery are the essential competitive priorities that firms need to consider closely while maintaining a competitive advantage over industry rivals. L'Oréal´s non-compromising concern for quality, flexibility, innovation, and delivery has continued to position it way ahead of close competition.

Order Winners and Order Qualifiers

L'Oréal´s key order qualifier is their focus on quality. The organization has set high standards of quality through its futuristic and product-focused corporate strategy. Besides, the company has positioned itself in the line of digitization and technocentrism. Their Order Winners include an intense focus on technological advancement and personalized beauty products. Furthermore, the organization has a reasonable and appropriate match between quality and price. While approaching their business from an international perspective, the company remains an attractive destination for diverse and globalized product offerings.

Supply Chain of L'Oreal Company

How the Supply Chain and Operations Design of L'Oreal Company Aligns With Its Strategy

L'Oreal operates through a highly complex operations design. Its business stretches across 150 countries globally, with over 150 distribution centers and eight channels (Armstrong, 2020). Through cutting-edge technology and continuous product innovation, L'Oreal has positioned itself as a highly reputable leader in the supply chain. Their technological focus on operations and supply has allowed them to automate the supply chain and practice e-commerce. The company thus has thousands of suppliers spread across the world. Collaborating the thousands of vendors in the supply chain is often enhanced by using an online automated system.

While the vendors are spread throughout the world, they may access the same information and "shared truths" through the E2Open (Armstrong, 2020). This collaborative portal allows for the sharing of forecasts and supply information to the cloud-sharing platform. Through the online sharing platform, the vendors often possess all the data from all L'Oreal factories. They may use such data in making an informed and timely purchase and supply decisions. One of the organization's top hierarchies exclaims that their "ambition is to have one global collaboration cloud for the entire L'Oreal" (Schulz, 2017). The vendors may organize their production and supply chain efficiently without falling into the temptation of trying to run the organization's supply chain for them. These supply vendors thus require proper training in adaptive systems and software.

Transportation/Distribution/Inventory Management

In 2017, L'Oreal developed an award-winning transportation partnership with less-than-truckload (LTL) partners Pitt Ohio Express and Averitt Express (Schulz, 2017). This partnership aimed at reducing transportation costs while providing carbon footprint management techniques and improving service delivery. SalonCentric (a company under the L'Oreal banner) collaborated closely with ecologists logistics departments, and economists to develop a highly appropriate and award-winning solution for logistics companies. The transportation and distribution solution is mainly intended to make the carriers an essential component of the logistics network (Rahn, 2017).

Such a highly efficient supply chain solution system points back to the organization's sharp focus on partnerships and acquisitions as a source of competitive and growth strengths (Rahn, 2017). The transportation and distribution system of the conglomerate is often viewed as a commodity. In this case, transport delivery aimed to return ecological and economic benefits to the social and environmental sectors. The human components of the logistics and inventory systems must be integrated fully into the organization's rest. This complete integration of the transporters to the store managers allows them to offer timely supply inquiries and purchases while remaining almost invisible in the store (Playe, 2011).

Manufacturing – MTO/MTS/ATO

The company manufactures over 85% of its products in-house (Playe, 2011). The firm recently restructured its manufacturing to streamline the production processes, enhance information sharing, and create a new technology framework for improving the manufacturing methodology. Such restructuring and visualization allowed the organization to increase processing capacity while improving the quality and reducing cost. Through a customer and product-oriented mission, the organization continues to innovate through people-focused change approaches.

L'Oreal currently has 42 manufacturing plants globally (Playe, 2011). Presently, the company has opened branches in India, China, and the wider Asian region. Mostly, though, the USA and Europe form the majority of L'Oreal's manufacturing. As already stated, the organization approaches manufacturing and distribution through its conglomerates and mergers. With quality as a central concern for all the brands, the organization sufficiently balances the Make-to-order (MTO) and Make-to-stock (MTS) approaches based on the clientele's needs. As they view beauty as personalized to diverse people's needs, the organization's manufacturing team must understand the specific demands. They must then custom-build the products for the required beauty standards (Playe, 2011).

Supply Chain Risks

Known-unknown: Political environments. Operating in diverse regions exposes the organization's supply chain to various extents of political and civil situations. As the company began to access the Chinese and Asian markets, it started to be exposed to more Eastern approaches to governments and politics. Such political differences between regions often shape the interests and behavior of individual and collective client units.

Unknown-Unknown: Climate Change. The current trends in climate change provide unidentified risks for the transportation and logistics sector. While L'Oreal attempts to explore online and virtual communication and logistics options, they still face the unforgiving consequences of changing nature.

Conclusion

L'Oreal has recently ranked the best company in supply chain and operational management. As this brief essay suggests, the organization has an active and futuristic R&D department that continues to determine strategic acquisitions and state-of-the-art technological advancement. The company's focus on futuristics positions it as techno-centric and highly innovative.

References

Armstrong, H. (2020, April 10). L'Oréal and suppliers collaborate in cloud-based Control Tower. Supply Chain Movement. https://www.supplychainmovement.com/loreal-and-suppliers-collaborate-in-cloud-based-control-tower/.

Awwad, A. S., Khattab, A. A. A., & Anchor, J. R. (2013). Competitive Priorities and Competitive Advantage in Jordanian Manufacturing. Journal of Service Science and Management, 06(01), 69–79. https://doi.org/10.4236/jssm.2013.61008

Playe , J. (2011). L`Oréal`s Manufacturing Makeover. Information Technology Planning, Implementation and IT Solutions for Business - News & Reviews - BaselineMag.com. https://www.baselinemag.com/c/a/Infrastructure/LOrals-Manufacturing-Makeover-190972.

Rahn, D. (2017). L'Oréal: A Gorgeous Supply Chain Makeover. Technology and Operations Management. https://digital.hbs.edu/platform-rctom/submission/loreal-a-gorgeous-supply-chain-makeover/.

Schulz, J. D. (2017, October). L'Oreal S.A. Creates Award Winning Transportation Solution with LTL Partners - Supply Chain 24/7. Supply Chain 24 7. https://www.supplychain247.com/article/loreal_creates_award_winning_transportation_solution_with_ltl_partners.