Online Exclusive: From Concept to Consumer and Back

The supply chain plays a critical role in creating value for the consumer.

Frank Murphy

By Frank Murphy, The Estée Lauder Companies

In today’s world, the path to successfully creating value for the consumer is blazed by the supply chain. This is a tough paradigm shift for beauty and fashion sectors where, historically, creative departments led the way.

Consumers used to look to an industry oracle who declared the next "must-have" trend. That has changed. Today, consumers expect purveyors of cosmetics and fragrances to deliver what they, the consumer, see as “becoming hip and desirable.” Companies are looking directly to the consumer–who has taken full ownership of determining the direction of these trends.

Today’s consumer also expects to have “the in thing” now and at a good price. Responding to these heightened demands of the modern consumer absolutely requires a fully realized supply chain.

To be a world class supply chain practitioner, you need to be able to consistently beat the competition to market with the latest trend and not by retaining a stable of design oracles. You need to do it with high-tech customer/consumer relations management (CRM), otherwise known as the leading edge of a fully realized supply chain.

At its highest level, supply chain is a tool to manage business’s three fundamental flows: Product, Cash, and most importantly, Information.

The information flow starts with CRM. CRM utilizes a suite of data collection tools on the retail floor. They fluidly transmit hard sales data to sales and marketing, and more importantly they provide consumers’ “retail buzz” to design teams.

This “retail buzz” data is quickly viewed in CAD/CAM software by teams of design, product and logistics engineers who continuously recommend product introductions (40,000 annually). Project management software then streams these recommendations to production and procurement specialists who quickly deliver cost and capacity estimates.

Approved products are loaded up into manufacturing/inventory controls systems which stream capacity reservations and raw material requirements to subcontractors via supplier relations management (SRM) software.

Supply chain addresses the consumers’ desire for “new” and “now” with CRM in not only retail stores but online environments. The supply chain meets online consumers via a web portal (i.e. a brand's home page). Value is created by posting an enjoyable online experience and ease of order placement. Additionally, CRM software is embedded to automatically harvest, solicit and store consumer data. This data is aggregated into field performance by SKU, product family demographics and individual consumer profiles.

CRM can also be used for interactive "up selling." For example:

“Enhance the body and sheen of your shampoo selection with the silky fullness from its companion conditioner.”

Additionally, CRM can be exploited for market research:

“We value your opinion of our products. Please take a moment to complete our survey.”

Supply Chain addresses the consumers’ demand for value by evaluating all processes through the prism of "value added." If a product or service does not add value for the consumer, it is then reengineered or eliminated.

In the beauty and fashion industry, this can present hardships on the creative end. Supply chain, however, demands that all participants break out of departmental silos and collaborate across all disciplines to define and deliver “consumer value.”

For instance, if market research indicates fragrance in a spherical bottle accented with multi-colored swirling graphics is a highly valued innovation by consumers, then packaging and manufacturing need to deliver a cost to sustain the margin and provide a product that not only is at an attractive price point to the consumer, but returns a profit directly to the company associated.

If logistics indicates costs to the consumer can be reduced by packing in standard shippers, than products need to be designed to accommodate.

Both of these examples lead to negotiating between internal partners, but the ultimate decisions will be guided by the insights derived by consumer information and CRM to deliver “consumer value.” Once the decision is made, all functional groups within the supply chain will collaborate to deliver.

This spirit of trust and collaboration is extended to suppliers and subcontractors and managed by state-of-the-art IT systems. This extended supply chain responds to deliver with relentless elimination of non-value added time, process and material. This integrated supply chain yields the trend desired by the consumer at a price point that communicates value.

Frank Murphy, CPIM and CSCP, is a 28-year operations veteran of The Estée Lauder Companies. He is currently in Supplier Support, and managing implementation SAP Portal for Subcontracting. He is an Executive Board Member of APICS – Northern New Jersey Chapter.