Flevy Management Insights Case Study
Supply Chain Resilience Strategy for Cosmetics Manufacturer in Asia


Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Supply Chain Resilience to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, KPIs, best practices, and other tools developed from past client work. We followed this management consulting approach for this case study.

TLDR A top Asian cosmetics manufacturer tackled supply chain issues, including rising costs and declining delivery rates. By leveraging advanced analytics and strategic supplier partnerships, they reduced supply chain costs by 15% and improved on-time delivery to 95%. This underscores the value of Digital Transformation and Strategic Planning for supply chain resilience.

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Consider this scenario: A leading cosmetics manufacturer in Asia is currently facing challenges in maintaining supply chain resilience amidst volatile market conditions.

The organization has observed a 20% increase in supply chain costs and a 15% decrease in on-time delivery rates over the past year, attributed to both internal inefficiencies and external supply chain disruptions. The primary strategic objective of the company is to enhance its supply chain resilience to ensure consistent product availability and competitive cost structure.



The organization under review appears to be experiencing significant strain on its supply chain operations, likely due to a combination of outdated processes and the impact of global supply chain disruptions. A deeper analysis might reveal that the lack of digitalization and reliance on manual processes in the supply chain are primary contributors to its current challenges. Moreover, the organization's limited visibility into its supplier network could be exacerbating the situation, hindering its ability to anticipate and mitigate risks effectively.

Industry Analysis

The cosmetics industry is highly competitive and rapidly evolving, with consumer preferences shifting towards sustainable and ethically sourced products. In response to these market dynamics, companies are increasingly focusing on supply chain agility and resilience.

Exploring the competitive forces reveals:

  • Internal Rivalry: High, due to the presence of numerous global and local brands competing for market share.
  • Supplier Power: Moderate, with a trend towards increased power as raw material suppliers consolidate.
  • Buyer Power: High, as consumers have access to a wide range of products and are becoming more price-sensitive and demanding in terms of product quality and sustainability.
  • Threat of New Entrants: Moderate, due to significant brand loyalty but offset by low barriers to entry in online marketplaces.
  • Threat of Substitutes: Low to moderate, with the main substitutes being homemade or natural alternatives.

Emergent trends include an increased focus on sustainability, digital marketing, and e-commerce. These shifts are causing major changes in industry dynamics, presenting both opportunities and risks:

  • Increased demand for sustainable and ethically sourced products, offering opportunities for differentiation but requiring more complex supply chain management.
  • Growth in e-commerce, necessitating investments in digital capabilities and logistics but reducing reliance on traditional retail channels.
  • The rise of influencer marketing, creating opportunities for brand visibility but also risks associated with brand reputation.

A PESTLE analysis indicates that regulatory pressures for sustainability, technological advancements in production and distribution, and evolving social attitudes towards beauty and wellness are significantly impacting the industry.

For a deeper analysis, take a look at these Industry Analysis best practices:

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4 Actions Framework (30-slide PowerPoint deck)
View additional Supply Chain Resilience best practices

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Internal Assessment

The organization boasts a strong brand reputation and a loyal customer base but struggles with outdated supply chain processes and a lack of digital integration. Its strengths lie in product innovation and market knowledge, yet operational inefficiencies and a fragmented supplier network present critical weaknesses.

A MOST Analysis reveals misalignment between the organization's mission to lead in innovation and its strategies for supply chain management, highlighting a need for strategic realignment towards digital transformation and supplier collaboration.

An in-depth analysis indicates that the company's product development and marketing capabilities are strong, but supply chain resilience and digital capabilities lag behind, suggesting prioritization of investments in these areas.

A Digital Transformation Analysis underscores the urgency to adopt advanced analytics and IoT technologies to gain real-time visibility into the supply chain, enhance decision-making, and improve supplier collaboration and risk management.

Strategic Initiatives

  • Enhance Digital Supply Chain Capabilities: Implement advanced analytics and IoT technologies to improve visibility, efficiency, and agility in the supply chain. This initiative aims to reduce supply chain costs by 15% and improve on-time delivery rates to 95% within 18 months. The source of value creation lies in operational efficiencies and improved risk management. This will require investment in technology infrastructure and training for supply chain personnel.
  • Develop Strategic Supplier Partnerships: Establish collaborative partnerships with key suppliers to ensure reliable and ethical sourcing of raw materials. The goal is to enhance supply chain resilience and sustainability, potentially reducing sourcing risks by 20%. Value creation stems from improved supplier reliability and sustainability practices. Resources needed include dedicated teams for supplier relationship management and sustainability assessment.
  • Optimize Inventory Management: Adopt a demand-driven inventory management approach using predictive analytics to better match supply with demand fluctuations. This aims to reduce excess inventory by 30% and cut stockouts by 50%. The initiative will create value through reduced inventory costs and improved customer satisfaction. It will require investments in predictive analytics tools and training for inventory management teams.

Supply Chain Resilience Implementation KPIs

KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.


What gets measured gets managed.
     – Peter Drucker

  • Supply Chain Cost Reduction: A key metric to measure the financial impact of enhanced digital capabilities and process optimizations.
  • On-time Delivery Rate: An indicator of supply chain efficiency and customer satisfaction.
  • Supplier Sustainability Score: Measures the ethical and environmental performance of suppliers, reflecting progress towards sustainability goals.
  • Inventory Turnover Ratio: Tracks improvements in inventory management and demand forecasting accuracy.

These KPIs will provide insights into the effectiveness of the strategic initiatives in enhancing supply chain resilience, operational efficiency, and sustainability. Tracking these metrics will enable timely adjustments to strategies and tactics, ensuring alignment with the organization’s overall strategic objectives.

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Stakeholder Management

Successful implementation of the strategic initiatives depends on the active support and involvement of both internal teams and external partners. Key stakeholders include supply chain management, product development, marketing, suppliers, and technology partners.

  • Supply Chain Management Team: Responsible for implementing supply chain improvements and digital transformation initiatives.
  • Product Development Team: Key in aligning product innovation with supply chain capabilities.
  • Marketing Team: Essential for communicating sustainability efforts and product availability to customers.
  • Suppliers: Critical partners in achieving sustainability and resilience goals.
  • Technology Partners: Providers of digital and analytics solutions necessary for supply chain optimization.
Stakeholder GroupsRACI
Supply Chain Management Team
Product Development Team
Marketing Team
Suppliers
Technology Partners

We've only identified the primary stakeholder groups above. There are also participants and groups involved for various activities in each of the strategic initiatives.

Learn more about Stakeholder Management Change Management Focus Interviewing Workshops Supplier Management

Supply Chain Resilience Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Supply Chain Resilience. These resources below were developed by management consulting firms and Supply Chain Resilience subject matter experts.

Supply Chain Resilience Deliverables

These are a selection of deliverables across all the strategic initiatives.

  • Supply Chain Digital Transformation Roadmap (PPT)
  • Strategic Supplier Partnership Framework (PPT)
  • Inventory Optimization Plan (PPT)
  • Supply Chain Resilience Impact Model (Excel)

Explore more Supply Chain Resilience deliverables

Enhancing Digital Supply Chain Capabilities

The initiative to enhance digital supply chain capabilities was underpinned by the application of the Value Chain Analysis and the Resource-Based View (RBV) framework. Value Chain Analysis, originally proposed by Michael Porter, was instrumental in dissecting the organization's activities into primary and support functions to identify areas for digital enhancement. This framework provided a clear structure for analyzing the supply chain processes and determining where digital technologies could add the most value. Similarly, the Resource-Based View was utilized to assess the company's internal capabilities and resources, focusing on how digital technologies could be leveraged to build a competitive advantage in the supply chain.

Following the principles of these frameworks, the organization:

  • Conducted a comprehensive Value Chain Analysis to map out all supply chain activities, from inbound logistics to after-sales services, identifying key areas where digital technologies could reduce costs, improve efficiency, or enhance customer value.
  • Assessed existing resources and capabilities in line with the Resource-Based View, pinpointing digital skills, technological infrastructure, and organizational knowledge as key areas for development.
  • Implemented targeted digital solutions, such as IoT for real-time tracking of goods and advanced analytics for demand forecasting, based on the insights gained from the Value Chain Analysis and RBV assessment.

The application of these frameworks led to significant improvements in supply chain performance. The organization achieved a 15% reduction in supply chain costs and increased on-time delivery rates to 95%. By focusing on areas of the value chain that offered the highest return on digital investments and aligning these enhancements with the company's unique resources and capabilities, the initiative not only improved operational efficiency but also positioned the company for sustained competitive advantage in the digital era.

Developing Strategic Supplier Partnerships

For the strategic initiative of developing strategic supplier partnerships, the organization employed the Stakeholder Theory and the VRIO Framework. Stakeholder Theory was pivotal in recognizing and prioritizing the relationships with suppliers as key stakeholders in the supply chain ecosystem. This perspective helped the company to identify mutual goals and build partnerships based on shared values and objectives. The VRIO Framework, on the other hand, was applied to evaluate the organization's resources and capabilities in managing these relationships, ensuring that the partnerships could be a source of sustained competitive advantage.

In implementing these frameworks, the organization took the following steps:

  • Utilized Stakeholder Theory to map out all supplier relationships, categorizing them based on their impact on supply chain resilience and sustainability goals.
  • Applied the VRIO Framework to assess the company’s capabilities in supplier management, focusing on the value, rarity, imitability, and organization of these relationships.
  • Developed and executed partnership agreements with key suppliers that included clauses for sustainability practices, ethical sourcing, and joint innovation projects, ensuring these partnerships were aligned with the company’s strategic objectives.

The strategic focus on supplier partnerships, guided by Stakeholder Theory and the VRIO Framework, resulted in a 20% reduction in sourcing risks and established a more resilient and sustainable supply chain. These partnerships not only secured the supply of critical raw materials but also fostered innovation and shared commitment to ethical practices, enhancing the company's brand reputation and competitive positioning.

Optimizing Inventory Management

The initiative to optimize inventory management was significantly supported by the application of the Theory of Constraints (TOC) and the Just-In-Time (JIT) methodology. The Theory of Constraints provided a systematic approach to identify and manage the most critical bottlenecks within the supply chain that were affecting inventory levels and flow. This framework was crucial for pinpointing areas where inventory could be reduced without impacting customer satisfaction. The Just-In-Time methodology complemented this by focusing on reducing waste and improving efficiency through the timely procurement and production of goods.

Through the application of these methodologies, the organization:

  • Identified the primary constraints in the supply chain that led to excess inventory and stockouts, using the Theory of Constraints.
  • Implemented Just-In-Time procurement and production practices to minimize inventory levels while ensuring the availability of products to meet customer demand.
  • Adopted a demand-driven planning approach, leveraging advanced analytics for more accurate demand forecasting, thereby aligning inventory levels more closely with actual market demand.

The combined use of the Theory of Constraints and Just-In-Time methodology led to a 30% reduction in excess inventory and a 50% decrease in stockouts. By focusing on the critical constraints within the supply chain and adopting JIT principles, the organization was able to streamline inventory management processes, reduce waste, and improve operational efficiency, contributing to enhanced customer satisfaction and financial performance.

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Key Findings and Results

Here is a summary of the key results of this case study:

  • Reduced supply chain costs by 15% through the implementation of advanced analytics and IoT technologies.
  • Improved on-time delivery rates to 95% by enhancing digital supply chain capabilities.
  • Achieved a 20% reduction in sourcing risks via the development of strategic supplier partnerships.
  • Decreased excess inventory by 30% and cut stockouts by 50% through optimizing inventory management.
  • Established a more resilient and sustainable supply chain, fostering innovation and shared commitment to ethical practices with suppliers.

The strategic initiatives undertaken by the organization have yielded significant improvements across key areas of the supply chain, demonstrating the effectiveness of the adopted frameworks and methodologies. The 15% reduction in supply chain costs and the achievement of a 95% on-time delivery rate are particularly noteworthy, as they directly contribute to enhanced operational efficiency and customer satisfaction. However, while the development of strategic supplier partnerships has led to a commendable 20% reduction in sourcing risks, the real-world complexities of managing such relationships may present ongoing challenges that were not fully anticipated. Furthermore, the impressive reductions in excess inventory and stockouts underscore the benefits of the Theory of Constraints and Just-In-Time methodology, but the sustainability of these improvements in the face of fluctuating market demands warrants continuous monitoring. An alternative strategy that could have further enhanced outcomes might include a more robust integration of customer feedback mechanisms to align product development and supply chain strategies more closely with market needs.

Given the successes and challenges observed, the recommended next steps include a deeper integration of customer insights into supply chain planning to ensure responsiveness to market changes. Additionally, it would be prudent to invest in advanced risk management tools and training to better prepare for and mitigate the complexities of global supply chain disruptions. Strengthening the digital infrastructure to support these initiatives will be crucial. Finally, ongoing evaluation and adjustment of supplier partnerships, with a focus on flexibility, innovation, and shared sustainability goals, will ensure these relationships continue to provide competitive advantage and resilience against future challenges.

Source: Supply Chain Resilience Strategy for Cosmetics Manufacturer in Asia, Flevy Management Insights, 2024

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