l'oreal supply chain case study

Technology and Operations Management

Mba student perspectives.

• Assignments
• Assignment: RC TOM Challenge 2017

L’Oréal: A Gorgeous Supply Chain Makeover

L’Oréal, the world's largest cosmetics company, is a global leader in operational innovation and digitalization to serve their ever-evolving fashion customers worldwide.

L’Oréal, the world’s largest cosmetics company[1], remains an acclaimed winner on the annual Gartner’s Top 25 Supply Chains[2] ranking and a global leader in embracing operational innovation and digitalization. What you may ask, is the secret sauce to this beauty company’s story of supply chain success?

Understanding the Basics

L’Oréal’s operations are highly complex – with business across 140 countries, 150+ distribution centers, 42 factories, 34 brands, and 8 distribution channels (including hair salons, mass-market retailers, department stores, drugstores, e-commence, etc.)[3]. L’Oréal’s growth strategy requires a commitment to new product innovation (up to 50% of products refresh annually[4]) focused on new and emerging markets, expansion across e-commerce channels, and widened diversity of distribution. These unique challenges, present L’Oréal’s supply chain leaders with the need for great agility and adaptability to serve their ever-evolving customers worldwide. Leading industry transformation, L’Oréal has invested in cutting-edge technology solutions and supply chain automation.

Progress Through the Years

In 2014 Emmanuel Plazol, L’Oréal’s head of supply chain, told press “our current approach of segmenting by distribution channel needed to evolve”[5]. Therefore, L’Oréal re-designed supply chain capabilities and implemented a world-class integrated information system that provided collaborative compilation of volume forecasts across sales, marketing, supply chain, and finance teams, which were then shared worldwide with their factory and distribution centers[6].

The results[5], improved sales forecast accuracy rate of 60% to 71%, while logistics costs decreased, and shipments increased 40%+ over five years from 2009 to 2014. Intended to improve order precision and responsiveness across the supply chain, even L’Oréal customers at shelf noticed the more efficient stock management[7] and in 2016 retailer’s saw improved customer service levels by more than 2%, while holding inventory constant[4].

Emmanuel Plazol said, “We thought the transformation would come only if our supply chain was close to the markets and customers, and was end-to-end. And for this to happen our supply chain had to cover from the customer to the factories”[5].

Pathways to Just Digital Future

Beyond inventory management, L’Oréal has felt the significant operational impact of e-commerce and “change in order profiles” says Erik Rodriguez, director of supply chain for L’Oréal Americas. “The sheer volume of orders has increased, but the lines per order has decreased. Additionally, there’s pressure from our retail customers to reduce our lead times and improve our delivery times because they are running leaner inventories”[8].

To meet the needs of the dynamic market, L’Oréal leverages automation like robotics and slotting software to mechanize their distribution centers globally[8]. By implementing these new solutions, L’Oréal has stayed competitive in order fulfillment speed, reduced labor cost, continuous quality improvement, and meeting the surges during demand peaks. Now, what’s ahead for L’Oréal supply chain innovation?

Strategy Recommendations

Without a doubt, L’Oréal will continue to feel the pressure from the competitive landscape. L’Oréal’s 5%+ annual growth rate has caught the attention of small independent make-up labels piling into the market, noted in The New York Times[9]. Their supply chain transformation and digitalization most empower the company’s success!

As a power-house marketing company, L’Oréal must put the customers need at the center of their supply chain strategy. They must observe, analyze, and predict consumer trends so they can quickly monetize the beauty industry’s impulsiveness and spontaneity. I recommend:

1. L’Oréal should use scarcity to their advantage! If L’Oréal approached each product line as a test-and-learn model, for instance, launching only twenty thousand units of the exclusive Gigi Hadid Maybelline Mascara in USA Target stores; they could predict sales forecasts by region, consumer target, color palette, etc. before launching globally. This fast-fashion apparel business model[10] applied to the beauty industry means less inventory, more collections, and greater flexibility to react to the changing tastes of fashion consumers.

2. L’Oréal should improve their direct-to-consumer sales channel! Today, L’Oréal across its 34 brands, relies on the majority of sales to come from department stores, mass-market retailers, and drugstores. L’Oréal’s predominant e-commerce strategy has been sending consumers from their websites to Amazon.com, Walmart.com, or Target.com to purchase online – but as a result L’Oréal forfeits control of the consumer experience, potential of higher margin, and strategic data analytics. L’Oréal should make strides for a best-in-class e-commerce and omnichannel user experience, driving direct online sales for a stronger customer relationship and better data insights.

3. L’Oréal should build localized, entrepreneurial capabilities! The simple fact is Chinese beauty consumers demand something very different than Americans. L’Oréal must react to regional differences in consumer preferences, while using the same foundational supply chain capabilities. I believe, segmented innovation and regional agility must be at the core of L’Oréal’s organizational culture. Therefore, L’Oréal must build a supply chain for smaller production runs, quicker leadtimes, and more volatile demand cycles for localized market needs.

Key Outstanding Question

How do you manage costs and margins against the chase for customization, speed, and flexibility in L’Oréal’s global supply chain?

(Word Count 798)

[1] “L’Oréal – Statistics & Facts.” Statista Inc., The Statistics Portal, www.statista.com/topics/1544/loreal/. [2] “Gartner Announces Rankings of the 2017 Supply Chain Top 25.” The Supply Chain Top 25, Gartner, Inc., 25 May 2017, www.gartner.com/newsroom/id/3728919. [3] “L’Oréal Key Figures.” L’Oréal Group, www.loreal.com/group/our-activities/key-figures. [4] “The 2016 Supply Chain Top 25: Lessons from Leaders.” Supply Chain 24/7, 19 Sept. 2016, www.supplychain247.com/article/the_2016_supply_chain_top_25_lessons_from_leaders. [5] Marle, Gavin Van. “L’Oréal Completes Five-Year Supply Chain Transformation – ‘Because We’re Worth It’”. The Loadstar, 9 Oct. 2014, theloadstar.co.uk/loreal-supply-chain-transformation/. [6] “Improving Supply Chain Efficiency.” L’Oréal Group, www.loreal-finance.com/en/annual-report-2015/supply-chain. [7] “L’Oréal’s Supply Chain Make-Over.” PYMNTS, 15 Sept. 2014, www.pymnts.com/in-depth/2014/loreals-supply-chain-make-over/. [8] Trebilcock, Bob. “L’Oréal: To Automate or Not to Automate.” Supply Chain 24/7, 6 Oct. 2016, www.supplychain247.com/article/loreal_to_automate_or_not_to_automate/forte_industries. [9] “Luxury Cosmetics and Chinese Demand Drive Sales Bounce at L’Oréal.” The New York Times, 2 Nov. 2017, www.nytimes.com/reuters/2017/11/02/business/02reuters-loreal-results.html. [10] “Zara’s ‘Fast Fashion’ Business Model.” The Wharton School, The University of Pennsylvania, 18 Feb. 2016, kwhs.wharton.upenn.edu/2016/02/zaras-fast-fashion-business-model/.

Student comments on L’Oréal: A Gorgeous Supply Chain Makeover

This is great Darrin! Profitability and customer promise are usually trade-offs, especially in the short term!

I believe the giant beauty conglomerate L’Oréal is losing certain share to the small premium personal care brands boosted by digitization, such as Dollar Shave Club. To regain its share, as you wrote, L’Oréal must put consumer at the center of its supply chain strategy. Meanwhile, they must continue to invest on innovation and R&D. They must invest on building eCommerce as well – benefits include hugely valuable consumer data and higher margin. All these investments might hurt bottom-line in the short term, but it will bring sustainable growth in the long term, which L’Oréal must be able to convince its shareholders, bring them on board and ask for their patience. But this will be challenging undoubtedly.

Thanks for your write-up Darrin!

You touch on the core issue facing many of the traditional businesses, especially CPG companies. I looked up all of L’Oreal’s brands and was amazed at the breadth and diversity, from Giorgio Armani to Kiehl’s. I think the question is how to best position its suite of brands to face digitization. We saw in the Kiehl’s case that their online website provided the company with detailed information on its customers and allowed the company to better service them and earn a higher margin. Can this direct-to-consumer model also be achieved across the rest of the suite of products? Should it be?

When looking at planned scarcity, I am little doubtful that it can be done at the parent company level. I think it may work at the individual brand level and would require the buy-in of the brands’ management teams. I think L’Oreal needs to be careful that any marketing plan fits the vision and spirit of the brand. Additionally, I think that every brand may have different inventory days with the example of a high-end luxury retailer like Giorgio Armani vs. Kiehl’s.

To me, there are two things happening here. First is the impact of digitization on back-end operations. L’Oreal must leverage digital solutions to continually improve their supply chains. Based on the transformations you highlight (world-class information systems, automation in distribution centers, etc.), they are already making big investments here to stay competitive.

The second impact of digitization is more complex: the impact on consumer behavior and demand-side dynamics. Your strategic recommendations focus entirely on this second point, and rightly so. In today’s world, large incumbents like L’Oreal have to be two steps ahead to compete with tech-based, D2C small premium players like Dollar Shave Club, as Zoe mentions.

I’m not sure how I feel about the scarcity tactic. I agree with the prior comment, that this would need to be considered at the brand-level, as it best fits for higher-end brands but might isolate or frustrate core consumers of lower-end brands that should be focused on reliability and accessibility.

To your second suggestion – the importance of direct-to-consumer sales is paramount, I completely agree. There is enormous potential for margin capture, and more importantly, brand loyalty. Currently only a handful of their brands sell D2C on individual websites [1]. I wonder if there is potential for them to leverage the broader portfolio to create a single platform offering a differentiated customer experience and perhaps loyalty benefits, though. As you stated it, their mission should be to create “a stronger customer relationship.”

[1] https://consumergoods.com/loreal-grows-direct-consumer-channel )

Thanks for the article, Darrin! As its supply digitizes, L’Oréal seems to be facing a core tension around the large-scale implications of a digital supply chain and the small-scale implications of region-specific consumer demand. While L’Oréal has successfully used robotics and slotting software in global distribution centers, it seems challenging to apply these while also increasing the number of SKUs to account for different consumer demands. To some extent, L’Oréal might be motivated to train customers worldwide to have as similar tastes as much as possible, in order to reap the full benefits of digitization for its supply chain.

L’Oréal seems likely to face similar tensions as they develop their direct-to-consumer sales channels. Because their portfolio of brands runs the gamut from extreme luxury to a shampoo I can buy for ten dollars at CVS, they need to be wary of over-affiliating brands that should be kept segmenting. While they should certainly try to own the online consumer experience rather than sending customers to Amazon.com or Walmart.com, they will need to make sure to keep each brand experience individual and unique.

Very thoughtful arguments, Darrin. Thank you. I read it having little familiarity with L’Oreal or the broader cosmetics industry; please contextualize my comments as such.

There were two main points that struck me in your essay and in the comments it inspired. First, I very much agree with you, Zoe, and Lisa on the importance of investing in online direct-to-consumer sales. I appreciate Sarah’s caution about the danger of brand conflation, but I wonder if L’Oreal can mitigate that by investing in a basic e-commerce back-end template that allows them to have distinct consumer-facing experiences across all of their brand websites. Vox Media comes to mind; while not in the e-commerce space, they have basically adopted this approach to managing their complex, varied online footprint. Regardless of the specific solution, I do not think L’Oreal can afford to cede so much value to Amazon and others.

Second, I agree with Sarah’s instincts as they relate to increasing SKUs to accommodate regional tastes. I worry about complicating an improving supply chain system, and I wonder if we can achieve the same ends (happy, satisfied customers) by different means. Is L’Oreal’s brand strong enough that marketing could drive demand towards more consistent choices across geographies? I suspect the answer varies by brand; different brands might have different customer promises and, therefore, different pressures to customize regionally.

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An Insight Into Loreal Supply Chain Strategy

In this blog post, you can gain insights into Loreal supply chain strategy and the broader dynamics that shape the cosmetics industry’s supply chain landscape.

In the fast-paced world of cosmetics and beauty, where trends evolve as quickly as the seasons, an efficient and effective supply chain strategy is nothing short of essential. Among the global giants of this industry, L’Oréal stands out not only for its iconic products but also for its meticulously crafted supply chain strategy. So, let’s begin our exploration of Loreal supply chain strategy, uncovering the methodologies and principles that keep the beauty flowing, shelves stocked, and customers delighted.

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This blog post delves into the inner workings of L’Oréal’s supply chain, uncovering the strategies and practices that have enabled the company to maintain its position at the forefront of the beauty industry.

Table of Contents

The Crucial Role of Supply Chain Strategy

In the cosmetics industry, where trends can emerge and fade in a matter of weeks, having the right products available at the right time is paramount. A robust supply chain strategy is what enables companies like L’Oréal to synchronize their operations, from sourcing raw materials to delivering finished products. By doing so, they can respond swiftly to market demands, minimize waste, optimize costs, and ensure customer satisfaction.

Evolution of Loreal Supply Chain

The journey of L’Oréal’s supply chain strategy is a testament to the company’s adaptability, innovation, and commitment to staying ahead in the dynamic world of cosmetics and beauty. From its humble beginnings to its current global prominence, L’Oréal’s supply chain has evolved significantly, shaped by industry trends, technological advancements, and changing consumer preferences.

Early Days: Building the Foundation

In its early years, L’Oréal’s supply chain was characterized by traditional processes that focused primarily on manufacturing and distribution efficiency. The company’s growth was driven by its dedication to product quality and an expanding product line. During this phase, supply chain management was relatively more straightforward, focusing on meeting local demand.

Shift to Globalization: Scaling Up Operations

As L’Oréal expanded its reach beyond its home market in France, its supply chain strategy had to adapt to the challenges of global operations. The company’s expansion into new regions required efficient cross-border logistics, localized manufacturing, and streamlined distribution networks. L’Oréal began establishing a more extensive supplier base, diversifying sourcing to ensure a stable supply of raw materials.

Technology and Innovation: Transforming Operations

The turn of the millennium marked a significant shift in L’Oréal’s supply chain strategy by integrating technology and data-driven practices. Advanced supply chain management systems, predictive analytics, and digital platforms were adopted to enhance demand forecasting accuracy, optimize inventory levels, and improve production planning. This transition allowed L’Oréal to respond rapidly to market shifts and consumer preferences, reducing lead times and enhancing product availability.

Customer-Centric Approach: Personalization and Agility

As consumer preferences evolved towards personalization and customization, L’Oréal adapted its supply chain to cater to these demands. The company introduced flexible manufacturing processes allowing smaller production runs and quicker product launches. This agility enabled L’Oréal to respond to emerging trends swiftly, ensuring its products remained relevant and desirable in a competitive market.

Sustainability and Ethical Practices: Supply Chain Responsibility

In recent years, L’Oréal has strongly emphasized sustainability and ethical practices throughout its supply chain. This shift reflects a broader industry trend towards environmentally conscious consumerism. L’Oréal implemented measures to source responsibly, reduce waste, and minimize the environmental impact of its operations. These initiatives align with consumer values and contribute to cost savings and long-term viability.

The Present and Beyond: Continuous Innovation

L’Oréal’s supply chain evolution is driven by the company’s commitment to staying at the forefront of the beauty industry. Integrating artificial intelligence, machine learning, and advanced analytics continues to refine demand forecasting, optimize production processes, and enhance logistics efficiency. Additionally, L’Oréal’s focus on digital engagement and e-commerce necessitates agile supply chain solutions to meet the demands of online retail.

L’Oréal’s supply chain evolution reflects its ability to adapt, innovate, and align with changing market dynamics. From its early days of local manufacturing to its present-day global and tech-integrated operations, L’Oréal’s supply chain strategy is a blueprint for success in the cosmetics industry. By embracing globalization, technology, sustainability, and customer-centricity, L’Oréal continues to create a seamless and efficient supply chain that drives its success as a global beauty powerhouse.

Core Components of Loreal Supply Chain Strategy

L’Oréal’s remarkable success in the cosmetics industry can be attributed, in part, to its meticulously designed supply chain strategy. The company’s ability to consistently deliver high-quality products to a global customer base is underpinned by several core components that work in harmony to ensure efficiency, agility, and customer satisfaction.

1. Demand Forecasting and Planning

Its sophisticated demand forecasting and planning process is at the heart of L’Oréal’s supply chain strategy. The company utilizes advanced analytics and historical data to predict consumer trends and demand patterns. This allows L’Oréal to adjust production levels and inventory management strategies to meet anticipated market needs. By accurately forecasting demand, L’Oréal minimizes the risk of overstocking or understocking products, optimizing resource allocation and reducing costs.

2. Inventory Management

L’Oréal’s commitment to lean inventory practices helps balance maintaining product availability and reducing excess stock. Through real-time visibility into inventory levels across its distribution network, the company ensures that products are available when and where customers need them. Efficient inventory management also helps L’Oréal respond promptly to changing market demands and new product launches.

3. Manufacturing and Production

L’Oréal’s production process is characterized by flexibility and innovation. The company employs agile manufacturing techniques to adjust production volumes and introduce new product variations quickly. This flexibility is crucial in an industry where trends shift rapidly, allowing L’Oréal to keep its product portfolio relevant and precisely meet consumer preferences.

4. Distribution and Logistics

L’Oréal’s extensive distribution network spans the globe, and its logistics operations are finely tuned to ensure timely and accurate deliveries. The company leverages data analytics and technology to optimize routes, minimize transportation costs, and reduce delivery times. L’Oréal’s distribution centers are strategically located to serve different regions efficiently, enabling the company to reach its customers promptly while minimizing its carbon footprint.

5. Customer-Centric Approach

Understanding that consumers are at the heart of its success, L’Oréal employs a customer-centric approach throughout its supply chain. The company’s demand-driven strategy ensures that products are available when and where customers want them. L’Oréal’s focus on personalization and customization aligns with changing consumer preferences for unique and tailored beauty solutions.

6. Innovation and Technology Integration

L’Oréal embraces technological advancements to enhance its supply chain operations. From utilizing artificial intelligence for demand forecasting to implementing Internet of Things (IoT) sensors for real-time inventory tracking, the company integrates cutting-edge technologies to optimize efficiency and accuracy in its supply chain processes.

7. Sustainability and Ethical Practices

A hallmark of L’Oréal’s supply chain strategy is its dedication to sustainability and ethical practices. The company’s commitment to responsible sourcing, environmentally friendly packaging , and reduced waste aligns with consumer expectations for conscious consumption. This contributes to L’Oréal’s brand image and resonates with an increasingly eco-conscious customer base.

L’Oréal’s supply chain strategy is a harmonious fusion of diverse components that work cohesively to ensure product availability, responsiveness, and sustainability. By leveraging demand forecasting, efficient inventory management, agile manufacturing, robust distribution, customer-centric practices, technology integration, and ethical principles, L’Oréal has cultivated a supply chain that is a model for success in the cosmetics industry. This holistic approach has allowed the company to meet market demands consistently, stay ahead of trends, and deliver on its promise of beauty to millions worldwide.

Challenges and Future Outlook for Loreal Supply Chain Strategy

While L’Oréal has successfully developed a sophisticated and efficient supply chain strategy, it is not immune to the challenges and disruptions that can impact any global business. Looking ahead, the company must continue to innovate and adapt to address emerging trends and overcome potential obstacles in the ever-evolving cosmetics industry.

Challenges in the Changing Landscape

• Rapidly Shifting Consumer Preferences:  Consumer preferences in the beauty industry can change in the blink of an eye. Keeping up with these trends and ensuring that the supply chain is agile enough to respond swiftly is a significant challenge.
•   Sustainability Pressures:  As sustainability becomes increasingly important to consumers, L’Oréal’s supply chain must evolve to incorporate eco-friendly practices, responsible sourcing, and reduced environmental impact.
•   E-commerce Expansion:  The rise of e-commerce demands different supply chain capabilities, including efficient last-mile delivery and optimized online shopping experiences. Adapting to this digital landscape requires ongoing adjustments.
•   Global Uncertainties:  Geopolitical factors, trade regulations, and economic shifts can impact supply chain dynamics. L’Oréal must navigate these uncertainties to maintain a stable and efficient supply chain.
•   Supply Chain Disruptions :  Natural disasters, pandemics, and other unforeseen events can disrupt supply chains. Building resilience to such disruptions through contingency planning is essential.

Future Outlook and Strategies

• Digitalization and Technology Integration: L’Oréal’s future supply chain strategy will likely involve integrating emerging technologies like blockchain for transparent sourcing and IoT for real-time tracking. This will enhance supply chain visibility and decision-making.
• Personalization and Customization: As personalization continues to be a trend, L’Oréal might explore further customization options, requiring more flexible and responsive supply chain processes.
• Sustainability as a Driver: The company’s commitment to sustainability will drive innovative practices such as using recyclable materials, reducing waste, and exploring carbon-neutral transportation options.
• Data-Driven Insights: L’Oréal can leverage big data and analytics for more accurate demand forecasting, helping to optimize inventory levels, reduce costs, and meet consumer demands more effectively.
• Collaboration and Supplier Relationships: Strengthening collaboration with suppliers and partners can lead to better risk management, cost optimization, and innovative ideas for improving supply chain efficiency.
• Resilience Building: L’Oréal will likely invest in building a more resilient supply chain, with backup suppliers, diversified sourcing, and contingency plans to mitigate disruptions.

Loreal supply chain strategy has come a long way, driven by innovation, technology, and a commitment to excellence. However, the future landscape will bring both opportunities and challenges. By staying attuned to changing consumer behaviors, embracing technological advancements, prioritizing sustainability, and cultivating a proactive approach to challenges, L’Oréal is poised to continue its legacy as a global beauty leader. Through ongoing evolution and adaptation, the company can ensure its supply chain remains a cornerstone of its success in the ever-evolving cosmetics industry.

DFreight: Revolutionizing Shipping and Supply Chain Management for the Cosmetics Industry

Imagine a world where shipping cosmetics is as effortless as applying your favorite shade of lipstick. Enter DFreight, the trailblazer turning this vision into reality by infusing innovation into the heart of shipping and supply chain management within the dazzling cosmetics industry.

With brilliance, DFreight’s digital platform and mobile app have unraveled the complexities that often shadow the shipment of cosmetics. Like a makeup artist’s expert touch, DFreight’s technological finesse ensures real-time tracking that’s more precise than a cat-eye flick and document management as seamless as blending foundation.

Fragile as a glass perfume bottle, cosmetics demand exceptional care during transit—here, DFreight’s expertise truly shines, guaranteeing that each product glides through its journey with the grace it deserves.

From adhering to stringent regulations with the swiftness of a precision eyeliner application to catering to the ever-changing whims of the cosmetics market with the agility of a shimmering eyeshadow palette, DFreight has transformed shipping into an art form, enhancing supply chain visibility with every step.

With DFreight, cosmetics businesses receive logistical solutions and a partner that understands the vibrancy, fragility, and time sensitivity that defines the beauty world.

In a world where beauty is an ever-evolving canvas, L’Oréal has mastered the art and redefined the strokes. Through an insightful exploration of L’Oréal’s supply chain strategy, we’ve uncovered the harmonious symphony of innovation, sustainability, customer-centricity, and technological integration that drives the company’s success.

As we conclude this journey, it’s evident that L’Oréal’s supply chain strategy isn’t just about products; it’s a masterpiece carefully crafted to capture hearts, mirror trends, and exceed expectations in an industry where every shade, scent, and texture matters, L’Oréal stands as a beacon, guiding us through the remarkable intersection of cosmetics and supply chain brilliance.

How does L’Oréal manage its global supply chain network?

L’Oréal balances central oversight with regional autonomy, maintaining quality standards while adapting to local market dynamics.

What role does technology play in Loreal supply chain strategy?

Technology, including AI and data analytics, enhances demand forecasting, production planning, and real-time tracking.

How does L’Oréal ensure product availability through its supply chain?

L’Oréal uses advanced analytics to forecast demand and manage inventory, ensuring products are available globally.

How does L’Oréal address disruptions in its supply chain?

L’Oréal has a comprehensive risk management strategy to address disruptions, including alternative sourcing options, diversified suppliers, and contingency plans for unforeseen events like natural disasters or geopolitical changes.

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L’Oréal Italy: Customer-focused makeover

• Call for Change
• When Tech Meets Human Ingenuity
• A Valuable Difference
• Meet the Team
• Related Capabilities

Call for change

Customers were already making ever-greater demands on the consumer-packaged goods (CPG) supply chain, then the pandemic struck, placing CPG companies under unprecedented pressure. In the wake of this disruption, many companies sought to make supply chains more agile to better serve retailers based on business priorities.

Similarly, the cosmetics company, L’Oréal Italy, wanted to reimagine and digitally enable its supply chain to be more customer focused. Smooth, streamlined processes that deliver the right product to the right customer at the right time would differentiate L’Oréal Italy in the market and contribute to growth.

In particular, the order-to-cash cycle is an important area of the supply chain to get right since it influences the quality of the customer relationship. Order-to-cash encompasses all customer interface processes, from retailer orders to financial reconciliation. Small hiccups with orders, for instance, can have an outsized effect on customer satisfaction. For this reason, L’Oréal Italy targeted order-to-cash for transformation.

Four product divisions carried out order-to-cash according to different methods. Each division used its own criteria to segment retail customers, meaning that several divisions might prioritize the same retailer differently, leading to multiple service levels and experiences, with different points of contact. In addition, different processes across divisions meant the company couldn’t exploit order processing and automation synergies or approve customer orders efficiently.

L’Oréal Italy sought assistance in cutting through the complexity. It needed new processes to transform the order-to-cash cycle and help employees make decisions in a systematic fashion rather than rely on specific employee experiences.

"The customer segmentation and process harmonization work Accenture performed is critical to our broader order-to-cash program at L’Oréal." — PIERO GAMBINO , Country Operations Director – L’Oréal

When tech meets human ingenuity

L’Oréal Italy teamed with Accenture to transform order-to-cash processes across its Consumer Products, Luxury, Active Cosmetics and Professional Products divisions. To kick off the strategic program, we helped the team develop clearer strategic guidelines across divisions and support customer collaboration. At the same time, we assessed order-to-cash processes across divisions, identifying pain points such as uncoordinated cross-functional communication workflows and disconnected processes for approving customer orders. To enrich our insights, we also used a process mining tool.

We created a new customer segmentation framework that aligned divisions across key retailer interaction areas, such as commercial, demand generation, supply chain collaboration, and customer administration and communications. We combined information like credit disputes, shipping points and payments, for instance, to create a holistic view of the retail customer. This enables L’Oréal Italy to better understand and coherently categorize its loyal and priority retail customers.

The new customer framework provides a view into each division, as well as across divisions, and serves as the foundation for process harmonization. The framework was helpful to identify areas of process improvement and interventions across divisions. The team also identified opportunities where innovative new technologies like robotic process automation (RPA), descriptive and predictive analytics, AI, and machine learning could enhance efficiency and mitigate risk.

A valuable difference

The new customer framework helps L’Oréal Italy serve retailers at mutually agreed levels to enhance the customer experience. It also provides a stronger base to build a service catalog for each segment and customer-specific service plans.

Better customer understanding and more precise retailer segmentation means L’Oréal Italy can take a proactive approach with customers to foster greater collaboration on projects and services like customized retailer promotions. In addition, employees can work more strategically by offering higher levels of service to high-priority customers by providing different service catalogues.

The program also helped identify other areas where each division could improve process harmonization and simplification. As a result, L’Oréal Italy now has 20 potential initiatives it can work on to improve operational efficiencies.

Thanks to the program, employees can better align and coordinate activities across functions—like supply chain or administration—and divisions to provide consistent service. For instance, improved alignment means that employees in different departments won’t waste time duplicating activities for the same customer.

With a more customer-centric approach, the company can align people and resources to bring the right products and services to the right retail customers at the right time. The harmonized order-to-cash processes are also helping to drive strategic investments in new, targeted services.

Meet the team

Luigi D’Alonzo

Antonio Milano

Related capabilities, supply chain & operations.

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L'ORÉAL: THE BEAUTY OF SUPPLY CHAIN DIGITALIZATION

By: Richard Markoff, Ralf W. Seifert

L'Oréal, the world leader in beauty products, began to rethink its vision for the industry. The world was on the cusp of a digital future full of possibilities. For a company known for its…

• Length: 16 page(s)
• Publication Date: Dec 8, 2021
• Discipline: Strategy
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L'Oréal, the world leader in beauty products, began to rethink its vision for the industry. The world was on the cusp of a digital future full of possibilities. For a company known for its consumer-pleasing beauty products and owner of some the world's most iconic brands, this meant thinking about innovation in a different way. It would no longer mean only providing the best products but also continuously adapting the industry to market needs. Through a combination of goal setting, training and communication, the digital transformation began, first with efforts in marketing, sales and consumer outreach, but supply chain quickly moved to a prominent role in helping address questions about how digitalization would affect the company's products and consumer expectations. Starting with a vision of the CEO, Jean-Paul Agon, the company found itself on a journey to challenge its culture, its approach and even what its value proposition was. Along the way, the supply chain became a force for bringing together the different functions of a large, complex organization to identify and implement new business models in the digital age that cut to the heart of the company's operations.

Learning Objectives

• Illustrate an effective, successful digital transformation and link this to Industry

4.0/supply chain digitalization capabilities by focusing on L'Oréal's success.

• Examine the challenges of supply chain digitalization, the role of senior leadership in agenda setting, global digital governance, linking the supply chain digital strategy to the company-wide digital strategy, planning for scale from pilot to deployment, and the external/internal development choice.

Dec 8, 2021

Discipline:

Geographies:

Industries:

Retail and consumer goods

IM1189-PDF-ENG

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• América Latina
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France, Europe – Score, A

With a commitment to ‘zero-deforestation’ by 2020, L’Oréal already sources 100% of its palm oil derivatives from sources certified by the Roundtable on Sustainable Palm Oil. The company worked with external stakeholders to design a tool – Sustainable Palm Oil and Traceability (SPOT) – to evaluate the environmental and social performance of all its products. In addition, L’Oréal uses the Global Forest Watch Tool to identify risks further down its supply chain, such as palm oil mills’ commitments to zero-deforestation. These programs and tools have helped L’Oréal reduce risks associated with deforestation, allowing it to map its supply chain and trace back 91% of raw materials to the refinery level and 74% to the palm oil mills level. By supporting 500 smallholder farmers in Sabah, Malaysia, L’Oréal has increased its availability of certified sustainable palm oil, helping to future-proof the business.