Table of Contents
Stages of Cosmetic Supply Chain.
Findings and Discussions.
3.1. Overview of Cosmetic Supply Chain Industry.
Multi-tier OEM chain.
3.3. Supply Chain Visibility.
Tracking Inventory Level
Responsiveness and Agility.
Utilization of Assets.
4.1. Blockchain Technology.
4.2. Radio Frequency Identification Technology (RFID)
RFID Update and Scanning Nodes.
The need for maintaining the supply chain visibility has been realised by the organisations with the consistent expansion of globalisation. This supply chain visibility will ensure that all the stakeholders directly or indirectly involved with the chain are properly informed. Considering the cosmetic supply chain which is a multi-tier in nature, there is a significance of the maintenance of accurate data about assigning unit values, sourcing, inventory, management of the product quotes and even the tracking of the supplies from the various suppliers. The maintenance of accurate data is considered to be of paramount importance because the raw materials used in the cosmetic industry are beyond measures.
The present report did an in-depth analysis of the obstructions faced by the cosmetic industry in terms of supply chain visibility and maintenance. The various methods to tackle this obstruction to get a transparent view of the supply chain has been discussed in the report along with the advantages and the obstacles. This will ensure the reader with a well-informed decision-making criterion for the new technologies and their adoption in the industry.
Often the customers are disappointed with the high price tag of the high-end makeup products of the cosmetic industry. This has led to the encouragement of many illegal cosmetic companies producing counterfeit products of the high-end makeup products affecting the brand value in the society (Bush, Bloch & Dawson 1989). The consumer is awestruck when they come across the various sites where the prices of the products are nearly half of the actual price of the authentic product (Zaichkowsky & Simpson 1996). Most of the time it is an impact of unconscious choice made by the customer too good to be a true price to purchase (Nill & Shultz, 1996). These fake cosmetic products have now reached the mainstream social media platforms including Instagram, Facebook, even shopping sites like Amazon and eBay.
An authentic legitimate product provides confidence to the customer over the achievement of certain standards which is not guaranteed in a counterfeit product (ABC Action News, 2013). In the words of City of London Police Det Sgt Kevin Ives, “saving money can lead consumers ending up with products which can cause serious burns and you also are supporting global criminal illegal networks” (ITV News, 2018). Several researches have also suggested that the manufacturing of the counterfeit products have dangerous, bad quality and allergy-causing elements with them. As per CNN, 2018, Animal waste as well as human waste with various dreadful bacteria have been found in these fake makeup products. The heavy metals used in the manufacturing of these fake products include arsenic Mercury and lead which can trigger health issues like infertility, high blood pressure and even can lead to cancer if regularly used (Good Morning Britain, 2015).
Verifying the authenticity of the cosmetic can be performed with various tools but takes a longer time. There is an urgent need for the development of understanding in the cosmetic industry over the active involvement of the government and legal bodies in the elimination of fake cosmetic companies. (Stumpf 2017).
There are various issues encountered by cosmetic brands for supply chain stability and sharing of common information with stakeholders. Various researchers have also studied that to improve the effectiveness concerning data storing and data sharing, the significance of supply chain visibility is incomparable. As per Williams et al. 2013, the link between the responsiveness and sharing app information, social factors of the supply chain, is inefficient.
As far as this report is concerned, the major focus is on the inefficiencies in supply chain working considerably the post supply and internal supply chain procedure to ensure the wiping of the counterfeit products-based markets. Another significant aspect of the report is concerning supply chain visibility and its role in the cosmetic industry. Resolution of the issues in the internal supply chain is inefficient and proper attention is to be paid to the post supply chain by achieving the supply chain visibility. The involvement of the management of demand planning, customer feedback, inventory, risk assessments and achieving sustainability is an integral part of supply chain which must be clear and coherent with the assistance of the process of supply chain visibility (Busse et al. 2017). The role of the supply chain manager is to resolve the issues for the supply chain where end to end visibility should be ensured so that the stakeholders are aware of the risk that would be likely to influence the supply chain (Williams et al. 2013). The luxury cosmetic companies, in particular, need to put extra efforts for minimising the impact of counterfeit in the market with the maintenance of clean visibility in the supply chain as it is affecting brand reputation.
As provided in the above chain, it is crucial to maintain transparency and traceability at every level to ensure the exact quality standards for stakeholders involved. Suppose there is a cosmetic product- X with no track record maintained. When such product meets the customer through a retailer, there is no evidence of genuineness of product. Maintaining a data in such order that all the stakeholders involved in the supply chain could have proper access to the minute details, likely to explain the whole processing and reaching of the product to the final customers, will ensure a better methodology with trust and ease to scrutinize the authenticity of the product. Therefore, maintenance of the account of the various codes assigned to each product and uploading the same on a common platform where the data are to be shared will provide the product transparency and discrepancy will provide evidence of counterfeit. With the use of RFID (Radio Frequency Identification) and BlockChain coding system, counterfeited can be monitored and traced in the internal supply chain.
The tracking and perseverance of the details of the product are focused on reaching the customer providing trust over the authenticity of product. The present report will progress describing the various methods of cosmetic product protecting the supply chain system with the use of RFID and blockchain to resolve the majority of the transparency issues in supply chain. The present paper also explains the use of technology effectively to overcome the obstacles of supply chain visibility, traceability and cosmetic counterfeits. Overall, this report will progress to focus on the effective implementation of the visibility in the cosmetic supply chain to improve all the process of cosmetic supply chain.
The present report has gathered the research data from the secondary sources such as journals, research papers, newspaper article and news reports and their methodology to improve different sectors of supply chain. The detailed study of research papers has concluded that supply chain visibility is that aspect where the organisations are facing challenges to achieve. The maintenance of supply chain visibility is highly suggested as the organisations are capable of identifying the risk factors and management to successfully resolved the same (Busse et al. 2016). Visibility can assist the organisations to increase the production planning process and improve the delivery performances with the help of the accurate data of their inventory levels (Somapa et al. 2017). The in-depth study of the sources and enabled to provide a report with recommendations for supply chain visibility for the issues encountered by the cosmetic supply chain.
The supply chain network is a collaboration of various process which involve entities like the creation of a product to ensure the accessibility of the right customers on the product (Sople 2012). The various tiers involved in a cosmetic company with the multi-tier supply chain has been shown in the given below image. The parent company which is responsible for manufacturing the final product with the dependence on Tier 1 suppliers for their raw materials is referred to as OEM (Original Equipment Manufacturers). Other suppliers are associated with the Tier 1 suppliers to provide the raw materials to manufacture the products.
Most of the cosmetic companies are following multi-tier OEM (Deloitte 2018) which leads to bringing challenges in developing visibility throughout the supply chain. The OEM has the role to ensure that the factors like the type and quantity of raw materials required, labels, suppliers and packaging materials which will be providing the sources in need.
Multi-tier OEM chain
The maintenance of supply chain visibility considering all the tires for the ethical sourcing is significant as the cosmetic companies are heavily dependent for the manufacturing of their products on external sourcing of chemicals. The quality of raw materials in different tiers is dependently detecting any discrepancy and the resolution of the same. Less supply chain risk will occur if there is a smooth flow of assistance between the tires.
The accession of the cosmetic industry must be based on the risks that are likely to affect them (Vtorushina et al 2017). Every department of the cosmetic industry is occupied with challenges. The understanding of the seriousness of business challenges and the corresponding appropriate measures are significant to ensure the maintenance of high standards in the market.
The most critical process in inventory management which can produce desired outcome of supply chain are planning of inventory and controlling it (Jones & Riley 1985). For the achievement of meeting the demand and supply of stocks, the study of fluctuations in demand for the previous years is considered to understand the sudden rise in the demands (Bailey and Helms 2007). The starting level of planning of the inventory for a new product is significant for predicting future success which is unknown (Boone, Craighead & Hanna 2008). The unified inventory is the centre of focus here as it enables accurate data of the inventory persisting in the entire supply chain which in consequence help in avoiding the extensive ordering (Harrison 2016). Thus, it is clear that visibility of supply chain has a prominent role to understand where the inventory lies (Busse et al. 2017) and the effect of using the inventory and the appropriate management of the same.
To achieve customer satisfaction and enhancement of the consumer demand, the step of progression to ensure transparency in supply chain and traceability is crucial for the industry (Sustainability: How Cosmetic company is Greening Up 2014). Prioritising health and safety, significance of environment and animal welfare are observed to be attractive feature for the female customers (Pudarut, Juwaheer & Seewoo 2013). The ethical practices focus on every process of the supply chain. Getting the desired product also involves the significance of health and safety along with maintenance of gender equalities in the companies. The companies with social and environmental commitments are found to have 88% of consumers showing loyalty with them (Anonymous, Global Cosmetic Industry 2017).
Counterfeiting is the process of misleading consumers with imitation of original products (Sari, Soediro & Rochman 2018). There has been a significant rise in the number of fraudsters dealing in beauty products which have been found to affect the health of the consumers resulting in damage to the brand image to a great extent. (McKeon 2015). The brand image and popularity of brand is used by these illegal companies producing fake products to sell their products (Nill and Shultz, 1996). Proper imitation of the brand products and selling with a lower price can lead to a shift of consumers to fake brands from the authentic brand (Zaichkowsy and Simpson, 1996). This leads to strengthening the market of counterfeit as there is an inclination of the consumers with incapability of purchasing high priced authentic products with their low incomes (Bush, Bloch, & Dawson 1989). The enhancement of technology and globalisation has led to access to all the minute details of a product leading to the counterfeits with ease and access.
The formation of a strong supply chain relationships is ensured by the visibility in supply chain and therefore involves the interaction of the sharing information with all the stakeholders of the supply chain (Caridi, Moretto, Perego & Tumino 2014). Sharing market data and availability of the same on the accurate time with all the stakeholders is also the part of the process. There are conflicts among the researchers over the recommendation of the significance of the role of demand and supply in the enhancement of potential and flexibility (William et al, 2013). The visibility of sharing of data for scheduling, supplier data, demand planning and pricing of the products may lead to sharing of accurate data resulting in better function of the supply chain (Somapa, Cools & Dullaert 2018). The advantages of the supply chain visibility for cosmetic industry are provided below.
Tracking Inventory Level
Inventory management is the best way to achieve the desired goals while ensuring that the demands of the customers are met. In the consideration of effective supply chain management, it is significant to trace the accurate amount of stock straight from supplier to manufacturer and ultimately warehouse (Wei & Wang 2010). The maintenance of such data is far more complex and interpretation can lead to production risk and disruption of the supply chain. The regular follow-up of stocks at each stage can assist in the maintenance of the transparency of the manufactured products. Such data allows the stakeholders to receive real-time data of existing stocks that ultimately help in avoiding any difference (Wei & Wang 2010). Greater returns and positive results are expected by achieving smooth processing of the supply chains (Ader 2016).
Responsiveness and Agility
There are many fluctuations in the market situation concerning consumer demand and expenses and are volatile as well with the rapid changes in globalisation. Attaining agile supply chains is significant to ensure that it does not affect mass production (Williams et al. 2013). Agility is basically about organisation's ability to ensure overcome from the demand fluctuations. The maintenance of data is also included to ensure quick resolution and replacement in case of any disparity. Organisations can achieve more agile supply chains with the sharing of information regarding the upstream and downstream partners with all the stakeholders in the supply chain (Syntetos et al. 2016). Supply chain visibility can be very supportive of the organisation in the cosmetic industries as the more complex supply chain with different departments.
Utilization of Assets
Saving of production cost and avoiding downtime of production can be ensured with the asset management. Consider the less transparency in the supply chain, there can be direct impact on production growth and capacity utilisation owing to the asset utilisation. Managers will be able to make informed decisions regarding the transportation of the goods produced if they are aware of the assets such as vehicles, pallets and the containers (Busse 2017). With the tracking of the current assets, the supply chain visibility can assure better decisions and no claims of economic losses. Is also impactful when different departments of a wide variety of common assets and require better understanding of use without conflict of requirements (Boile & Sdoukopoulos 2014).
Considering a complex supply chain, for example the cosmetic industry, the stakeholders will require to be well informed internally with the flow of information to avoid last-minute accountability issues. The probability of errors is more likely to encountered than accountability with such complex supply chain structure (Webster 2015). The various stakeholders will be blamed on arising of any problem because of lack of accountability. The supply chain visibility can allow to identify the accurate root cause and avoid any future deviations with no interruption in supply chain. In this way, minimum time will be spent on finding out what went wrong and who is accountable instead of finding corrective actions to eliminate them (Supplychain 2017).
The impact of lack of supply chain transparency on various areas of the supply chain is discussed in the above section. The below recommendation will be addressing these issues.
The concept of maintainig of tamper-proof ledger to disseminate one common reliable flow of data within the whole supply chain and can be shared with all the stakeholders is called blockchain technology (Chow 2018). The maintenance of all the inflow and outflow of data with this technology leads to formation of a unique digital token number for a product (Kristoffer & David 2018).
A ledger of the token numbers is maintained by the blockchain technology which is assigned to all the products and details at each step in the supply chain. Further, these blocks are spread to individual computers that are accessible by the authorised member of the supply chain (Underwood 2016). A smartphone application can be developed to help the consumers verify the token provided to the product with this technology This application will check the genuineness of the product and will ensure the worth of the price paid by the consumer and avoiding fatal health problems.
The decentralisation of this technology leads to providing notification to all the stakeholders of the chain to make sure that they are aware of the changes that are being made (Pauka 2017). This provides transparency and enable the stakeholders to be aware of all the minute data details of the supply chain. The ways in which blockchain can surpass the transparency issues in the cosmetic supply chain are mentioned below.
Product Journey using Blockchain
The maintenance of tokens and allocating them to different milestones in the supply chain enables it to be easier to track because most of the cosmetic supply chains have a straight flow of goods (Francisco & Swanson 2018). Since the customer is the most important stakeholder, the need to verify the product is authentic when it reaches the consumer. The consumers can reach traceability with the information provided about the data which gives an account of the source raw materials used to manufacture the products (Francisco & Swanson 2018). The different notes of the blockchain where the authentic data is stored serve as an authentication certificate for the clients to believe in the brand and the product with the access of such information from each node without a centralised server for tracking (Alzahrani & Bulusu 2019).
Thus, this technology allows traceability within the supply chain for stakeholders as well as the customer. According to my recommendation, the data of the journey of product can be stored in a code to be shared with the customer to facilitate the process of customer engagement. This code can we track my customer through a mobile app that is accessible only to authorise code holder. This will build the reputation and trust of customer with the brand.
It is important to edit the data as the technology make the stakeholders more concerned of the data as every other stakeholder have access to the data and queries over the data can be raised (Pauka 2017). Thus, while generation of the purchasing orders to maintain inventory stock, a surplus of order can be avoided.
With end-to-end visibility, stakeholders while tracing can access all the necessary point of data. Large amount of data can be stored without affecting the accuracy of the chain. The quantity of the assets and their quantities can be accessible for the authorized stakeholders on a common platform when assets are considered (Nofer et al. 2017). Hence, it simplifies the accounting that shares information on the accounting details and the transaction data of suppliers.
RFID Update and Scanning Nodes
The process of marking a product with a distinctive code or number that can be scanned to provide details of the products with the help of software is termed as RFID. When such data is entered into the system, the code is assigned to the respective genuine data (Muller 2011). As provided in the above image, each note is a sign with a reader in the supply chain. This node reading the unique code automatically update the data at the node. In this way, there is constantly updated data at each stage of the supply chain enabling the easy track of product journey. The RFID allows the updating of real-time data which assist the downstream and the upstream supply chain. (Jun’e, Xiaocui, & Bingwu 2010). The advantages of using RFID technology in the maintenance of supply chain visibility are mentioned below.
In distinguishing the fake products from the authentic, RFID is most reliable and convincing technologies (Gong et al. 2016). RFID activates tags when they are attached to the products in a supply chain. The RFID contains the details of process journey of product that can be tracked with an RFID reading code resulting in a genuine story. (Bu & Li 2018). Since the information labelled on the product is unique and scanners are also designed to be read it, the making of fake replicas of such product becomes impossible.
Along with the storage of journey details, RFID also maintains data concerning its financial details, compositions and sourcing roots. When access from unauthorised host, such data will enable well-informed decisions later regarding the up-gradation of the product. Competitive advantages can be achieved by organising the process according to the details of the product. (Leung et al. 2014).
The increasing complexity of the supply chain due to the globalisation suggest the utmost importance to ensure transparency and easy data flow across the chain. Supply chain visibility will be helping the organisation accessing data in a more agile and flexible way to avoid anomalies. Several authors in invariance research identify the importance of visibility in improving supply chain accuracy (Caridi et al. 2014). Researches have been conducted to understand the relationship between the supplier and buyer information exchange, which is advantages (Williams et al. 2013). This has proven to be extremely beneficial for the end results as the cosmetic supply chains need to concentrate more on agility and flexibility. The engagement of stakeholders in the supply chain with the supply chain visibility will remove the barriers between the stakeholders and the necessary data will be accessible allowing them to be aware of the updates (Scott 2015).
While blockchain and RFID implementation have advantages, some disadvantages have also been identified. If we assume large amount of data are stored on the ledger common to access, updating large amount of data will take longer time (McCabe 2017). If an existing tag conflicts with another tag, the information obtained can be inaccurate and sometime unreadable (Yang et al. 2010). When perceived as the big picture, RFID and blockchain have far-reaching benefits with proper implementation helping the organisation reap maximum benefits than limitations (Deloitte 2018). Therefore, the implementation of such technology is recommended to address issues of supply chain transparency.
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