L'oreal's Acd Supply Chain Puzzle

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L’Oreal’s ACD supply chain puzzle

Case study analysis report

Le Ba An Binh – s3654515 | BUSM 4532 – Business Operations Management | May 20th 2018

Word-count: 3,121

1. Introduction

L’Oreal’s Active Cosmetics Division (ACD) is one of the four personal care divisions of L’Oreal S.A, the world’s largest cosmetic company. This division offers brands of products which are suitable for sensitive skin or dermatological conditions.

This report presents the findings of analysis conducted for L’Oreal’s ACD focusing on the degrading service level problem that the division encountered in the last two years. It will start with a thorough situation analysis of L’Oreal’s ACD, followed by problem identification and solution generation using the Double Diamond Design Thinking framework. The generated solutions will then be run through the Desirability, Viability and Feasibility sieves to yield the final recommendation to improve the situation at L’Oreal’s ACD.  

1. Assessment Method

Since “L’Oreal’s ACD’s supply chain puzzle” was a complex business problem that involved many processes and people, Design Thinking method was employed.

Design Thinking is a human-centered methodology that yields a more empathetic view of the situation and thus is able to provide solution that add real and practical value to the system and its users. One popular Design Thinking framework is the Double Diamond (Design Council, 2005) framework that maps the problem-solving process into 04 phases: Discover, Define, Develop and Deliver in which the first two Ds focus on problem identification and prioritization while the last two Ds facilitate the solution generation and shortlisting. Each pair involves two different types of thinking: divergent and convergent. The first type of thinking is about thinking broadly, considering anything and everything with an open mind. Convergent thinking, on the other hand, helps to bring back the focus and to define one or two key areas to proceed further.

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Table 01: Double Diamond framework - Design Thinking (Design Council, 2005)

This report will follow these phases closely in the following sections.

1. Situation Analysis

In the Discover phase of the Double Diamond framework, this report will start by looking at L’Oreal’s ACD as a whole, reviewing both internal and external factors of the system through a SWOT analysis. It will then move along L’Oreal’s ACD supply chain to find all potential problems.

1. SWOT analysis

As the abbreviation of SWOT stands for, the SWOT analysis is a tool to provide an overview of the Strength, Weakness, Opportunity, and Threat of an organization. The Weakness and Threat session of the SWOT analysis will help giving more context for further identification of problems.

Details of the SWOT analysis is listed in table 06 in the appendix. Key highlights from the SWOT analysis are below.

It was obviously the strength of L’Oreal’s ACD to have a decent portfolio of brands and products that accepted and distributed in more than 20 countries world-wide. Moreover, the division was able to meet customer’s needs and usage occasions via its 2,300 SKUs list through its two key distribution channels. On top of these, the French origin and its famous water source also helped L’Oreal’s ACD’s business.

These strengths, at the same time, put pressure on L’Oreal’s ACD’s supply chain. In order to leverage its water source, the production had to be centralized in France and finished goods had to be shipped to local markets. Yet, the current supply chain structure and way of working could not yet cope with this complication as evidenced in human error when consolidating the global demand plan or when inputting the launch time of a specific market.  

There were also mis-alignment between different functions within L’Oreal’s ACD as well as discontent between the factory and its key supplier. This resulted in changes in production plan in the last minutes which directly affected the volume delivered to each country and, in turn, the sale performance of that country for not having enough stock to sell.

All of these will be explored further in the next section in which each function together with its related stakeholders will be carefully assessed.

1. IDENTIFICATION OF ISSUES AND PROBLEMS

Many empathy interviews were conducted with key people in all departments of the L’Oreal’s ACD supply chain and suppliers. Various issues and problems were detected. They are all listed in the table below. This also concludes the Discover phase of the Double Diamond Design Thinking framework.

Table 02: Initial issue & problem identification