Optimising Supply Chains in the Cosmetic Industry: 6 Big Challenges and Solutions

The global cosmetics industry is growing rapidly. In 2022, its global market size reached a staggering 429.2 billion US dollars. It’s expected to grow even further, at a CAGR of 7.1% between 2023 and 2032, and reach 864.6 billion US dollars by 2032. Though these numbers may present great opportunities for new and upcoming cosmetic companies, the industry isn’t without its growth-hampering challenges.

This blog will explore the top 6 supply chain challenges the cosmetic industry faces and effective strategies to mitigate them. 

Navigating Material Shortages in Cosmetic Supply Chains

As the name suggests, material shortages in the cosmetic supply chain mean a lack of key raw ingredients required to produce cosmetic products. These include pigments, packaging components, oil, extracts, and more. Disruptions in regions from where you source your raw materials, climate change, geopolitical issues, and high demand exceeding production capacity are the primary reasons for raw material shortages. These shortages can lead to potential delays in manufacturing, increased prices, and product unavailability for your consumers.

Extreme weather events can also damage crops and disrupt production in regions that are dependent on specific botanicals. Logistics issues like port congestion, labour shortages, and transportation delays can also hinder the movement of raw materials. Customers are emphasising the importance of sustainability, which can lead to limited availability of some eco-friendly materials. 

Here are some materials that are impacted the most:

• Essential oils due to geographical constraints.
• Botanical extracts, including sunflower oil, aloe vera, jojoba oil, etc., due to limited cultivation areas and weather conditions.
• Natural or synthetic pigments or colourants due to production limitations or regulatory issues.
• Packaging materials due to fluctuations in prices of raw materials and manufacturing capacity.

So, how do raw material shortages impact the cosmetic industry? Let’s find out how.

• Cosmetic brands usually end up increasing prices to compensate for higher costs of raw materials.
• It might be difficult for your customers to find cosmetic items in retail stores.
• It may even impact your customer’s perception of your brand, damaging your reputation and impacting loyalty.
• You may face innovation challenges, where you have to adapt product formulas to use readily available ingredients. 

Solutions

Here are some effective ways to mitigate these challenges:

• Instead of relying on just one source, make sure you source raw materials from multiple regions and suppliers.
• Stock your key ingredients strategically. This will act as a buffer when the cosmetic industry experiences supply chain issues that lead to raw material shortages.
• Build strong relationships with suppliers. Collaborating with them on production planning can be very beneficial for your business.
• Research alternative ingredients or even sustainable sourcing options.

Managing Seasonal Peaks and Unpredictable Demand

You must have faced difficulty accurately forecasting how much of a particular cosmetic product your customers will want to buy at any given time in the future. This is referred to as unpredictable demand, and it is often quite challenging for cosmetic companies to effectively manage their inventory levels and production schedules throughout the supply chain.

Factors Causing Unpredictable Demand

Several factors contribute to unpredictable demand in the cosmetics industry, including rapidly changing trends, seasonal fluctuations, influencer marketing, special events, and more. Let’s explore these factors in detail.

• Latest Trends: Some products may see a sudden surge in demand, as cosmetic trends can change quickly due to a number of factors, including celebrity endorsements, social media, and fashion cycles.
• Seasonal Peaks: The demand for certain cosmetic products may significantly increase during specific seasons or holidays, like Christmas. 
• Influencer Marketing: When social media influencers promote a particular product or brand to their followers, it can greatly impact market demand and spike sales. 
• Product Innovation: When a new product launches in the market, it can have varying reactions and consumer acceptance levels, making it even more difficult to predict sales volume in the initial phases. 
• Limited-Edition Products: Exclusive or limited-edition product releases often generate a lot of buzz and high market demand, which can again lead to unpredictable buying patterns.

Challenges

Here are some challenges you may face due to unpredictable demand.

• If you’ve prepared for unpredictable demand by overstocking, it can result in excess inventory and potential markdown costs. On the other hand, stockouts can lead to lost sales opportunities if you don’t have enough inventory.
• If forecasting demand is difficult, it can disrupt production schedules and lead to inefficiencies in manufacturing.
• Fluctuating demand can lead to issues with warehousing and transportation, which will impact delivery times.

Solutions

Here are some effective strategies to manage unpredictable demand in cosmetic supply chains:

• Make sure your production processes are flexible so you can quickly adapt to the changing customer and market demand.
• You can collaborate with retailers and share sales data to gain better insights into customer behaviour and overall market trends. 
• You can use advanced data analytics tools to identify patterns, forecast demand, and improve the accuracy of demand forecasting.
• Pairing these analytics with supply chain optimisation strategies ensures inventory is balanced across warehouses and channels, so stock levels remain ideal even during sudden demand surges.
• You should always maintain a smaller inventory or quick response inventory of readily available products that you can quickly restock based on current customer demand.
• Track sales and inventory levels in real time so you can quickly make any required adjustments to production and distribution. 

Tackling Fulfilment Complexities Across Channels

Fulfilment complexities can arise for various reasons, but they primarily stem from the need to source raw materials from multiple global regions. Other factors contributing to fulfilment complexities across channels include managing complex packaging requirements, stringent regulatory compliance, and volatile demand forecasting. You also have to ensure product quality and safety throughout the distribution process while navigating the overseas market with different consumer preferences and trade regulations. 

Challenges

Let’s explore the key fulfilment complexities in the cosmetics supply chain.

• Sourcing Raw Materials: The biggest challenges are geographic diversity, sustainability concerns, and quality control. If you source raw materials from various global regions, you may notice fluctuations in their availability and quality depending on geopolitical factors and harvests. You’ll also have to balance the growing demand for eco-friendly sourcing with cost-effectiveness. 
• Packaging Challenges: You may want to balance functional packaging with a design that appeals to your customers and meets market expectations. At the same time, you may want to use eco-friendly packaging materials while maintaining product integrity. Customisability is another major challenge, as you’ll have to manage different packaging needs for different product lines and markets.
• Regulatory Compliance: Challenges can arise in various forms, including complex labelling requirements, testing and certification, and batch traceability. You must comply with different labelling regulations across different countries, from disclosing your products’ ingredients to specifying safety warnings. To make sure your product batches are traceable, you should maintain detailed records of each production batch. If a recall is necessary, it’ll speed up the process. 
• Difficulties in Demand Forecasting: As mentioned above, you can face problems in forecasting demand due to changing beauty trends, seasonal variations, and evolving consumer preferences. Complex omnichannel sales can further complicate demand forecasting. You must coordinate your inventory levels across multiple sales channels, especially if you sell online and offline. It’s essential to avoid both overstocking and understocking.
• Global Distribution Challenges: You’ll have to navigate global shipping regulations, customs clearance, and potential trade barriers. At the same time, you’ll have to adapt to potential disruptions due to geopolitical instability in regions from where you source your raw materials. What can further enhance your problems is the fact that if you sell temperature-controlled products, they have unique storage and transportation requirements.

Solutions

These challenges emphasise the importance of adaptation and careful consideration across the supply chain to deliver cosmetic products safely and on time. Here’s how you can do it.

• Collaborate closely with your suppliers to ensure consistent quality of raw materials, timely deliveries, and, most importantly, transparency.
• Use tracking systems to monitor product movement throughout the supply chain.
• You can also use advanced analytics and forecasting tools to predict customer demand accurately.
• Maintain a dedicated team of regulatory compliance experts. They can help you stay updated on changing regulatory requirements and ensure compliance.
• Make sure your processes are agile and flexible enough to quickly adapt to changing customer demand and supply chain disruptions.

Staying Compliant and Ensuring Product Safety in Beauty

If you are in the cosmetics industry, you’re aware of the fact that you must implement quality control measures throughout the entire production process and comply with regulatory standards. You must ensure the safety of cosmetic products for your customers from the moment you source raw materials to the distribution of finished products. 

Challenges 

Key challenges you face in the cosmetics supply chain are:

• Complying with different regulator requirements across diverse sourcing countries
• Ensuring compliance with suppliers who operate on a small scale because they often lack systems to take care of quality control
• Staying updated on the changing product safety requirements and concerns regarding the ingredients of cosmetic products
• Keeping innovation at the heart of the production process while conducting safety tests and ensuring regulator compliance

Solutions

There are several ways to ensure compliance and product safety.

• Following all laws and regulations related to the ingredients, manufacturing, and labelling, which can vary from one country to another.
• You should thoroughly test all batches of raw materials you source to verify their identity and purity and ensure they conform to specifications.
• Follow good manufacturing practices (GMP). They establish quality standards for manufacturing processes and finished products. They can help you identify any issues and ensure product quality.
• You can implement a system to track the origin and movement of raw materials and finished products throughout the supply chain. Traceability also ensures quick identification of issues and product recalls in case of major safety concerns.
• Assess product formulations to evaluate potential skin irritations, allergies, and other adverse reactions. 
• Listing all ingredients, any safety warnings, and other necessary information to ensure accurate labels and compliance with labelling regulations. 

Making Beauty Supply Chains Greener and More Ethical

Some raw materials, such as palm oil, used in cosmetic products can have severe environmental consequences. Though making the cosmetics supply chain ethical and greener may seem like the best alternative, it’s a complex process.

Challenges

Let’s explore the major challenges the cosmetic supply chain may face when it comes to sustainability.

• Excessive extraction of botanicals and minerals that impact biodiversity.
• Sourcing palm oil and other ingredients that are linked to deforestation.
• Using ingredients that are tested on animals.
• Potential toxicity of some synthetic chemicals used in cosmetic products.
• High energy usage and water consumption in production facilities to process ingredients contributing to carbon emissions
• Waste generation, including packaging waste from excessive packaging materials and byproducts from manufacturing processes.
• Non-biodegradable and plastic packaging further contributes to environmental pollution.
• There’s a lack of accountability and transparency in tracking the origin and source of raw materials, in addition to limited disclosure of companies’ sustainable practices and environmental impact
• Labour exploitation and poor working conditions in factories and negative ecological effects on local communities near production sites.

Solutions

Here are some ways to address these challenges:

• Prioritise responsibly sourced ingredients and raw materials and fair trade options.
• Implement waste recycling programs, minimise packaging materials, and optimise production processes to reduce waste.
• Use recyclable, biodegradable, and reusable packaging materials to limit environmental impact.
• Collaborate with suppliers to ensure full transparency and ethical practices throughout the supply chain.
• Invest in initiatives for carbon reduction to compensate for emissions.

Strong supply chain resilience complements sustainability goals by ensuring these green initiatives remain consistent even in times of global crises or material shortages.

Enhancing Delivery Efficiency with Shiprocket Cargo

eCommerce businesses understand the critical importance of timely deliveries for customer satisfaction, and for cosmetic businesses, this involves additional complexities.

Here are some key aspects of delivery efficiency in cosmetic supply chains.

• Real-time visibility into all process
• Quality control measures
• Reliable relationships with suppliers
• Accurate demand forecasting
• Efficient warehousing and distribution 
• Optimised transportation and logistics 

Now, let’s see the challenges you may face.

• Some ingredients have a short shelf life, so you must manage inventory carefully and ensure faster turnaround times.
• Complicated logistics related to different packaging and storage needs. 
• Ensuring timely deliveries during peak seasons can be quite a challenge.

There are multiple ways to deal with these challenges, including using data analytics tools to identify gaps in the supply chain or partnering with a logistics and shipping company like us.

Shiprocket Cargo is a tech-enabled solution that handles all your shipping requirements. It is a next-generation shipping solution tailored to your cosmetic business, enabling you to choose the best courier partner with AI recommendations. You can prioritise efficiency at every stage of the supply chain with features like:

• PAN-India coverage
• Quick commerce options
• Time-bound deliveries
• NDRs (Non-Delivery Reports)
• Notifications and more 

Conclusion

The cosmetics supply chain is marred by challenges related to regulatory compliance, responsibly sourcing raw materials, sustainable packaging and more such issues. Overcoming these challenges will require agility, flexibility, planning, and strategic foresight. A well-optimised supply chain, with minimum disruptions, can reduce product manufacturing costs and establish customer trust and loyalty. However, to adapt quickly to changing customer needs, preferences, and market trends, you’ll have to be proactive. To do so effectively, you must collaborate with suppliers and streamline operations. In an industry as competitive as beauty and cosmetics, overcoming supply chain challenges with brands like Shiprocket Cargo may position your business for long-term success.