Cadena De Suministro De Avon

Avon Gets Its (Supply Chain) Makeover
Running a global cosmetics business involves much more than just marketing and makeup. In a new book, two experts describe how Avon rebuilt its manufacturing and transportation infrastructure from top to bottom—and how much that paid off.
By Shoshanah Cohen and Joseph Roussel


What do you do when you have an enormous growth opportunity but can'tcapitalize on it because your supply chain is in the way? If you're Avon, you embark on a radical transformation—a high-risk venture with no guaranteed returns.
Avon is the world's leading direct seller of beauty products, with $6.8 billion in annual revenues. In addition to cosmetics, skin-care products, fragrances, and personal-care products, the company offers a wide range of gift items, includingjewelry, lingerie, and fashion accessories. Avon sells to customers in 145 countries through 3.9 million independent sales representatives. More than $1.2 billion of Avon's sales come from its Europe region, which serves 32 countries in Europe, the Middle East, and Africa with more than one million sales reps. But in the 1990s the region's strong growth threatened to overwhelm its supply chainorganization.
With its primary focus on marketing and sales, Avon had neglected its supply chain for years. Back in the 1980s, Avon Europe had branches in only six countries, each with a separate factory and warehouse supplying the local market. The branches operated independently, with separate information systems, no overall planning, and no shared manufacturing, marketing, or distribution.
On asmall scale, this worked quite well. Each entity could be very responsive to local needs. But in the early 1990s the company began globalizing its key brands and modernizing its image through the launch of new products, packaging, and ad campaigns aimed at younger consumers. Avon planned to double sales revenue in the Europe region from $500 million in 1996 to $1 billion in 2001. The companyrealized that replicating its country-based supply chain model in every new market would be expensive and unwieldy. Explains executive vice president Bob Toth: "Ten years ago we operated country to country, with a very decentralized model. You just can't compete that way now."
The first problem was a fundamental mismatch between the company's selling cycle and its supply chain. In most European markets,Avon begins a new sales campaign—complete with a new brochure, fresh product offerings, and promotions—every three weeks. This short selling cycle is a cornerstone of Avon's direct-sales model. By regularly offering new products and promotions, the company gives its sales representatives a reason to call on customers often, strengthening relationships and driving sales.
A short selling cycledemands a flexible, responsive supply chain. There Avon fell short. Its factories manufactured everything to forecast and then shipped inventory to the country warehouses before the start of each three-week selling campaign. Inevitably, certain products would be big hits, and the branches would rush orders back to the factories. However, it took an average of 12 weeks for products to cycle throughAvon's supply chain from sourcing to manufacturing to distribution.
The timing mismatch led to on-the-fly solutions and enormous inefficiencies during the course of each sales campaign. Avon relied on the heroics of employees to meet customer needs—regardless of cost. But as the business grew, keeping up with different markets and accurately forecasting demand for individual products becameincreasingly difficult, especially since Avon was entering new markets at a rate of two or three per year.
The rush orders destroyed manufacturing efficiency too. Since 40% to 50% of the items sold more than expected, the factories were constantly interrupting their schedules to switch from one product to another. Changeover costs were high—especially because the factories were set up for high-volume...