The Social Supply Chain: The Impact of Social Media on Supply Chain Management at L’Oréal

akarim    October 28, 2014

Image courtesy L’Oreal Twitter page.

The L’Oréal Group

Beauty, Cosmetics

Richard Markoff, Supply Chain Director – L’Oréal Operations

L’Oréal is a cosmetics and beauty company based in Clichy, Hauts-de-Seine. It is the world’s largest beauty company with sales reaching approximately $29.7 B in 2013. The company primarily focuses on make-up, hair colour and care, skin care, perfumes and sun protection.

Here’s a clip featuring Richard, Supply Chain Director – L’Oréal Operations about his job:

Supply chain management is integral to many global businesses; it is the very structure that supports and grows the business. Before you begin to understand a “social supply chain,” you should first understand the definition of a traditional supply chain. In his article “What is Social Supply Chain Management,” Jacob Morgan references a quote from the book “The New Supply Chain Agenda” by Rueben E. Slone, J. Paul Dittmann, and John T. Mentzer to define supply chain management:

“The activity that manages the flow of information, money, and material across the extended enterprise, from supplier through the functional silos of the firm to customer.”
– “The New Supply Chain Agenda” by Rueben E. Slone, J. Paul Dittmann, and John T. Mentzer

Morgan goes on to state that there are many facets to a supply chain:
– Capital needed to manage and distribute inventory
– Products and Services
– Inventory movement and turnover (slow vs fast)
– Transportation costs
– Warehousing costs

With the wide expansion of social media in our digital lives, consumers, businesses and industries on a whole are adopting social media strategies along with cloud computing, internal social networking, and social customer service to enhance their supply chain management systems. According to Forbes, the use of social networks by the Fortune 500 companies has seen exponential growth with 83% of the companies using at least one social media outlet in 2010.

Here’s a Podcast from Primedia Broadcasting called “Cracking the corporate supply chain” that describes the best practices in supply chain management:

Strategy and Approach:
In the article “Effective supply chain management through social networking” by Nicholas Moores, the author describes that social media is used outwardly to interact with consumers and within the business for supply chain management:

Firstly, one is able to monitor the here and now of their supply chain production and needs. Logistical updates can be tracked, data can be shared, and progress can be monitored. All this means that in turn should any problems arise, they can be dealt with quickly and effectively, pooling resource and ideas from across the entire network of suppliers.
– “Effective supply chain management through social networking” by Nicholas Moores

At L’Oréal, a third of their products are new each year, according to the Financial Times. The company must constantly monitor internal and external information to drive production and sell products that consumers want.

L’Oréal develops and markets a range of outstanding brands in extremely varied distribution circuits in a great many countries. Supply Chain therefore plays a key part in the group’s development. L’Oréal’s Supply Chain is integrated and structured around the main sectors of business.
– L’Oréal

L’Oréal has adopted cloud computing for their supply chain management by partnering with E2Open, the leading provider of cloud-based solutions for collaborative planning and execution across networks. In a press release on the E2Open website, L’Oréal explains the partnership and how it has helped shape their social supply chain: “Having an agile, highly responsive supply chain is a key source of L’Oréal’s competitive advantage in the beauty industry,” said Morris Lenczicki, Vice President, Industrial Systems Applications, L’Oréal Operations Americas. “By partnering with E2open to improve our supplier collaboration and network visibility via the cloud, we’ve taken our demand fulfillment approach to the next level thanks to the availability of high quality, real-time information.”

Here’s a video from Tawfiq Ali on Social Media & Supply Chain Strategies

In the lecture, Ali describes a growing consensus that “the customer has the voice” through social media and that companies need to utilize customer feedback through these channels to meet new product demand.

L’Oréal USA, with the help of Clarabridge, a sentiment and text analytics provider, to analyze real-time social media data about their 27 brands. This data is collected and analyzed from a number of outlets including website and product reviews, blogs, Twitter and Facebook. In a press release, Céline Dumais, vice president of Consumer Care Center at L’Oréal USA said, “Social media is all about real time, so we need to react in real time when it comes to customer engagement. We expect to see significant ROI through our ‘Voice of Beauty’ mission and, most importantly, we expect to continuously improve our relationship with our customers – something you can’t put a price on.”

Lessons Learned:
– Social media is impacting supply chain management by creating transparency, strengthening supplier relations and promoting internal/external communication
– The “social supply chain” can utilize the customer’s newly found “voice” to shape new products and how they market those products
– B2B communication is just as important as B2C communication, and with new technologies both can now be done through social media

L’Oréal Supply Chain
L’Oréal USA analyzes real time social media data
What is Supply Chain Management?
Forbes – Are You Ready for the Social Supply Chain?
Making a More Social Supply Chain
FT – Demands on Supply Chain Help Boost Innovation

Submitted By: Alisha Karim – SMBP Student, University of Waterloo.
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