Introduction

L’Oréal is a beauty products Company that was founded in 1909 by Eugene Schueller. The company operates in about 130 countries across the globe. L’Oréal is the leading and second largest beauty company across the globe. The Company is focused at providing quality facial and hair products including perfumes. L’Oréal produces and distributes beauty and personal care products for both men and women. It has about seventy eight thousand six hundred and eleven employees worldwide and generates about 22.53 billion euros annually. The Company has a large team that helps in research and innovation activities. Although it was founded in Europe, about half of its sales come from outside Europe (Hitt, Ireland & Hoskisson, 2007; Loreal 2015).

Characteristics to be included in the strategic planning process

Products/services

L’Oréal Company specializes in manufacturing of beauty and personal care products only. The Company also offer research on dermatology and cosmetology. L’Oréal offers products for all category of consumers.  For example there are products that target the high class in the society like the society such as the L’Oréal Luxe. L’Oréal company products are divided into four segments which include the consumer products which the company sell in the mass retail channels. The other division is the professional products which include the various products used in and also sold in the hair salons. The third group of products are the L’Oréal Luxe which are provided for sale in the selected stores such as Medi-Spas and departmental stores among others. The final division is the Active Cosmetics segment which includes those products for complexions and which are usually sold through various health channels (Trefis Team, 2015).

Markets and customers

L’Oréal Company has embraced acquisition as a way of expanding geographically. The company has opened branches in different parts of the world. For example, in 2012, the company opened a factory in Russia which was meant to serve the local customers. Moreover, in 2012, L’Oréal opened another company in the Indonesia to cater for the South-East Asian market and another one in Mexico to serve the North America and Latin. In UK L’Oréal owns ‘The Body Shop International’ which helps it in distribution of its cosmetics. The retailer has about 2500 stores across the world thus increasing the market base for the L’Oréal cosmetics. The company also uses joint venture to expand its markets. For example the company has a joint venture for the deter ology with Nestle company which is called laboratories Garnier. L’Oréal offer a range of products that are created in a way that they fit in different culture. Through their able research and innovation team, L’Oréal is able to provide products that fit customers’ lifestyle, culture and needs. (Das, 2015).

Facilities (plants, distribution centers

L’Oréal Company has about 38 factories that are located strategically in different countries for easier distribution in various parts of the world. The decreasing hair care in Europe is currently affecting the sales of the hair products for the company. The main products provided by the company are the Skin care, the color care, and the hair care (Hitt, Ireland & Hoskisson, 2007).

L’Oréal inventory policies

L’Oréal Company embraces the one in one out inventory policies.  The cosmetics company ensures that all products are used before introducing a new product in the store. This way Loreal is able to ensure that there is no dead stock in their store thus, saving cost. L’Oréal has also adopted the cloud system that is helping it to track activates in all its factories. With this system in place, the inventory manager is able to see all the inventories and the demand thus, knowing when to make orders for new supplies to keep the manufacturing activities going. Through sharing data with the supply chain members, it is easy for the company to make inventory and production projections (Hitt, Ireland & Hoskisson, 2007).

Capacity planning Alternative

L’Oréal embrace the Expansionist strategy to manage its capacity in relation to the demand. Expansionist strategy is always proactive to changes in demand and involves the sense of being one in the market (Das, 2015). L’Oréal uses the implements this strategy through the use of the market development expansion strategy. The demand for the L’Oréal products is very high accounting for about a third of the cosmetics demand in the world. The increasing population in America and the increasing number of the middle class individuals has in recent years contributed to the high demand for the cosmetic demand. The company is regularly opening new factories in different parts of the world and producing products that best for the customers in those areas. For example, in 2012, the company opened a new factory in Indonesia that produces products that are used during the hot and the humid conditions (Loreal, 2015).

To expand geographically easily and at a lower cost, the L’Oréal Company has made a number of acquisitions. For example in 2016, the company acquired the IT cosmetics in the US and the Rivadis group. Other acquisitions by the company are the American Urban Decay, the make-up brand Vogue in Columbia, the Niely cosmestico in Brazil, the interbeauty in Kenya, and the Magic holdings in China among others. All these Acquisition has helped L’Oréal to reach new markets at a lower cost (L’Oréal 2014).

Long-range forecasting techniques

L’Oréal make use of both the Qualitative methods and the Quantitative method to forecast for their demands.  The quantitative forecasting method embraced by the organization is the trend method. The company analyses the trends on how the consumers are using the cosmetics. For example, through the analysis of the trends, the company was able to have an idea of the antiaging products required in different parts of the world. Moreover, through the analysis of trends the company was also able to forecast the product demanded by men and those demanded by women (Loreal, 2005).

L’Oréal also make use of the qualitative method to forecast for the demand of different products. L’Oréal Company has many and experienced research and innovation personnel that take part in researching about different products thus providing  useful information that can be used in forecasting. For example, through research, the company was able to know the views that customers have towards antiaging products. This was through the analysis of opinions that consumers had towards looking young and old (Hitt, Ireland & Hoskisson, 2007).

Make or buy decision

L’Oréal Company make use of both direct procurement as well as outsourcing. The company purchases ingredients and packaging directly. However, for services such as IT, HR and FM services, the company has embraced outsourcing as it is cheaper and less time consuming. Through outsourcing of these services the company was able to save about 4 million euros within six months. This way the company is able to reduce t operation cost giving it a chance to lower its prices. For example, through outsourcing HR services, the company is able to make savings on, Salary, phones as well as phone tariffs (Xchanging, 2012).

L’Oréal has been experiencing procurement hiccups for a long period of time. To trace all the procurement expenses the company has different Data for procurement. However this still poses a challenge for the company as it requires an analytic to organize analyze the data in an easier way for the management to understand. L’Oréal Company therefore decided to outsource these services from the IBM Company. This has helped the company to save on various costs related to employing and training analytics for their own (Goldberg 2013).

Initiative to improve the operations

L’Oréal Company employs different strategies to accomplish improvements in its manufacturing. Six sigma is one of the strategy that the company employ to enhance improvement. The company also practice lean manufacturing and has other programs that are meant to facilitate continuous improvement in its manufacturing operations (Loreal, 2015).

L’Oréal manufacturing performance

L’Oréal Company has recorded outstanding manufacturing in most of its factories and was awarded an award for operational excellence and the organizers strategic manufacturing award in 2010 in the EMSS- European Manufacturing Strategic Summit. The company make use of the FlexNet which is a global platform that helps in the manufacturing operations. The platform helped in the improving the equipment operation in 20 of its plants within eighteen months. The company still expects to enhance the effectiveness of its equipment as they continue employing technology in its operations (McDougall 2010).

L’Oréal is one of the cosmetic companies with quality products. All products produced by the company are ISO 9001 certified. The company products also adhere to the safety and environmental standards in all countries where they manufacture. Employees are also provided with the safety gears required in a manufacturing company. Currently the company is also OHSAS2 18001 certified. However the company still remain to attain certification from the environment-ISO-14001 (Loreal, 2005).

In terms of cost, L’Oréal Company has strived to operate in a cost efficient manner. Although there is increasing cost of raw materials, the procurement team of the company work closely with the suppliers so as to reduce the cost. The company employs negotiation method with its tier two suppliers in order to cut cost. L’Oréal also employs reverse auction and heavily sourcing from emerging markets where the cost of raw materials is lower. Moreover through standardization of manufacturing equipment the company has been able to greatly reduce investments in all its factories thus further saving its operation cost (Loreal, (2005).

L’Oréal Company always strive to enhance its environmental performance. The company is committed at reducing its water consumption as well as waste in all their production. By 2020 the L’Oréal Company is focused to reducing its carbon emission by about 60%. The company was able to attain about 58% reduction of the carbon emission in 2014. The L’Oréal USA also registered reduced consumption of water by about 40% in 2014. The company also enhances sustainability by using solar in its distribution centers instead of electricity. For example in South Brunswick distribution centers alone, the company has more than 10,000 solar panels which produce about 2,800,000kwh per year. The company has also identified other sources of renewable energy that has helped in the conservation of energy and reduction of the company’s carbon footprint in the environment. For example, the company make use of natural gas for heating cleaning water and producing steam that is used for sanitizing the vats (Block, n.d).

L’Oréal Company is also focused at reducing waste both in its plants and the distribution centers. By 2015, the company was able to achieve over 30% of waste reduction. Through standardization and eco-design, the company was able to reduce waste related to transport packaging by about 13%. The company also ensures that there is continuous improvement in its production system so as to reduce production related waste. In 2015, the Belgium plant was able to reduce production related waste by about 30% (Loreal, 2015).

L’Oréal Company has been implementing various methods to ensure that they produce efficiently. For example, the company has derived different ways of reducing waste in production. Implementation of technology in its operations is also focused at enhancing efficiency. However, more need to be done as there is still notable wastage in the production of Palm oil plants. Although the company has placed several measures to deal with the problem it has not been able to reach zero waste reduction in this area. Moreover, the company still uses road transport in some parts of the world to transport their products thus making it somehow inefficient in its operations.

Manufacturing strategy improvements recommended

L’Oréal embraces innovation and market diversification which has contributed to its present success. However, product diversification would be of greater importance to the company. Considering that the company is well placed in the market across the world, it will be very easy for it to introduce market and sell other products alongside cosmetics. It is clear that the sales of hair products have been declining it would be advisable to have products like mouthwash which are offered by the competitors and whose sales are rising. Despite the competition, the products will sell as customer’s loyalty for the current products-cosmetics is still high.

It is also recommended that the L’Oréal invest more on research and development so as to come up with more sustainable ways of production. It is clear that the company has invested much in R&D, and it has noticeable improvements in the sustainability efforts. However, more need to be done. For example, the company has not been ben certified for environmental sustainability as their damage to the environment is still high. Although the company has reduced its carbon emission, it is has not reached the limits. The destruction of palm tree plantation is still high despite the many strategies that have been put across to curb this. However, through the company’s innovation and research team and increased financing it will be easy to identify other sources of raw material.

Conclusion

L’Oréal is the leading cosmetics manufacturer in the world. The company has an outstanding manufacturing system which has earned them two awards in the past. The company has developed various ways of enhancing sustainability through energy saving programs, waste minimization programs as well as responsible use of natural resources as raw materials. To save cost, L’Oréal heavily depend on outsourcing of various services such as IT and HR. however, the company’s manufacturing system has some drawbacks which include environmental unsustainability and decreasing demand for products like the hair products. Therefore, it is recommended that the company adopt the product diversification strategy to deal with the decreasing demand for the hair products and decreasing sales. Further, it is recommended that L’Oréal invest more in research and innovation for better management of the environment.

 

 

List of Reference

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Block F. (n.d). L’Oréal USA. Retrieved from https://www.ase.org/sites/ase.org/files/resources/Media%20browser/ee_award_nomination_lorealusa.pdf

Das A. (2015). An introduction to Operations Management: the Joy of operations. NY: Routledge.

Goldberg M. (2013).L’Oréal USA signs outsourcing deal with IBM for procurement Analytics. Retrieved from http://data-informed.com/loreal-usa-signs-outsourcing-deal-with-ibm-for-procurement-analytics/

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic management: Competitiveness and globalization; [concepts and classes]. Mason, Ohio [u.a.: Thomson South-Western.

L’Oréal, (2005). Innovation and Standardization drive performance. Retrieved from http://www.loreal-finance.com/_docs/rapport/2005/us/Production_and_Technology.pdf

L’Oréal, (2015).L’Oréal annual report 2015.Available at http://www.loreal-finance.com/_docs/0000000088/LOreal_2015_Annual_Report.pdf

Loreal, 2015). The 2015 progress report. Retrieved from http://www.sharingbeautywithall.com/sites/default/files/cms/sbwa-progress-report-2015_english.pdf

McDougall, A. (2010). L’Oréal awarding for outstanding manufacturing system. Retrieved from http://www.cosmeticsdesign-europe.com/Packaging-Design/L-Oreal-awarded-for-outstanding-manufacturing-systems

Trefis Team, (2015), Key Trends that impacted L’Oréal’s performance in 2014. The Forbes. Available at http://www.forbes.com/sites/greatspeculations/2015/01/12/key-trends-that-impacted-loreals-performance-in-2014/#7ed709334252

Xchanging, (2012). L’Oréal: An innovative approach to indirect procurement. Retrieved from http://www.gsa-uk.com/files/316.pdf

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