Oriflame Cosmetics is well positioned to capture future growth opportunities after making its biggest ever supply chain investment, whilst achieving an excellent level of ethical procurement.
Operating in more than 60 countries, it has a wide portfolio of approximately 1,000 products in categories including skincare, colour cosmetics, fragrances, personal & haircare and accessories marketed through around three million independent consultants around the world, generating annual sales of around €1.4 billion.
With a strong presence in Russia and other major CIS countries- the region makes up approximately 50 percent of yearly group sales- the company is establishing more robust foundations by building a new factory near Moscow. This is due for completion very soon.
Originating from Sweden in 1967 and founded by brothers Jonas af Jochnick and Robert af Jochnick, Oriflame has subsequently expanded its geographical footprint and currently operates in more than 60 markets in split into four Global Business Areas – CIS, Europe, Latin America and Turkey, Africa & Asia. Today, the company has seven factories with the one under construction in Moscow and five Group Distribution Centres (GDC’s) as part of the company’s supply chain infrastructure.
Russian and CIS strength
As well as these facilities in Poland, Sweden, Russia, China, Hungary, Ukraine, India, Portugal to name but a few, the cosmetics giant also has more than 100 stockholding points, some of which are central market warehouses. It also has smaller stockholding points around the world.
Gökhan Çakmak, Global Logistics Director at Oriflame, said: “Oriflame is an international beauty company, and we were founded on the principle of not testing products on animals. It was one of the best pioneering decisions made in my opinion.
“We have a rich and long heritage, with a strong commitment to be responsible and ethical. Building on this philosophy, we have cemented our position in ethical and responsible procurement by applying a number of initiatives.
“We are looking to tap into new markets and on average we introduce several hundred new products each and every year. Our in-house production of approximately 60 percent of products, is considered a core competency and it is expected to increase over time. The rest is externally produced by third-party suppliers.”
Oriflame has two global hubs near its big manufacturing points in Russia and Poland where it then distributes to other countries and warehouses. Oriflame actively consolidates local markets distributions into GDCs to reduce costs, increase productivity, improve efficiency and inventory levels. Group logistics operations are improved by re-structuring the GDCs under the newly created Global Logistics organisation to effectuate greater global synergies. The new Moscow factory and GDC facilities have been built according to highest environmental standards and green building certifications.
The semi-automated lines in the GDCs also paved the way for a more seamless process which has improved accuracy and productivity significantly, while substantially decreased inventory as a result of advanced planning systems. Delivery times and quantities are improved, and collaboration in the planning process within the supply chain is strengthened.
The changing international trade regulations and restrictions such as transit times and border issues are subjects impacting entire supply chain velocity. Those are challenges that Oriflame constantly faces.
Çakmak said: “Regarding the challenges I would highlight demand, distances, documentation and diversity as challenges due to our expansion and geographical coverage. The company’s significant presence in developing countries means dealing with the infrastructure is often very difficult and differing standards.
“Our motto in Global Operation is to deliver our promises to our customers. By achieving these promises going forward we will be much more sustainable, cost effective and prosperous. Oriflame’s sustainability strategy defines three key areas for the company’s efforts; to create opportunities to improve people’s lives; bring beauty and wellbeing through responsible products and drive environmental sustainability.”
Paper is Oriflame’s primary raw material used primarily in catalogues and packaging. The company aims to source 100 percent of paper through credible sustainable sources or recycled material. In 2013 it achieved 96 percent compliance according to the Rainforest Alliance, the global conservation organisation.
The firm also works with the World Wide Fund for Nature (WWF) and has a total score of 11 out of 12 in purchasing sustainable palm-oil. Oriflame will continue to pursue green building certifications in all of its future constructions.
“Our commitment in logistics is to reduce carbon emissions by 50 percent by 2020 so we have a long journey. But since 2010, carbon emissions have decreased by 30 percent primarily thanks to doubled load utilization in both sea containers and trucks by using various ways of loading efficiencies. On October 15th 2014 Oriflame Cosmetics was awarded with a position on The A List: The CDP Climate Performance Leadership Index 2014 for its actions to reduce carbon emissions and mitigate the business risks of climate change among 2000 listed companies. So we are also pleased, but still we have a way to go to reach our 2020 goal and have other targets of where we want to be.” Çakmak said.
While some cosmetic companies focus on the retail environment to reach their consumers, the Oriflame founders chose to take an alternative route; the direct sales model. The business model builds on the desire and ambition of people to run their own business, by grasping the Oriflame business opportunity.
Çakmak said: “Oriflame aims to source more products in its main markets to align the supply closer to the demand. It is an important step in the company’s ambition to improve operational efficiency. Asia is very important for us as well as the Latin American countries where we have great growth potential.
“The world is changing very fast. The big fish will not eat the small fish anymore. It will be the fast eating the slow. Oriflame aims to source as close to the market as possible to shorten the supply chain and improve procurement costs. It also reduces greenhouse gas emissions and transportation costs. Near sourcing will help increase our agility too. In logistics it is our strategic vision to outsource warehousing and transportation.”
He also states the company believes in continuous education to improve employees’ skills by internal and external training.
“We try to empower people to share their expertise to others by leading specific in-house training. This includes project management, supply chain and procurement academy.” added Çakmak.
Employees share experiences to give better visibility of each other’s jobs to encourage better collaboration.
The supply chain academy programme includes sourcing, manufacturing and logistics, and it continues to grow across management levels around the world through ongoing fine-tuning and development.
During the next years Oriflame will continue to strengthen its customer experience and supply chain is a major contributor to guarantee the success. In order to achieve our Global Operations motto of “to deliver our promise to our customers” we will be more agile, listen our customers’ needs, faster while cost effective and sustainable.