Table of ContentsRaw Material SourcingInventory ManagementTransportation and PackagingStrengthsAdopting a “Creative Buying” ApproachFlexible Inventory ManagementZero Waste AspirationsWeaknessesDifficulties with SuppliersRapid GrowthInefficient TransportationChangesPotential Changes in European RegulationReusable Packaging and Filling Stations? Technological AdvancesRecommendationsLushLush is a cosmetics company that manufactures and distributes a range of fresh, artisan products to over 900 independent stores around the world. Operating in an industry that has its ethical challenges, Lush, as a 'green' company, has a unique approach to its supply chain management practices and procedures. The company prioritizes CSR at all levels of its supply chain. Credible CSR practices go beyond marketing. With numerous social and environmental policies such as ethical purchasing, fair trade, animal protection and zero waste, Lush guarantees ethical procedures at all levels of the supply chain. Vertically integrated, Lush sources its raw materials globally, creates and manufactures its products and delivers them to its stores. The business is a seasonal business with a 60% increase in sales around the Christmas period. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Sourcing Raw Materials Lush sources its raw materials taking into consideration the impact they have on people and the environment. With CSR at the heart of its operations, lush has created creative purchasing teams. The team's role is to look beyond the lowest prices and bottom lines, and instead find the best, safest and most suitable products in accordance with their ethics. To preserve the environment and social impact, the team often travels to the communities where they source their raw materials. Lush supports fair trade and community trading initiatives, which build strong relationships with their suppliers. By using this method, the company removes the proposition of middlemen and ensures that materials as well as suppliers are treated with respect. Inventory management Most of Lush's raw materials are fresh and require special storage as perishable goods. At scale, it becomes difficult to effectively manage inventory levels while minimizing waste. For example, the company purchases 50 tons of fresh fruits and vegetables, 8,000 bouquets of flowers and 55 tons of cocoa butter per year. A just-in-time inventory approach, which keeps stock levels extremely low to avoid rotting and over-ripening, is crucial to maintaining and delivering fresh produce to stores. The factories have "small grocery stores" which are stocked on Friday, generally sold out the following Wednesday and restocked on Friday. Through this process, inventory can be monitored and maintained daily. The raw materials are kept in the refrigerator until processing. Most products are processed, dried or solidified and kept in large plastic containers during the manufacturing process, and will be stored less than a week in inventory before reaching their final product form and being sent to a store. Transportation and packaging Lush's biggest hurdle in terms of sustainability is transporting their products. Products are transported mainly by land and air through49 countries, which creates a carbon footprint, fuel consumption and potential inefficiencies. Lush uses intermodal transport systems. Cargo is transported by multiple modes of transportation, such as vehicles, rail, and ships, without being handled itself when changing modes. This allows Lush to reduce damage and waste of its cargo. Motor carriers are used for delivery from factories to retail stores, which are mostly outsourced. Their finished products are 100% vegetarian and more than 70% self-preserved. However, Lush's strict freshness policy makes transport particularly difficult, as products must be transported overnight. About half of the products in store can be taken home without packaging. Lush uses packaging where necessary, 90% of which is recycled. Lush's long-term goal is to have 100% recyclable or compostable packaging materials. Currently, recycling of their black packaging pots is not available everywhere. When they are returned to stores, they are recycled or used as art materials. StrengthsTaking a 'creative buying' approach Lush's creative buying approach is a system for delivering the best quality products to the customer. This allows Lush to better understand raw materials, how they are produced and factors that can affect cost, such as climate or seasonality. Purchasing products with face-to-face communication Lush ensures an uninterrupted supply of materials. This method allows their suppliers to understand the needs of their business, and at the same time, to better understand the constraints of their operations. Consecutively, the company can plan in time for any difficulties in sourcing raw materials and avoid shortages or out-of-stock situations throughout the supply chain. In this way, the company streamlines its supply chain, leaving little room for errors. Through the practice of creative purchasing, the company has gained enough knowledge about agriculture to be able to purchase fields of roses and other flowers that are used to produce essential oils for their factories. This takes vertical integration even further, allowing them to have complete control over the supply of essential oils. Lush strives to be effective through collaboration with local communities, understanding and supporting their practices and performance. Flexible Inventory ManagementLush successfully reduced its on-hand inventory by 7 days by implementing automation software and streamlining its inventory management systems. Electronic data interchange (EDI) is a method of electronic communication that provides standards for the exchange of data via any electronic means between two different businesses, even in two different countries. Given the large number of international suppliers, this system allows Lush to efficiently exchange documents such as purchase orders, invoices and shipping notices with all suppliers. Implementing systems like this to help them manage inventory turnover sometimes less than 24 hours can minimize waste. Lush does not store excess raw materials in the warehouse due to limited space, which could reduce efficiency and time management. This speed and quality control goes a long way in supporting rapid product development. Lush's innovation team manages to release dozens of new products to serve the consumer in a new season. In response to feedback fromcustomers and thanks to its flexible inventory management system, it can remove products that are not selling at high speed. Through intelligent allocation of raw materials for production, Lush ensures that raw materials are not wasted while waiting to be processed. Lush orders its ingredients mainly based on orders it receives from individuals and stores, which again allows factories to keep as little stock as possible, thereby reducing food waste. Zero Waste Aspirations Although the products are perishable which poses a major shipping challenge, the company saves time and money by removing packaging from its products. Lush, by removing most of its packaging, is able to fit more products per shipment and reduces the time it takes to unpack and assemble products in store. At Lush, the manufacturer has a list for transforming liquids into solids, and therefore removing packaging. The products are delivered “naked” to stores. Wrapped in paper and put in plastic boxes, Lush ensures the product is delivered safely to the store. Lush is encouraging its customers to return their little black pots to the store thanks to a promotional incentive. For every 5 black pots brought in, the company promises a free face mask. As part of their anti-waste policy, this promotion allows the company to recycle its pots. Weaknesses Difficulties with suppliers Some difficulties with suppliers may depend on cultural differences. When sourcing raw materials, Lush will not interfere with the way local farmers harvest and handle their raw materials. Given the scale and range of raw materials purchased, it is impossible for Lush to have the same quality control and efficiency as with a supplier operating on a large scale. Additionally, the strict criteria imposed on suppliers means that Lush only has a limited number of suppliers to choose from. If, due to external factors (such as weather conditions or harvests), suppliers do not meet the quantities required for production, Lush may have difficulty finding alternative suppliers for a specific raw material. For example, due to child labor issues in India, Lush decided to move its sandalwood sourcing to Australia. This is despite the fact that sandalwood is more common in India than in Australia. As Lush relies on a small number of suppliers to self-audit, it is difficult to ensure ethical standards are met. A supplier may claim to have a sustainable supply chain, but if they do not audit their internal processes or use external auditors, this uncertainty prevents them from becoming a supplier to Lush. Rapid growth The company has seen a sharp increase in sales since 2013, with profits increasing by 50% to over £31 million, a factor which has led Lush Cosmetics to diversify its sources globally , thus creating a social impact. With Lush expanding to around 930 stores in 50 countries, it is becoming increasingly difficult to monitor its performance throughout the supply chain. With such rapid growth, it is impossible to say that the supply chain is completely clean. The company had to overcome obstacles to find new suppliers for its raw materials. Often, the company discovered cases of slavery or child labor and was forced to find new suppliers. Don't settle for just one supplier and find other ways tosourcing materials requires time, resources and creative thinking. Simon Constantine, the company's ethical purchasing director, explains: "From a supply chain perspective, we've struggled to keep up." “With the amount of work that has to be done to stay on top of things and everything is changing so quickly...I would never be comfortable saying that our supply chain is 100 percent clean.” Inefficient transportationAs road carriers that move their products from factories to stores are outsourced, lush has little control over vehicle choice. The company is using fewer truckload shipments for its freight. Products transported long distances may be damaged as most are considered “bare” products. Careful handling is required when loading and unloading trucks, which can prolong the company's outbound logistics. In season, best-selling products will sell out quickly and will need to be restocked at individual stores. This task can be difficult because the factory supplies individual stores to order, so in the event of a stock out, the factories will not be able to restock the stores. In conclusion, Lush manages to create a certain degree of transparency within its supply chain. through various social and environmental policies. By working closely with its suppliers, the company benefits from a clear flow of information that allows it to adapt to changes in demand and prepare for potential changes in supplier production. As the business continues to grow, it will become increasingly difficult to maintain all processes and CSR effectiveness at similar levels. Lush uses land, air and sea shipping, but tries to avoid air shipping where avoidable due to its ethical philosophy. As the company grows, so will the demand for its products. Lush will be forced to ship larger quantities of raw materials which will need to be processed in a relatively short period of time to reach the customer on time. Therefore, Lush will have to use more air traffic which will have an effect on their CSR policies. Changes Changes in the external or internal environment may result in new challenges or opportunities for Lush's supply chain management. Anticipating these changes gives companies time to prepare their supply chain systems based on the effect of these changes on supply and demand. Potential changes to European regulations Due to child safety concerns, the European Union was considering banning inedible products that look like fruit, candy or other foods that children might be tempted to put in their mouth. Supporters of the ban argued that products such as scented soaps or bath bombs that resemble food could pose a potential safety risk. This change in legislation could result in a significant loss of Lush's product range and a potential withdrawal from the European market which accounts for over 70% of its annual sales. Reusable packaging and refill stations? Potential changes for reusable containers and filling stations could revolutionize the business. practices. Currently, legislation does not allow companies to reuse their black pot packaging, so they are recycled or reused as artwork. However, with a change in legislation this could potentially mean that once packaging.