Strategic Supply Chain Management - Supply Chain Online

Avon Profile:
Calling on Customers
Cost-Effectively
What do you do when you have an enormous growth opportunity but
can’t capitalize on it with your existing supply chain 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 and related products,
with $6.2 billion in annual revenue. In addition to its cosmetics, skin care
products, fragrances, and personal care products, the company offers a
wide range of gift items, including jewelry, lingerie, and fashion accessories.
Avon sells to customers in 145 countries through 3.9 million independent
sales representatives, providing an earnings opportunity to women
throughout the world. Its Europe region (spanning Europe, the Middle
East, and Africa) accounts for more than $1.2 billion of Avon’s sales, with
operations in 32 countries and more than 1 million sales representatives.
With a primary focus on marketing and sales, Avon had neglected its
supply chain for a number of years, never viewing it as a strategic lever.
This presented acute problems for Avon Europe because the region’s
strong growth threatened to overwhelm the supply chain organization.
Back in the 1980s, Avon Europe had branches in only six countries,
each with a separate factory and warehouse supplying the local market.
These branches operated independently, with separate information systems,
no overall planning, and no shared manufacturing, marketing, or distribution.
On a small scale this worked quite well. Each entity could be
very responsive to local needs. In the early 1990s, the company began
globalizing its key brands and embarked on a strategy to modernize its
image through the launch of new products, packaging, and ad campaigns—
a strategy aimed at more and younger consumers.
Avon planned to double sales revenue from $500 million in 1996
to $1 billion in 2001 for the European region as a whole—growth
fueled in large part by dramatic inroads in central and eastern Europe.
But the company realized that replicating its supply chain model in
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