Strategic Supply Chain Management - Supply Chain Online

AVON PROFILE: Calling on Customers Cost-Effectively 97
Based on these insights, Avon completely changed its sourcing strategy.
The company reduced its supplier base by more than half, embraced
the concept of supplier partnerships, and focused on lowest total cost
instead of lowest price. Today, Avon buys most of its inventory from suppliers
that are close to its factories in Poland and Germany. Although the
company may pay a slightly higher price on a per-unit basis, the benefits
of managing far fewer relationships with more flexible, responsive suppliers
result in a lower total cost overall.
Dealing with a smaller number of suppliers delivered other dividends
as well. Explains Watson, “Because we have longer-term relationships, we
can invest together in new, better ways of working.” For example, Avon
worked with its suppliers and a London-based design firm to create a better
product design. In the process of standardizing the bottles for its different
products, Avon asked its suppliers for help in designing new bottles in
the most cost-effective way. The suppliers were able to explain why certain
approaches were more costly than others—how a lighter-weight bottle
saves on materials, for instance, or how a bottle with a specific geometry
comes off the production line almost twice as quickly.
Avon also sat down with its suppliers
and mapped out the whole manufacturing
process, looking for ways to take out time
and money. Together they identified where
there were inefficiencies and why. In many
cases Avon had to change its own approach
so that suppliers could manufacture its products
more cost-effectively. For instance, Avon
agreed to change its order patterns to reduce
the suppliers’ manufacturing setup costs.
Avon has stopped placing orders
entirely with some suppliers, instead giving
Avon had to change
its own approach so
that suppliers could
manufacture its
products more costeffectively.
them access to production information via a Web-based system designed
on the back of its own avon.com Web site. The suppliers just look at the
factories’ production schedules and deliver accordingly.
BUILDING ON SUCCESS: COLLABORATIVE DESIGN
Avon plans to extend the concept of collaboration throughout the supply
chain organization. The company recently conducted a collaborative design
workshop that included suppliers, a design firm, and representatives from
marketing and the supply chain—40 people in a room trying to design a