Index Raw material sourcing Inventory management Transportation and packaging Strengths Adopting a "creative purchasing" approach Flexible inventory management Zero waste aspirations Weaknesses Difficulties with suppliers Rapid growth Inefficient transportation Alterations Potential changes in EU regulations Reusable packaging and waste stations replenishment?Technological AdvancesRecommendationsLushLush is a cosmetics company that produces and distributes a range of fresh, handmade products in over 900 independent stores around the world. Operating in an industry that presents ethical challenges, Lush, as a “green born” company, has a unique approach to 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 ensures ethical procedures at all levels of the supply chain. Vertically integrated, Lush sources its raw materials globally, creates and produces its products and delivers them to its stores. The company is a seasonal business with a 60% increase in sales during the Christmas period. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Raw material sourcing Lush sources its raw materials taking into consideration the impact it has on people and the environment. With CSR at the heart of its operations, Luscureggiante has created creative purchasing teams. The team's role is to look beyond the lowest prices and profits and instead find the best, safest and most suitable products in accordance with their ethics. To safeguard the environment and social impact, the team often travels to the communities from which it purchases raw materials. Lush supports fair trade and community trading initiatives, which builds strong relationships with its suppliers. By using this method, the company eliminates the need for intermediaries and ensures that both materials and 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 a challenge to manage inventory levels efficiently while keeping waste to a minimum. 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, keeping inventory levels extremely low to avoid rot and over-ripening, is critical to sustaining and delivering fresh produce to stores. Factories have "small grocery stores" that are restocked on Fridays, usually sold out by the following Wednesday, and restocked by Friday. Through this process the inventory can be checked and maintained on a daily basis. The raw materials are stored in refrigerators until processing. Most products are processed, dried or solidified and stored in large plastic containers during the manufacturing process, and will be held in inventory for less than a week before reaching the final product form and being sent to a store. Transportation and Packaging Lush's biggest obstacle in terms of sustainability is transporting their products. Products are transported primarily by land and air across 49 countries, which creates a carbon footprint, fuel consumption and potential inefficiencies. Lush uses intermodal transportation systems. Goods are transported by multiple modes of transportation, such asvehicles, railways and ships, without being moved independently during the mode change. This allows Lush to reduce damage and waste from its cargo. Motorized transporters are used for delivery from factories to retail stores which are mostly outsourced. Their finished products are 100% vegetarian and over 70% self-preserved. However, Lush's strict freshness policy makes transportation particularly difficult as the products have to be transported overnight. Around half of the products in store can be taken home without packaging. Lush uses packaging when necessary, 90% of which is recycled. Lush's long-term goal is to have 100% recyclable or compostable packaging materials. Currently, recycling of black packing pots is not available everywhere. When they are brought back to stores they are recycled or used as art supplies. Strengths Adopting a "creative shopping" approach Lush's creative shopping approach is a system of providing the customer with the best quality products. This allows Lush to better understand raw materials, how they are produced and what factors might influence the cost, such as climate or seasonality. By purchasing products with Lush face-to-face communication you are guaranteed an uninterrupted supply of materials. This method allows suppliers to understand the needs of their business and, at the same time, better understand the supplier constraints of their operations. As a result, the company can plan for any difficulties with the supply of raw materials in time and avoid shortages or out-of-stock situations along the supply chain. In this way the company simplifies 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 moves further towards vertical integration, allowing them to have full control over the supply of essential oils. Lush strives for efficiency by collaborating with local communities, understanding and supporting their practices and performance. Flexible Inventory Management Lush was able to reduce on-hand inventory by 7 days by shifting software implementation to automation and optimizing inventory management systems. Electronic Data Interchange (EDI) is a method of electronic communication that provides standards for exchanging data via any electronic means between two different companies even in two different countries. Considering the many international suppliers, this system allows you to efficiently exchange documents such as purchase orders, invoices and shipping notices with all suppliers. With systems like this in place, helping them manage an inventory turnaround, sometimes less than 24 hours, can minimize waste. Lush does not store excess raw materials in the warehouse due to limited space which may reduce efficiency and time management. Speed ​​and quality control go a long way in supporting rapid product development. Lush's innovation team manages to bring out dozens of new products to serve the consumer during a new season. In response to customer feedback and thanks to its flexible inventory management system, it can quickly recall products that are not selling. By using intelligent raw material allocation for production, Lush ensures that raw materials are not wasted waiting to be processed. Lush sorts its ingredients primarily byorders it receives from individuals and shops, which once again allows factories to keep as little inventory as possible, thus decreasing food waste. Zero Waste Aspirations Although the products are perishable, which is a major challenge in shipping, the company saves time and costs by removing packaging from its products. Lush, by removing most of the packaging, is able to include more products per shipment and reduces the time needed to unpack and assemble products in store. At Lush the manufacturer has a list of procedures for turning liquids into solids and then removing the packaging. The products are delivered "naked" to the stores. Wrapped in paper and placed in plastic boxes, Lush ensures that the product is delivered safely to the store. Lush is encouraging customers to bring their black pots back into stores with a promotional incentive. With every 5 black pots reported, the company promises a free face mask. As part of their no waste policy this promotion allows the company to recycle their pots. Weaknesses Difficulties with suppliers Some difficulties with suppliers may depend on cultural differences. Lush does not intervene in the sourcing of raw materials in the ways in which local farmers collect and manage their materials. Considering the scale and range of raw materials purchased, it is impossible for Lush to have the same quality control and efficiency as they would with a supplier operating at scale. Furthermore, the strict criteria for suppliers means that Lush has a limited pool of suppliers to choose from. If due to external factors (such as weather or harvests) suppliers do not reach the quantities needed for production, Lush may face problems in 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 sandalwood being more important in India than in Australia. Relying on a few suppliers for self-monitoring makes it difficult to ensure compliance with ethical standards. A supplier may claim to have a sustainable supply chain, but if they do not monitor their internal processes or use external auditors, this uncertainty prevents them from becoming a supplier to Lush. Rapid growth The company has seen an increase in sales since 2013, with profits rising 50% to over £31m, a factor which has led Lush Cosmetics to diversify its sources globally, creating social impact. As Lush expands to around 930 stores in 50 countries, it is becoming increasingly difficult to monitor its performance throughout its 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 raw materials. Many times the company learned of cases of slavery or child labor and was forced to find new suppliers. Not settling with one supplier and finding alternative ways of sourcing materials takes 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 you have to do to keep up with things and everything changing so quickly… I would never feel comfortable saying our supply chain is 100% clean.” are outsourced, Lush has little control over the choice of vehicle. The company uses less than truckload shipping for its goods. Products transported over long distances may be damaged becausemost are considered "naked" products. Careful handling is required when loading and unloading trucks, which can lengthen the company's outbound logistics time. During the season the best-selling products will sell out quickly and will have to be restocked in individual stores. This task can be difficult as the factory supplies individual shops to order, so in the event of a stock-out emergency the factories will not be able to supply the shops. In conclusion, Lush manages to create a certain degree of transparency within its supply chain through various social and environmental policies. Through close collaboration with its suppliers, the company benefits from a clear flow of information that allows them to adapt to changes in demand and prepare for potential changes with suppliers' production. As the company continues to grow, it will become increasingly difficult to maintain all CSR processes and efficiency at similar levels. Lush uses land, air and sea transportation, however tries to avoid air transportation when avoidable due to its ethical ethos. As the company grows, the demand for its products will also increase. Lush will be forced to ship larger quantities of raw materials which will need to be moved in a relatively short space of time to reach the customer in time. Therefore, Lush will have to use more air traffic which will have an effect on their CSR policies. Alterations Alterations to the external or internal environment may cause new challenges or opportunities for Lush's supply chain management. Anticipating these changes gives companies time to prepare their supply chain systems for the effect these changes have on supply and demand. Potential changes in EU regulations Due to concerns about child safety, the European Union was considering banning inedible products that resemble fruit, sweets or other foods that children might be tempted to put in their mouths. Speakers in favor of the ban argued that products such as scented soaps or bath bombs that resemble foods could pose a potential safety hazard. This change in legislation could mean a major loss in Lush's product range and a potential withdrawal from the European market which makes up over 70% of their annual sales. Reusable packaging and charging stations? Potential changes to reusable containers and charging stations could revolutionize the company practices. Currently legislation does not allow companies to reuse their black pot packaging, so it is recycled or reused as art. However, with a change in legislation, this could potentially mean that once purchased by a customer, packaging can be reused without it becoming waste. Technological Advances New technology that allows for the development of more efficient machinery could have a major impact on lead times, managing inventory levels, or the perishability of the company's products. Ultimately, if local communities wish to acquire new technologies in harvesting raw materials, this could impact Lush's production. It could improve the quality of crops, speed and size of harvest. Recommendations An effective audit not only sends a strong message to suppliers, but increases transparency and helps identify problems that need remediation. While the cost of a thorough audit process may seem prohibitive in the short term, the long-term benefits of a well-designed process will almost always pay off. Lush