Richard Markoff: “Don’t be too rigid in what we define”

Nine questions about the topics on the supply chain agenda of a supply chain professional.

By Helen Armstrong  (Supply Chain Movement)

L’Oréal, the world’s largest cosmetics group, has an ambition to win over another one billion consumers within ten years. Most are expected to come from the emerging markets where one of the greatest challenges is the supply chain. The entire company is motivated to achieve this goal and Richard Markoff, as the company’s first Supply Chain Standards Audits and Director, has the job of laying down and auditing supply chain standards for four global business units, which include 27 international brands. Just like the company creates new skin and hair care products to meet the consumer’s diverse and infinite needs is a company trademark, there’s opportunity for innovation in the supply chain.

1. What is the strategy of the Company (or Division/Supply Chain): Operational Excellence, Product Leadership or Customer Intimacy?

We always put the customer first and foremost. We want to be the best supply chain in the beauty business and the preferred supplier of our major partners. We believe we can do this by adding value. We are building our entire supply chain around service, costs and proactivity, even trying to predict an event before it happens. Our organization is set up so that we can collaborate closely with our customers. We know their demands and we propagate that through the supply chain through to our factories and network of suppliers. To be a preferred supplier we have to understand what our partners want and in the different distribution channels the expectations are also different.

2. What is your responsibility regarding the supply chain?

As Supply Chain Standards Audits and Director my mandate is to standardize the core part of our supply chain practices globally. It involves all four of our company business units – luxury, consumer, active cosmetics (drug stores and doctor) and professional (salon) – which in a way are all defined by a distribution channel. Active cosmetics and professional are often distributed to small businesses and the emphasis is on high reliability. Consumer products place priority on margin and inventory and that requires close collaboration with our customers to squeeze out as much efficiency as possible. Luxury products are driven by season and special day promotions, such as Mother’s Day.

Our quality approach to the supply chain is tailored to these different distribution channels. I have to make sure that everyone understands the best way to manage our knowledge and best run customer collaboration and demand planning with our vendors. My team communicates the standards and audits different parts of the supply chain to monitor what people are doing well and where they can improve. This can be anything from picking and packing in the warehouse, demand planning and the S&OP process, to production planning and shop floor scheduling.

3. What are the main business challenges that drive supply chain projects at the moment?

First and foremost this is to fulfill the ambition of our CEO Jean-Paul Agon, which is to add one billion new consumers, to our current one billion, within ten years. We know these consumers will come from emerging markets in Asia, Eastern Europe and Russia, Africa and Latin America. Our biggest challenge is to ensure that we have the right supply chain in place. This means we have to have the right factories in the right places with the right capacities and with the right distribution network.

A lot of variables are involved, such as infrastructure, income and local circumstances, but all have been considered strategically and the entire company is mobilized towards this ambition. We have already opened business affiliates in Saudi Arabia and Kenya.

Also, to meet this challenge, we need to know the expectations of consumers and their buying habits. For example, there are 8.5 million points of deep trade in India, mostly very small shops, so we won’t be running the same promotions there as in multinational retail stores.

And, while we are expanding our business in emerging markets, pressure in Europe and the US means we have renewed emphasis on saving costs, without compromising our quality of service. The challenge is that the consumer is becoming ever more demanding, the turnover of products is higher and higher and the pressure to innovate and have perfect service is greater than ever.

4. Which supply chain challenges keeps you awake at night?

We are in so many distribution channels that the question is always, “Are we building the right supply chain for each of our different customers?” Our customers have very different requirements and expectations so I want to be sure that our distribution channels and supply chain models allow each of the business units to fully address their customers’ needs.

For example in the luxury division we have to ensure that batches are not too large, so we don’t generate large inventories, and that our supply chain can react easily around launches. The supply chain for the professional and active cosmetics divisions deals with high frequency, low volume deliveries that require a high level of customer service. The consumer products business unit needs supply chain standards that allow sophisticated customer collaboration, global data synchronization, and collaborative forecasting and replenishment. Here, we have to put more emphasis on ongoing price promotions to stay with the competition and keep our customers happy.

5. What do you do about these challenges?

The challenge for me is not to be too rigid in what we define. We have to build in flexibility, listen to our customers and react. We have to build a supply chain in which we put the customer first, that offers the right level of service for that customer and at the same time control our costs.

We have 42 factories and we manufacture 86% of what we sell. Having our own factories gives us more flexibility. We can make more nimble decisions in our shop floor scheduling to react to events in the market place. Also, it gives us more supply chain security in terms of social responsibility, safety, the environment, our carbon footprint and coping with unexpected events. At the same time e-commerce is an ever growing part of our business but our e-commerce strategy has to go hand–in-hand with the business strategy in each market.

6. Who do you like to meet for an exchange of knowledge?

I like to meet other supply chain professionals and those working in IT as it is very hard to separate what we do in the supply chain from the tools we have to do it with. Also, I like to know what challenges other companies are facing.

We make a big effort at L’Oréal to ensure that our supply chain road map and IT road map go hand-in-hand. We use SAP and APO monitoring software to do advanced planning and optimization and we are rolling out an exciting project called Kiss to improve our reactivity in S&OP up and down the chain.

7. Which book has inspired you the most and why?

I do read a great deal and the most recent book that should be on everyone’s Must Read list is: The Signal and the Noise, by Nate Silver. He is a gifted statistician and he examines how we all try and predict what is going to happen and why sometimes we’re right, and sometimes not. We all face a lot of data and he describes how we try and pull a signal out of the noise. Silver says we put too much confidence in our ability to predict and not enough emphasis into being able to react when we are wrong. These are some important lessons for organizations.

8. What do you expect to be doing professionally in 5 years?

I have been in this role for less than a year and it is not a short-term mission. It will take some time to put all the standards into place. However, I think in five years it will be important for me to leave corporate and go back to an operational role to see how things have evolved and refresh my knowledge base.  It’s dangerous to stay in a corporate role for too long. You have to live and breathe supply chain to truly understand it.

9. What do you use for an agenda?

I use Outlook for everything – contacts, agenda, messages – and I live and breathe with my Blackberry. It’s the first think I pick up in the morning and the last thing I put down when I go to bed!