FEATURE: Inside L’Oreal’s Middle East supply chain
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Present in 130 countries on five continents with a portfolio of 32 brands, L’Oréal plans to gain a billion new consumers by 2020, while simultaneously reducing its global carbon footprint by 60%.
The company plans to do this by adopting sustainability measures across all its business processes: at plants, distribution centres, and its entire value chain, covering production, transportation and packaging. It will do this in each region in which it operates, with the project overseen by the regional head office. The company’s activities in Dubai and the GCC region are managed by L’Oréal Middle East, based in Dubai.
This type of organisation structure is perhaps one of L’Oréal's major strengths. It makes it easier to respond to consumers’ expectations by understanding habits, lifestyle and adapting to local distribution channels.
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“Because L’Oréal operates in several countries with different business models, its supply chain process is a bit complex,” says Yassine Bakkari, operations director at L’Oréal Middle East. “Most of our raw material sourcing is centralised because our products have almost the same ingredients. For example, surfactant, which is used for producing both soaps and shampoos, is sourced from famous suppliers in Europe. Likewise, we have suppliers in Asia as well as the US. We always ensure that our raw materials are of the highest quality.”
As part of its sustainability efforts, L’Oréal has launched a programme, named ‘Sharing beauty with all’, that sets out targets for the business until 2020 and provides a list of best practices that regional divisions follow and innovate upon.
By the end of 2016, L’Oréal had managed to reduce its carbon emissions by 67% and increased production by 29% over a 10-year period. Which supersedes its ambition of reducing its environmental footprint by 60% by 2020. The company currently boasts 15 carbon neutral sites, which include factories as well as distribution centres.
“The first thing the group did was measure. Understanding where we could make changes was 50% of the solution. So what we did first is to make a data collection of our entire value chain: of our factories and of our import and export operations,” explains Bakkari. “We had to understand where we consumed excessively and where we generate losses in terms of Co2 emissions. Then the findings were compiled in a book of best practices.”
Some of the best practices include shrinking the transport footprint, cutting waste per unit of finished product and reducing water consumption. These commitments are adopted in L’Oréal’s entire value chain.
Regional divisions also team up with logistics providers to increase efficiency through higher load factors and multimodal transport possibilities. Partners are made to understand the need to address climate change and build sustainability into operations and supply chains region-wide. L’Oréal Middle East has two subsidiaries in the GCC, one in the UAE and one in Saudi, and each has worked with its 3PL partners in this regard.
“The way we run our operations has a huge impact on our sustainability efforts. Last year we moved from a distributor model of business to a retail model. We now manage the end to end supply chain of the business: from development to manufacturing to inbound supply chain, packaging, labelling and outbound supply chain. We also deployed some new channels recently, such as e-commerce and free standing stores,” Bakkari says.
The main factory for the Middle East is based in Cairo. The company also has factories in Kenya and South Africa as well as a development and research centre based in Johannesburg where it develops products especially for the African region.
“The factory in Egypt is our prime supplier of products to the Middle East & North Africa. Having a regional factory, helps in terms of consumer relevancy and also reduces time to get the goods into the market,” Bakkari says. Towards it sustainable efforts, L’Oréal Middle East has been able to save carbon emissions through reduced airfreight and through optimising container space by 20% by using slip-sheets.
“When we import goods from our Egypt factory or transport goods in bulk to our customers, we use slip-sheets instead of pallets. The use of slip sheets help us reduce space wastage and export more number of products, thereby reducing carbon emissions. As per our research, this method has helped us make 20% optimisation of space.” Bakkari explains.
“Another step we have taken is to rely more on sea freight instead of airfreight. Airfreight is really a high demanding mode of transportation in terms of carbon emission. Last year, L’Oréal Middle East was able to save 50% of carbon emissions just by cutting out on airfreight,” Bakkari adds.
The company also tries to make the supply chain process shorter whenever possible to save resources, often by cutting out the regional transhipment hubs. “For example, when we sell our products sourced from France to Tunisia, we don’t import it to the UAE, though it is a part of the L’Oréal Middle East segment. We import directly to Tunis. That is a huge saving in terms of carbon emissions,” he says.
L’Oréal Middle East has a complex distribution system, delivering to big outlets such as Carrefour and Lulu, small boutiques, as well as salons and pharmacies. In Dubai alone, L’Oreal has 4,000 customers and a thousand points of delivery. Mohebi Logistics has been managing L’Oréal’s Middle East’s logistics operations for the last 18 months.
“When we changed our business from a distributor model to a retail model, we decided we needed a strong partner to manage our logistics, and we made a choice to go through a tender process and Mohebi Logistics was selected,” Bakkari says. Mohebi Logistics provides L’Oréal with hub warehousing for the region, UAE warehousing, retail transport, as well as picking solutions.
L’Oréal Africa Middle East also holds regular workshops with Mohebi Logistics, to discuss ways to promote sustainability in its operations and to promote its vision of sustainable transport. “We cannot attain our sustainability goals without help from all our stakeholders. Mohebi Logistics is a strong actor in our sustainability process. We hold regular meetings with them to discuss green goals,” Bakkari adds.
Mohebi Logistics carries out two models of operation for L’Oréal. “There is a regional model, in which L’Oréal prepares an order from its regional distributors. These goods are picked and made market ready with value-added services and then delivered. For the UAE market, we again receive orders, we pick those products and deliver them to the final customer,” said Phil Showering, COO Mohebi Logistics.
Value added services include ink jetting, labelling and co-packing. “We work closely with L’Oréal to adopt the company’s best practices in our operations to reduce carbon emissions. Some of these are using slip sheets to optimise container fill, consolidating orders to reduce frequency of shipments, and making use of reusables whenever possible, for instance using plastic boxes instead of cardboard boxes,” explains Showering.
“Mohebi Logistics has 33 vehicles, from large trucks to small cars, which can be adapted to our different needs,” Bakkari said. Talking about L’Oréal’s goals for the future, Bakkari adds, “We are currently working now at our Egyptian factory to develop a solar panel. We also plan to carry out waste water treatment at the factory. The energy gained from that can be reused in our energy cycle, creating a ‘closed loop’.”
L’Oreal’s endeavours thus far have paid off handsomely, in April this year the company won the award for Retailer of the Year at the Logistics Middle East Awards.