Case

Case Study for Elizabeth Arden

Background

Established a century ago, Elizabeth Arden, a modern U.S. beauty industry, does a great job in marketing and has huge customer base, especially in 2007. Unfortunately, challenges also exist in the company in supply chain field. Currently, Elizabeth Arden costs too much on logistics costs due to separate independent suppliers and complex shipments. Also it has some other problems such as high inventory carrying costs because of overestimation of demand, increasing overhead including excess labor resources and no specific strategic management structure.

In order to further develop market, keep high market share and gain more profit, Elizabeth Arden has to solve following main questions: 1. How to effectively consolidate suppliers? 2. How to execute organizational structure for the new strategy? 3. How to study monetary impact of the re-engineering and its shareholders?

To deal with aforesaid problems, the main focus is consolidating suppliers. It could simplify the suppliers, which could also simplify shipments, leading to lower costs. The most important reason is Elizabeth Arden and suppliers could build up a long-term relationships by consolidation. Long-term relationships can benefit all parties because it improves communication and quality and lowers prices.

Solution

Based on the

1. Cut Product Line

The first solution we are convinced to be effective is to cut the product lines. Elizabeth Arden sells more than 9,000 SKUs in FY2006, only 12 percent of which take up 80 percent of total sales. The rest 88 percents SKUs only account for less than 20 percent of sales but resulting in much higher level of complexity and variability, and this situation leads to high inventory level, low fill rates and the accompanying costs. Therefore, cutting most of those unprofitable products does not lose much sale but save considerable expenses. Moreover, fewer SKUs also helps to reduce variabilities and shorten lead...