THE ANALYSIS OF THE LOGISTICS SYSTEM – SC
AVON COSMETICS (
CHAPTER 1: Introduction
Avon Cosmetics Romania was registered on September 4, 1997. It operates in 96 areas throughout the country, with three main locations: the head-office- Avon Cosmetics (Romania), Ermil Pangrati no. 30, sector 1, Bucharest; one express delivery center in Bucharest, Lahovari Square, no. 36-40 and the Operational Center, Chiajna, No 13bis.
From the very beginning until
so, due to the economy crisis
In the first nine months, net profit fell by 45% to 356.4 million U.S. dollars from 642.9 million
AMWAY: One of the best known direct sales companies in the world,
entered the market in
FABERLIC: entered the Romanian marketing
2004. Originally from
ORIFLAME: It was the first direct
sales cosmetics company that entered
OTHER COMPETITORS: Even though there is a strong competition on the
cosmetics market, the main competitors of
the purpose of this paper is to analyze and evaluate the logistic activities of
One selling cycle (also known as a campaign) lasts for three weeks, enough for each area to place two standard orders: usually in the first and the last week of the campaign.
The following chapter will provide detailed information about each component of the logistic activities.
CHAPTER 2: Identification of the logistic activities
Every company that aims to survive on the market needs a well-defined logistics system, given the fact that the way the consumer requirements’ are fulfilled can make the difference in favor or against one company or another.
According to the scientific theory, logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers. Logistics involves the integration of information, transportation, inventory, warehousing, material-handling, and packaging, and occasionally security.
There is a logistic function in every step of the commercial act and this function administers either the material flow (goods, products) or the immaterial one, which is related to the information and financial circuit. According to the direction of the flow, we can distinguish three basic components of the logistical activity:
the upward logistics
the downward logistics
the inverse logistics
As we have already mentioned, AVON Romania doesn’t produce, but imports the products and delivers them to the sales representative or to the final consumer. Given so, we will evaluate the following processes:
Proceses belonging to the upward logistics: procurement, purchasing and boundary operations for the flow of the goods towards the warehouse
Proceses belonging to the downward logistics: warehousing, co-packing, labeling, order preparation and transport towards the sales representative
The only process that belongs to the inverse logistics :return
Procurement. Purchasing. Boundary operations.
Given the fact that the commercial agreements between
However, it is certain that the cosmetics
commercialized by Avon
The Procurement process is always related to the forecast of supplies and it is mandatory for both parts to respect the specific quality standards, the boundary regulations and the international commercial laws
Warehousing. Co-packing. Labeling. Transport.
On a surface
square metres, the
The products are received in the dock’s region, where the infrastructure allows unloading four trucks simultaneously. Then it is transferred into the warehouse region that lays on a surface of 3300 sq. m and a warehousing capacity of 4100 pallets. According to the number of orders that are asked for daily, the products are transferred to the region of co-packing.
The way the products are arranged in this region is changed every three weeks
because according to the promotions and offers in the brochure, the volume of ordered products is subject to change every campaign.
Before reaching the packing region, appropriate labels have to be stuck on the containers. At the very beginnings of Avon Romania, the containers were printed directly, which was a great disadvantage because a product in a bottle printed in Romanian language couldn’t be delivered in another country, due to the commercial regulations.
After the products are packed, the boxes (carton boxes of different dimensions) are arranged according to volumes, type of delivery and destinations and go forward towards the delivery docks.
All the regions involved in the processes of product handling are strongly supervised to respect the temperature and humidity conditions, as well as specific hygiene requirements.
Not mentioning the external
deliveries (towards the Balcan’s region), the products are delivered either to
The delivery company is chosen
every year, after an auction process. Every delivery has to be proven with the
signature of the Sales Representative on the delivery documents and the
obligation of the courier is to try the delivery at least twice before
returning the package to
Type of order
Type of delivery
Twice a campaign, scheduled dates
Only in the area the SR belongs to
One day after the Credit Check
Free of charge
Internet Express Home Delivery Order
Daily, online order only
One day after the Credit Check
Express Center- Lahovari only
Express Center- Lahovari only
Free of charge
The following products can’t be returned:
- Brochures, samples, demo products offer, and any other product that is aimed to promote and support sales
- Products that support various social campaigns (ex. silver badge Breast Cancer). Funds from the sale of these products are intended to support the social campaigns.
- Goods received as a result of errors in placing the order. Exceptionally, all the above products can be returned only to be replaced, if they are defective.
Returns are considered full returns if the boxes haven’t been unpacked, packages that weren’t delivered to or raised by the representative in the delivery time.
the returned products to the Operational Center Chiajna:
Returned products will be sent by each representative through the Romanian Post (only at post offices that have Messaging) or any other courier service which package allows the declaration of value, necessarily accompanied by a return form.
The Department of Operations will receive the returns every working day from the Post Office Chiajna and forms will be processed within 3 working days of their receipt on the operator.
Chapter 3- Classification and evaluation of the logistic services
Given the fact that the main logistic activities have already been described, this chapter is aimed to provide a more structured perspective over them.
As such, we have considered that a classification of the processes according to the logistic function fulfilled would be useful, since it both emphasizes the chronological order of the sequences and the importance of every step in the supply chain:
Processes that belong to the industrial logistics:
The purchasing and
procurement of raw materials- as it has already been stated, Avon
b) The transport of the products within the deposit is realized on wheels, from the dock’s region ( where the trucks are unloaded) towards the warehousing area.
c) Warehousing processes- are developed on 3300 out of the sq. m. The maximum capacity of 41 pallets is almost entirely used, especially during the peak-seasons, due to large amounts of quantity ordered during the winter holidays and later on for the Valentine’s day, and the 8th of March.
Processes that belong to the storage logistics:
a) The transport of the finished goods
b) Replenishing the distribution platforms
c) Storing the finished goods
The three above processes are strongly connected one another, mainly due to the aggregate character of the machinery. Items in the order fulfillment area are picked and replenished in one of two ways:
Items can be picked from a machine called an A-frame, which dispenses items into containers
corresponding to each order. This machine can process about 40 orders a minute, so the
supply of items stored there can be quickly depleted. Because of this, cases of each item picked from the A-frame are stored in flowrack located near the machine; this supply is used to replenish the A-frame.
Items can be picked by workers who visit an item’s storage location.
Processes that belong to the distribution logistics:
Given the character of the selling process, as a direct activity, the distribution logistics only comprises the transport from the warehousing area, where the orders are waiting to be delivered, towards the loading region. That is the point where the strategic partner- Fan Courier -starts to assume responsibility for the ownership of the packs.
Even if the above classification offers an overview of
the main processes, it is a functional one and its role is to clearly
distinguish the limits of the logistic functions. Moreover, we have considered
that all the mentioned processes are essential for the business itself and
their impact over the activities performed by
For this reason, the following chapter will focus on the way the processes can be improved so as to bring even more results with fewer resources.
Logistics is a real source of competitive advantage, a key component of the organization. By reconsidering the strategy of logistics services for customers, the organization can meet in greater demands in terms of target market segments.
Giving the fact that Avon
processes every three weeks thousands of orders summing more than 9 million
products, we believe it is a priority
They should improve two aspects of processing orders: picking items from the storage modes in which they are kept, and replenishing the supply of those items in the storage modes.
Every three weeks,
They should determine
which items should be stored in each storage mode, and the quantities in which they should be stored, in order to minimize the total cost of picking and restocking the order fulfillment area.
the process of assigning items to storage modes and determining the quantity in which they should be stored is called slotting the warehouse.
It should be developed a method for slotting the warehouse by modeling the operations in the order fulfillment area.
They also should extend the model of the
Logistica si Distributia Marfurilor, C.Vasiliu, M.Felea Ed. ASE, Bucuresti, 2008, page 31
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