Raw Materials & Their Importance in Cosmetics

Consumers’ interest in specific raw materials and product composition has grown immensely over recent years. With digital marketing on social media platforms and data transparency, today’s more progressive consumer is eager to know:

  1. What materials go into the product I am purchasing?
  2. From where are these ingredients sourced?

Ethical sourcing of raw cosmetic ingredients is a trend that certainly comes with its benefits and complexities.  That said, this trend is not going anywhere any time soon.

Raw Materials – Quality, Quality, Quality 

There are hundreds of options when it comes to hair, face, and body cosmetics products. From CVS products to high end designer brands, cosmetics products companies define and execute a go-to-market strategy based on the ingredients they put in their products. Some brands are focused on low cost effective solutions while others focus on top quality product beyond all other factors (often resulting in very high prices). As of late, consumer interests have shifted towards premium solutions. After all, having high attention to detail down to the ingredient level ensures brands formulate the highest quality product. Creating high quality products gives consumers a sense of pride in their purchases, reduces risk of customer churn, and leads to a higher probability of profitability for the long-term. Materials is the main answer to why consumers would prefer to speak $30, $50, or even $65+ for a bottle of shampoo vs a $6.50 bottle of Head & Shoulders. 

How’s It Made and Where’s It Come From? 

How many consumer product instagram ads have you seen where a specific ingredient is highlighted? Consumers perhaps care equally about what materials in their product as they do about ‘where’ and ‘how’ the materials were sourced. Organic, cruelty-free, vegan, made in USA, etc are additional important material characteristics that consumers care about. Each of the consumer subsets mentioned has one thing in common; their passions are a lifestyle. Cosmetic brands who listen to their customers and formulate a product to reflect their passions will reap the rewards of a loyal fanbase that consistently comes back for more.  

Perceived Value Provides Margin Flexibility

For many brands, it’s difficult finding that balance between sourcing high quality ingredients that meet ethical standards while balancing profitability.  The superior materials and branding warrant higher consumer prices but they will always battle value brands. Most of the high cost cosmetics brands also focus dominantly on digital sales channels which generally bring higher margins. 

The GRID: Digitizing Raw Materials Processes

Raw ingredient sourcing is complex; accounting for multiple components, managing local and international suppliers, ranging lead times and duty rates, disconnected systems, various spreadsheets and email threads, etc. Although the moral / economic gains are there for the taking,  this is obviously a lot to handle from an operational perspective.  These challenges have caused many companies to turn to the GRID for help.

The GRID is the next generation supply chain platform for emerging cosmetic brands.  The GRID provides brands with one collaborative platform to track and manage raw ingredients / components, products, digital assets, projects, purchase orders, and shipments.  More relevant to this conversation, the GRID drives significant value, process automation, and operational connectivity for cosmetic brands who source raw ingredients. 

Component Management – learn more here

  • Store & manage raw item details at individual component level
  • Link raw ingredients & components to finished goods creating BOMs
  • View inventory details for individual ingredients & components
  • Associate raw item costs & supplier information from material library to bill of materials

Vendor Collaboration

  • Identify & clearly articulate specifications with suppliers in advance to speed up lead times
  • Ensure suppliers have the correct amount of inventory to avoid stock outs
  • Create & share delivery schedules with vendors to effectively coordinate flow of materials into production

Purchasing – learn more here

  • Create & issue cost sheets, run bids across multiple vendors, & auto-calculate margins for side by side comparison
  • Create & manage purchase orders
  • Navigate exceptions & automate reconciliation process with ERP
  • Track production milestones

Shipments Management

  • Create & manage shipment records
  • Link purchase orders / order items to specific shipments
  • Consolidate or split shipments
  • Track logistics milestones

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