Elizabeth Arden is one of the oldest global prestige ‘beauty products’ company with an extensive portfolio of brands that include Elizabeth Arden skincare, color and fragrance products, sold in over 120 countries.
Elizabeth Arden deploys a procurement model wherein third-party CMs conduct transactional buying with raw material and packaging suppliers. Use of different data systems by CMs from the company resulted in price discrepancies between contract and invoice prices.
To address the potential negative impact of this variance on budgeting and cash flow, the company engaged The Smart Cube to establish a process for tracking PPV, identifying underlying causes, and mitigating transactional risks and losses.
Starting with receipt of raw data feeds from manufacturers, The Smart Cube established a business process.
After consolidating, standardizing, and cleansing this data, they utilized a variance calculation tool to compare the PO prices with internal price standards.
The results of this analysis, along with the relevant KPIs and insights, were presented to Elizabeth Arden in the form of an interactive dashboard. This enabled their company executives to analyze these variances and investigate the underlying causes.
This solution resulted in a number of improvements to Elizabeth Arden’s contract manufacturing practices. Some of these are:
The consolidation of the company’s manufacturers’ data provided Elizabeth Arden’s executives a comprehensive analysis of what their entire network was buying on the company’s behalf.
With detailed information on PO compliance with contract prices, the company can quickly respond to variances that may otherwise snowball into significant losses over a period of time.
The first compliance report prior to leveraging The Smart Cube’s solution indicated an 18% accuracy, implying that there was variance between the contract terms and the actual transactions for 82% of the purchases.
Since leveraging The Smart Cube’s solution, accuracy has increased to 50%—a 178% improvement over the previous accuracy rate and a 32% overall increase—significantly reducing the volume of rework and reconciliation.
Elizabeth Arden will benefit from more accurate purchasing data that can be used to better predict and impact the cost of goods sold.
At the end of this project, William Babuschak, SVP of Global Planning, Procurement, and Manufacturing, Elizabeth Arden commented, “For the first time since implementing the directed turnkey model, we received consolidated analysis that provided visibility into $110 million of future purchases that were being made on our behalf. Given the scale of this amount, it stood out how beneficial The Smart Cube’s analysis could be for improving our company’s efficiency and profitability.”
This proves that robust analysis of variances in purchasing prices using data analytics tools can significantly improve visibility into price dispersion. Better visibility can be used to identify the principal reasons for this variance, and, ultimately, to reduce the risks and losses associated with the purchasing of raw materials through CMs. Additional benefits include improved budgeting and more accurate spend analysis. Therefore, companies should consider leveraging data analytics solutions to mitigate losses in an increasingly risky procurement environment.
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