Is on-demand production the future of the cosmetics industry?

 Key learnings: 

• The topic of on-demand production sparks interest among cosmetic industry representatives. 

• The largest potential for customized cosmetics seems to be in product types where different colors are important for the users, such as nail polish and foundation. 

• Some saw the possibility of on-demand orders and production in combination with drop shipping to save costs on transport and storage.  

• Most of the companies were positive about on-demand as a good marketing strategy. Mobile equipment could be brought to different events or be used in stores for a shorter time period. For these use cases, rental of the equipment was deemed interesting.  

Concerns: 

• There is a lack of consensus regarding the magnitude of unsold products and whether this constitutes a significant problem.

• Larger players often grapple with excess inventory stemming from promotional campaigns, seasonal product launches, packaging changes, and product returns. The stringent hygiene regulations surrounding returns often result in product destruction. It has been observed that not all product colors sell equally well. Yet, the necessity to order an equal quantity of each color further complicates inventory management and results in waste. The current solution in the presence of overstock seems to be to sell the products at reduced prices at different outlets or donate them.

• Some of the smaller companies already work with small batches and forecasts, so they try not to produce more than they sell and have small waste volumes.  

• Many of the interviewees had difficulty in seeing how it could be profitable to produce only one product at a time on-demand.  

• There are some practical barriers to on-demand in existing supply chains. For example, some products, such as perfumes, must be tested before being sent to customers. Another practical barrier is the frequent use of minimum quantity at production plants. 

Here is what we recommend doing more research on to find out if on-demand production of cosmetics would be more sustainable and circular: 

• How big is the post-consumer waste stream for cosmetics? How much is wasted because the color turned out to be wrong, or because it did not work as promised, or because it was forgotten in the back of the bathroom shelf? The magnitude of this problem was not investigated in this study and could be further explored.  

• Is producing on-demand solving the problem with waste and over-production or is the problem just pushed further upstream in the value chain? Or would it actually be more resource-efficient because the actors further up in the value chain have more flexibility towards other customer groups?  

If you or your company are interested in doing more research, or maybe a pilot with on-demand production, feel free to contact us on

Ann-charlotte.mellquist@ri.se

Hanna.nordeno@ri.se