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How You Can Reduce Costs Effectively

The world of cosmetic production has been in turmoil since the outbreak of the pandemic. And now we have a war in the Ukraine which looks set to make things much worse.

Supply chains are creaking. Inventories are declining. And inevitably as a consequence prices are rising.

The other thing that is inevitable when prices are going up is that people will look at ways to reduce costs.

So let’s look at the smart way of going about this.

Look for alternative suppliers

When supplies are short the obvious response is to look for new suppliers. The first thing any of us do when we are looking for anything nowadays is to hit Google. And why not? As we all know it is a fantastic resource. But not everything is available at the click of a mouse. I know of many useful suppliers who hardly trouble the algorithm at all.

If you are going to find the more elusive sources you need to hit your contact book. If you have been diligently keeping note of all the people you have spoken to over your career, and I hope you have, now is when it can pay off. Your contacts of course will also have contacts. Firing off emails and making phone calls can get you in touch with suppliers you wouldn’t be able to find any other way.

LinkedIn is good for this kind of work, so if you haven’t joined yet doing so will probably be worth it. Online forums like Formulators’ Kitchen and Chemists Corner might be worth exploring too.

Review your formulations and manufacturing methods to reduce costs

Formulations have often been developed many years ago, and are rarely reviewed regularly. There may well be things you can do to make them cheaper. This applies both to the raw materials that you are using and the way you are making them.

One potent source of cost reduction is the level of active material used. This could often be the most expensive ingredient in the formulation. Suppliers will generally be recommending a pretty high level of usage. But most effects tend to follow an s-shaped response curve.

A typical s-shaped response curve

Once you hit the maximum effect, anything extra is wasted. So this is well worth looking at. The same applies to fragrances. Many products have more smell than they need and the companies that make them have larger raw material bills than necessary to match.

Smart lab work reduces costs

Experimental design is very popular nowadays, especially in the pharma industry where it is often known as QBD. The rapid development of Covid vaccines is a good demonstration of its power. It is the best way of getting the most out of your lab work, and is particularly valuable for cost reduction and coping with regulatory changes. In essence what the experimental design approach does is to create a mathematical model from your experiments.

In many ways experimental design is a bit like planting a tree. The best time to do it is 20 years ago. The second best time to do it is now.

Increase your sales

There’s a bit of the chicken and egg about this one. When you increase your sales, you effectively reduce your costs per unit. Of course, you may well be reducing your costs with the intention of increasing your sales. But it is always worth remembering that these things have quite a strong interaction with each other.

Think Through Your Cost Reductions

Use your brain. Thinking is the most profitable thing you can do. Indeed, you can’t make a profit without thinking. A shortage of supplies doesn’t mean a shortage of opportunities. Keep your eyes open and your mind engaged. If you manage the resources you have available to you well, there is every chance you can emerge from the current crisis stronger than you went into it.

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