China over-reliance? Corum says COVID-19 presents opportunity to reconsider supply chain strategy
The novel coronavirus originated from China’s Hubei province just days leading up to the Lunar New Year festivities in China and other parts of Asia.
Taiwan-based company Corum told CosmeticsDesign-Asia that it felt the effects of the epidemic immediately.
“We’ve observed dramatic slowdown of most business activities in China. The vulnerable consumer confidence has been lingering since the start of US-China trade war last year and is now hitting an even more catastrophic bump with no end in sight,” said Snow Hsieh, international sales manager at Corum.
According to Hsieh, the outbreak of the virus has spooked its customers, some of which have made large orders hoping to stock up on materials.
She noted that fellow ingredient suppliers operating in the North East Asia region have also experienced this behaviour.
The anxiety is understandable considering that China, the world’s largest producer, effectively shut down its industrial core in a desperate bid to curb the spread of the virus.
While factories have begun to reopen, Hsieh believes China will take some time to reboot itself.
“Given all the quarantine orders and limited rotating shifts in China, the supply chains around the world have been disrupted in one way or another. It will be a while for the world’s largest producer to resume its normal production level, let alone for the global economy to recover.”
Fortunately for Corum, all its production lines are located in Taiwan and it only obtains a fraction of raw materials from China.
“In the face of this disruption, our effective risk management has, without question, greatly reduced any potential predicament which may impact our operation. Our systematic management of safety stock and second source further enables us to comprehensively monitor and evaluate our supply chain, production line and logistics in response to this crisis,” said marketing manager Lisa Lien.
Hsieh highlighted that the current predicament has presented cosmetic companies with an opportunity to revaluate its reliance on China.
“No one can deny the importance of China in the world’s supply chains, but at the same time, the disruptive magnitude to which such a big engine can have on businesses would be unimaginable if we all continue to rely heavily and solely on China,” said Hsieh
“Both cosmetic ingredient suppliers and cosmetic manufacturers will be forced to rethink their supply chain strategy and divert their risk in the aftermath of this epidemic outbreak.”
Time for improvisation
While there is still much uncertainty, Corum said it will continue to improvise to keep up with new market requirements in light of the virus outbreak.
In the past month following the outbreak, Corum has seen a sharp increase in demand for its natural-based water-soluble emollients, which can be used in hand sanitisers to counter the drying effects of alcohol.
Lien explained that water-soluble emollients are added in alcohol-based hand sanitisers to impart moisturizing, soothing and softening effects on the skin, which would otherwise dry out from the high alcohol content.
Moving forward, the company believes will continue to see demand to rise given the current predicament of the outbreak.
“Some top virologists believe that COVID-19 has already missed the golden window of containment. If that is the case and the virus continue to spread without sign of improvement in the next coming weeks or months, we would expect to see the demand for hand sanitizers reaching a new high,” said Lien
In particular, the firm sees demand for hand sanitisers with natural ingredients.
“It is a trend for the beauty and personal care industry to go green. The demand for natural hand sanitisers has always been there in the market even before the outbreak and will continue to grow as we fight to contain the spread of COVID-19 virus,” said Lien.
She added that the demand may shine a brighter spotlight on label transparency in Asia.
“Label transparency in beauty has been trending and will be further augmented as consumers pay more attention not only to product function and efficacy but also where each ingredient derives from.
“Consumers are anxious to know if sanitising formulas are actually effective… and manufacturers can disclose in-depth information on their product composition, origin, safety and quality management to reassure consumers.”
