Fragmented supply chains “paralyze” beauty brands threatening billions in revenue

A report by Atelier and Accenture warns that beauty brands risk forfeiting billions in annual revenue if they do not adapt their “fragmented, linear, and archaic” supply chains to the new era of AI-powered and composable manufacturing.

“Brands are trapped in legacy thinking. They’ve built their operations around relationships and archaic processes that worked great 20 years ago but are now preventing them from growth,” Nick Benson, CEO at Atelier, tells Personal Care Insights.

Progress has been made in digital marketing and e-commerce, but Benson maintains that the core infrastructure behind product development and manufacturing remains slow and fragmented — making it difficult for companies to respond quickly or innovate at scale.

According to the report, digital business transformation in the beauty industry has increased by 183% since 2019. However, only 13% of companies say their supply chains are equipped to support their current priorities.

Consumer demand for new product launches continues to rise, with 64% of shoppers wanting brands to respond faster to their needs. Meanwhile, the number of “net-new” product launches has dropped to 46% in early 2024 compared to 63% in 2015.

Despite a strong consumer appetite, many brands operate with development cycles beyond a year. Benson says brands’ lack of visibility is a significant issue.

“Most beauty companies lack insight into their supply chain performance and the full range of alternative and performant partner possibilities. They’re making million-dollar sourcing decisions based on outdated spreadsheets and gut feelings rather than actual data about quality, capacity, and reliability,” he explains.

“Brands are so afraid of disrupting their existing operations — especially with the current uncertainty — that they end up paralyzed, even when their current setup is actively costing them market share. The reality is that the status quo has become the riskiest strategy of all, and as our latest report shows, it’s leaving US$86 billion on the table.” 

Only 13% of beauty companies say their supply chains are equipped to meet current business priorities.From linear to modular

Accenture and Atelier point to composable manufacturing as a key solution to outdated beauty supply chains. This approach uses AI-powered tools to digitally connect every part of the manufacturing process to make it faster and more flexible.

Benson explains that composable manufacturing breaks down entire supply chains into modular building blocks with interchangeable components that brands can mix and match depending on their goals.

The approach brings R&D, formulation, sourcing, and packaging onto a single digital platform, allowing teams to collaborate in real-time. Instead of waiting weeks for physical prototypes, brands can simulate and adjust product designs virtually, tailoring development for specific markets or ingredients before committing to full-scale production.

According to the report, companies using this approach have shortened development timelines up to sixfold and doubled operating profit margins on new product launches.

“You no longer have to choose between speed, quality, and cost. You can optimize for all three simultaneously to increase strategic advantage during new product development, mass production, and scalability.”

“When disruptions hit — whether it’s tariffs, natural disasters, or demand spikes — you can instantly recompose your supply chain rather than scrambling for months to find alternatives.”

The need for nearshoring

As global trade dynamics continue to shift, beauty brands are rethinking what cost efficiency means. Tanya Menendez, CEO of Nearshore, tells us: “There’s a clear shift toward more data-driven decision-making and scenario planning.”

“Price remains a significant factor, but the evaluation has expanded to include manufacturing and materials costs as well as tariff and freight expenses.” Rather than focusing on unit cost alone, companies are increasingly assessing the whole picture — how and where products are made and what it takes to get them to market.Beauty brands are increasingly shifting operations to Latin America as part of nearshoring strategies.

In this context, nearshoring is becoming a more attractive strategy. “Both suppliers and brands are actively negotiating with current partners and seeking competitive quotes from potential new manufacturing partners,” Menendez adds.

By moving production closer to key markets, brands can reduce transit times, improve flexibility, and better withstand global disruptions — all without sacrificing competitiveness.

According to Nearshore COO Liz Long, there is also a shift in how beauty brands choose manufacturing partners, such as moving away from sole-sourcing toward more diversified or regional networks.

“We’re seeing beauty brands pivot from Asian production to searching for formulators in the US and Latin America. This requires resourcing their ingredients and packaging, so it’s a multi-part move. Some are taking a hybrid approach, keeping their original ingredient sources and doing more of the mixing and filling in the Americas,” Long tells Personal Care Insights.

According to her, custom formulation is the capability that is most in demand right now. “Beauty brands are actively looking to recreate formulas they’ve developed abroad.”

Notably, she says the “clean beauty” trend drives brands to accelerate their product development cycles.

“There is strong interest in eco-friendly ingredient alternatives, enabling brands to confidently position their products as clean and secure placements within prominent clean beauty categories on major e-commerce channels.”

Instead of waiting weeks for physical prototypes, brands can simulate and adjust product designs virtually.“Interchangeable” without AI

Accenture’s global beauty lead, Audrey Depraeter-Montacel, highlights that while composable manufacturing builds the flexible system, agentic AI adds the intelligence and automation that makes the system dynamic, responsive, and self-optimizing.

This technology ensures the adaptable elements work together intelligently to hit complex targets with minimal human oversight. Depraeter-Montacel tells us it is influencing the industry’s operational core and connection with consumers.

“Agentic AI is reshaping both the commerce landscape and the consumer-brand relationship. With intelligent agents now able to proactively act on instructions and make purchases on behalf of the consumer, AI is poised to become the decision-maker in everyday interactions — streamlining tasks like product comparison, checkout, and post-purchase support.”

Accenture found that 75% of consumers are open to using agentic AI as personal shoppers. Depraeter-Montacel says this raises the stakes for brand visibility and discoverability in shopping experiences powered by AI.

Depraeter-Montacel says traditional “searching” methods are rapidly changing, and new platforms increasingly decide what products will surface. “If agents optimize only for price or product specs, brands risk becoming interchangeable.”