Dive Brief:

• Sally Beauty is working to add more visibility to its supplier operations after raw material shortages led to an estimated $15 million in lost sales during the second quarter, President and CEO Denise Paulonis said in a Q2 earnings call.
• The beauty supplier is working to better communicate with vendors about where backlogs exist following stockouts in top-selling SKUs. Sally Beauty is also getting “more specific” with suppliers on where the company is seeing the most customer demand, so vendors can prepare accordingly, Paulonis said.
• Raw material shortages among suppliers were most acute in April and May, before improving in June, according to Paulonis. The company expects that supply constraints won’t fully resolve until fiscal year 2023. 

Dive Insight:

Miscommunication with suppliers exacerbated stockouts, particularly in the company’s Beauty Systems Group unit, which caters to licensed beauty professionals. Sally Beauty also saw stockouts of certain top-selling hair color dyes.

The beauty supplier is now trying to get ahead of future shortages through closer communication with suppliers.

“I think we had a little concern that is equal responsible on our part and the vendor part to be sure that clarity of the pent-up demand was getting through into the demand signal,” Paulonis said. “And so we're focused on that.”

The beauty supplier is more clearly highlighting which products are seeing high demand to give suppliers adequate time to prepare over the “coming weeks, months, quarters,” Paulonis added.

“What we see them doing with that is then going back up their supply chain and trying to work hard to say, ‘I'm going to have all my raw materials, I'm going to be able to build to those numbers,’” she said.

Closer communication with suppliers has already helped with supply availability, with shortages improving over the last two months.

“All of our vendors want these sales as much as our customers want the product. So they are clearly trying to work hard, whether it's a bottle, or a lid, or raw material ingredient itself, to be pushing those things back through,” Paulonis said. “And I think we're seeing those results.”