Breakin’ down that Value Network one step at a time #Birkholz

It is crazy that yet another busy workweek is drawing to a close. With only 5 more weeks left in the program, I am starting to appreciate the early morning wake-up and 7-hour work-day just a little bit more! Soon I won’t have the luxury of traveling from the hip city of Berlin to the beautiful town of Kleinmachnow every day!

Even so, the last few days at work have been HECTIC! Important discussions regarding product design, marketing strategy, and shop specifications have all circulated resulting in a lot of work for everyone in the office. Yesterday, new packaging prototypes arrived from a potential supplier, causing me to reflect on the complex supply chain and value network within the fragrance industry:

It is first important to distinguish that Birkholz International is a “Duftberater” (fragrance consultant) and not a “Parfümer.” To someone unfamiliar with the fragrance industry the difference may seem trivial, but it is actually quite an important distinction to make. This is because a Parfümer sits in a laboratory and physically mixes the perfume oils from natural ingredients. A Duftberater, on the other hand, provides the distribution channel and fragrance knowledge/ expertise to bring the product to the final customer.

Birkholz International utilizes a vast supply chain and value network to outsource the production and manufacture of most of the components that go into each bottle of perfume that they sell. After talking with Herr Birkholz, I gained further insight into the intricate inner workings of the fragrance industry. To start, the fragrance industry is much more complex and nuanced than many people think. Since starting here I have learned that it is standard for one bottle of perfume to contain upwards of 9000 individual components! The actual perfume oil alone can contain thousands of components and raw materials (that’s before packaging and bottling decisions)! Additionally, a long and complex supply chain is commonplace. For example, the perfume oil can come from one supplier and then must be sent to another supplier for mixing and infusion with alcohol. Then, it can be sent to yet another supplier for aging, and then again to another for quality testing and so on.

Birkholz International, however, has a unique competitive advantage. After years in the fragrance industry, Birkholz international has acquired the connections and technical capabilities to produce a bottle of perfume in 500-1000 components. In the B2C channel, the advantages of this are clear: saved time and money! But in the B2B channel, the advantages go even further. It is common in the fragrance industry for celebrities such as Christina Aguilera, Ariana Grande, Taylor Swift, etc. to release limited edition fragrances. To do so, these superstars utilize established perfume companies to market and distribute the fragrance under their name. With its unique competitive advantage, Birkholz International has the ability to offer celebrities and public figures the possibility of launching their own perfume in a timely, impactful, and cost effective way.

Going back to the value network, it has been a unique opportunity for me is to actually see some of the product decisions that go into the formulation of a final product. For example, Birkholz International uses a French company called Anha for their packaging design and manufacture (the same company that does packaging for Chanel)! On more than one occasion, Birkholz has received prototypes for review. Whenever this occurs, Herr Birkholz calls a staff meeting where all of the employees state their opinions (good and bad) on the prototype or concept. The following hour a Skype or phone conversation usually occurs in which Herr Birkholz states the groups concerns and comments.

As each day passes here at my internship, I learn something new abut the complex supply chain and value network within the fragrance and perfume industry!

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