When I got my first formulation job, I was hired as a “cost savings” chemist. This meant it was my job to identify ways to reduce the costs of our formulas. It wasn’t a particularly glamorous job but I did take pride in the fact that I literally saved the company a few million dollars a year. Some of the projects were even ideas I had myself! Too bad I didn’t get a portion of that cost savings. But that’s the life of a cost saver.
Even if you are not a “cost savings” chemist, as a formulator or product development chemist you should have an eye on how you might reduce the cost. Here are some of my favorite tricks for reducing formula cost without sacrificing product quality.
1. Reduce or remove nonfunctional ingredients. Typically, you will inherit a formula so the level and choice of ingredients may not have been ones you made. Frequently, there are ingredients that may have been added without checking whether they make a difference or not. Some chemists are inspired to add ingredients if they like the supplier and claims enough. You may be able to remove ingredients completely from your product without anyone noticing a performance difference. To identify these I recommend you do a knockout experiment.
2. Optimize your formula – Sometimes the ingredients in a formula were not optimized when it was originally created. This makes sense because once an ingredient is put in a formula and it works, there is little extra incentive to optimize. There is also usually not enough time. But there may be many ingredients in your formula that could be reduced by half or even more. Use your knockout experiment to guide you. You may also use the cost of the ingredients in your formula to guide you. When you are looking for cost savings, reducing the levels of the most expensive ingredients is an efficient way to go about it.
3. Replace expensive ingredients – There is a wide range of prices for ingredients that essentially do the same thing. If you can find a less expensive alternative for an ingredient in your formula, you can significantly cut the cost of your formula. Identify the most expensive ingredients you’re using, then seek out less expensive alternatives.
4. Find a new source – You don’t have to necessarily change the ingredients to get a cost savings. If you are buying a raw material from one supplier, look for the same raw material with another supplier. They may be able to match or beat the price you are currently getting. If you work for a big company, make recommendations for ingredients that could be better sourced to your purchasing department.
5. Consolidate formulas – If your company has a few lines of products or the brand that you use has a number of SKUs, find ingredients that could be commonly used among all the formulas. This will allow your company to buy a higher amount of a raw material and potentially get a cost break. It is these kinds of reasons that when a big company like P&G buys a smaller company like Clairol, they change the formula of their popular Hebalessences line to match the Pantene line. It’s a huge cost savings.
6. Find synergies – This one is a bit harder but if you can replace some ingredients by finding a synergistic effect between other ingredients, you can get the same impact using a lower level of the ingredients. For example, using guar hydroxpropyltrimonium chloride in a cleansing formula allows you to reduce the level of surfactant while maintaining the same level of foam quality.
7. Use multifunctional ingredients – Some ingredients can do double duty to allow you to remove multiple ingredients in a single formula. For example, some polymeric thickeners can double as emulsifiers. This can allow you to remove your emulsifier while reducing your formula costs.
8. Packaging changes – Do you really need to deliver 16 ounces of shampoo when 15 ounces works just as well? This was the idea when the VO5 brand shifted from 16 ounce bottles to 15 ounce bottles without significantly changing the look of the product. Consumers continued to buy the product and we got a nice cost savings. And your package changes don’t have to be in the design. You can also change the resin in the packaging which may save a significant amount of money too.
If you’re building a new company, focusing on cost savings can be detrimental to growth. No one ever cost saved themselves into a billion dollar beauty brand. But as a formulator working at a company, you can significantly improve your value by finding ways for your company to make more money without having to make more sales. Formula cost savings is the way to do that.
Incidentally, be sure to test any new formulation. While you might not think there will be a significant impact on performance, safety or stability, testing is the only way to verify this.