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Workers making fist-sized bath bombs produce on average 500 a day by hand.


The outside of Lush Handmade Cosmetics's factory in Toronto is quiet and unadorned.

But inside the plant, production of balms, bath bombs and other bathing products is frenetic. Workers stand at tables, mixing, pouring, applying sticky pastes, scooping powders and dipping balls of sodium bicarbonate into bright liquids. Glitter and the sweet cosmetic smell of Lush stores permeate everything. Workers making fist-sized bath bombs produce on average of 500 a day by hand.

The factory's taut production process is a study in how the company is trying to keep up with rapid demand.

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Since 2006, the heavy demand for products and ingredients had come from the intense push to fill Lush's growing number of retail stores, with 30 to 35 new outlets being added a year to the approximately 250 outlets already in Canada and the United States, each doing an average of more than $2-milliion in business. As the North American arm of Lush Ltd., which is headquartered in Poole, England, the company makes its products for Canada and the United States in just two factories, the one in Toronto and another in Vancouver.

Starting this year, however, Lush's growth strategy has shifted. The company has a three-year plan to stop focusing on opening stores in new North American markets and instead to relocate and refit some of its existing outlets. (Around 40 stores will be changed in 2017.) The refitted stores will be three to four times larger.

Tray after industrial tray of pink beauty confections sit, waiting to be shipped with the sense of urgency coming not only from more stores opening and shelves needing to be stocked, but from existing stores being enlarged.

Lush's North American outlets are typically 800 square feet, but some have been expanded to 2,500 square feet. An outlet in West Edmonton Mall is more than 3,000 square feet, says Mark Wolverton, chief executive of Lush Cosmetics North America.

Because the products are delivered fresh and preservative-free, they have to be moved quickly to the stores, not stored as inventory. The process resembles that of a food company moving perishable products.

As Mr. Wolverton notes, Lush's production cycle is so tight that it aims to have a store order a product one day, the product manufactured and shipped the next, and then a customer buying and using it the next day, still fresh. "That's the ideal situation. It's a bakery-style system," he says.

Lush's original British founders developed some of the early products for The Body Shop. Later, they started afresh as a mail-order business. Later still, Lush's owners opened their first store in Poole. The business grew, and Mr. Wolverton, who comes from a Vancouver family in the brokerage business, set up Lush's North American business in Vancouver in 1996.

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"As we expanded stores into the U.S., it took a little longer in places like Texas and Florida for the brand to catch on, versus the upper Eastern Seaboard, or the West Coast, the California-to-Washington area," he says.

Yet with the southern United States now catching on to its products, the company is rethinking its North American manufacturing, possibly opening a plant in America.

To ship fresh products to stores, the company calculates it needs to have a factory within about 1,600 km of each of its more than 930 stores in 49 countries.

All of this leads to a core pressure point in the process: procuring fresh ingredients.

"We buy materials from all over the world, whether that is shea butter from Ghana, or cocoa butter coming in from producer groups in South America that we've been working with. Or argan oil from Morocco. And all of our perfumes come from the U.K., and we buy a lot of other materials from the E.U.," says Heather Deeth, Lush North America's buying manager.

The company tries to work directly with growers, many being small farmers' groups. The difficulty is finding enough ethically grown and environmentally sound raw materials.

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"That's what I lose sleep over every day, as I'm the gatekeeper for buying. How do we grow our supply chains in an ethical way, over time, to support the growth of the business?" Ms. Deeth says.

Take cocoa butter, used for various products from body lotions to scented bars made to melt in bathwater. "If I wanted to do great things for the bottom line for our business, I would say, I'll just buy conventional cocoa butter off the market. I'd do a three-year contact, and I won't really care where it comes from," she says.

On the contrary, though, Ms. Deeth and Lush's mandate is to care where and how the ingredients are grown. A few years ago, the company decided to start buying certified fair-trade organic cocoa butter. To ensure enough supply, Lush is buying from producers in Latin and South America, from co-operatives in Peru and the Dominican Republic to groups in Colombia and Ecuador.

"Some of the edgier work that we're doing now is trying to directly trade with a variety of groups in countries that are less developed, that don't even have the infrastructure around exports," Ms. Deeth notes.

Mehmet Gumus, associate professor in operations management at the Desautels Faculty of Management at McGill University in Montreal, says suppliers will find themselves having to form partnerships and implement more advanced supply-chain technology to meet the needs of manufacturers and retailers.

With producers such as Lush needing to hit the frantic pace of production of bath bombs and other fresh goods, "the supply chain and consistency on that is pretty critical," Ms. Deeth says.

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