Download - Unilever Supply Chain Management
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RESTRUCTURING OF THE SUPPLY CHAIN MANAGEMENT
PRACTICES
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Unilever is a British Dutch multinational consumer goods company co-headquartered in Rotterdam, Netherlands, and London, United Kingdom. Its products include food, beverages, cleaning agents and personal care products. It is the world's third-largest consumer goods company measured by 2012 revenue, after P&G and Nestlé. Unilever is the world's largest producer of food spreads. One of the oldest MNCs, its products are available in around 190 countries
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Unilever claims that in 1 min. the world would have used 330,000 of its products.
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Unilever’s portfolio of categories
Leading category positions
Ice Cream & Beverages
Personal Care
Homecare
Savoury, Dressings & Spreads
Strong category positions
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OVERVIEW & BACKGROUND
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• Unilever is one of the world's leading suppliers of fast-moving consumer goods. It has its three major global divisions - Foods, home care and personal care.
• Vision: Our Vision is to help people feel good, look good and get more out of life with brands and services that are good for them and good for others.
• Mission: In the last five years, we have built our business by focusing on our brands, streamlining how we work, and improving our insight into the evolving needs and tastes of consumers. Now we are taking the next step in simplification - by aligning ourselves around a clear common mission.
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• Unilever was formed in 1930 with the merger of British soap company Lever brothers and Dutch Margarine company Margarine Unie.
• During 1960’s and 1970’s it expanded by horizontal and vertical integration emerging as a diversified conglomerate.
• In 1980’s it decided to have a more focused approach and referred to it as “core strategy” and focused on four industries – Food, Personal care, health care and specialty industry, this decision involved acquisition and divestiture of brands.
• As a result of this it developed an extensive range of product categories under each business segment.
• Unilever found itself becoming inflexible due to its huge operation and other inefficiencies. To come out of this mess it decided to restructure its strategy
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• They reduced their product category from 50 to 13 and by mid-1990’s it has acquired over 64 food business.
• Food business recession in the Western Europe (their main market) and US had severely affected its business and they had to shutdown many of their companies, to increase its sales
• It focused on different product segment for different countries based on their sales potential which doubled their sales.
• Due to this restructuring the operating margin reached over 11% and return on capital over 22%. It also became the second largest packaged consumer goods company and the third largest firm
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REASONS FOR RESTRUCTURING OF
SUPPLY CHAIN
1. Its announcement of special interim dividend2. The growing popularity of internet and telecom stocks were
moving consumers away from the old stock.
Thus in the year 2000 Unilever announced a five year growth strategy to bring a significant change in the company. This initiative was named as “Path to Growth Strategy”. It announced a comprehensive restructuring in their operation and business and their SCM.
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SHORT TERM GAINS AND LONG TERM
PERSPECTIVE1. In December 2001, Unilever was declared as the winner in
the Aberdeen’s groups.2. Best practices in E-procurement contest by implementing
the Ariba buyer E-procurement solution.3. Unilever established the European Ariba Academy to
provide multiple site implementation and virtual training.4. The initiative named ‘Path to Growth’ aimed in achieving
the annual top line growth of 5%-6% and operating margins over 16% by 2004.
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•€15.3 billion spent on raw materials and
packaging from over 10,000 suppliers in 2009.
Raw materials and ingredients
Our share of world volume:
Preliminary data pending audit.
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SUPPLY CHAIN RESTRUCTURING
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• Unilever decided to cut down its vast brand portfolio from 1600 to 400 in order to enable its complete focus.
• Unilever focused on 400 key brands including Dove soap, Lipton tea, Calvin Klein fragrances, Close-up toothpaste, Magnum ice-cream and Omo fabric detergent. Tail brands fall away, good brands stay.
• The SCM restructuring plan was built around five focus areas.
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UNILEVER- THE WORLD CLASS SUPLY
MANAGEMENT INITIAVEFocus Areas Project Methodology
Organization(Supply Chain Organization)
Agree Targets
Processes(Global Procurement)
Identify Projects
People(Supply Chain Executives)
Provide Resources
Supplier(Supplier Involvement)
Measure and Track
Technology(e-Procurement & Information technologies)
Ensure Enablers
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• Unilever decided to make significant changes to its supply chain of 380 manufacturing plants across the world, by focusing on 150 key factories.
The major thrust areas were:1. Implementing executive purchasing.2. Attracting, developing and retaining world class supply
management executives.3. Professionalizing the purchase of non-production items.4. Enabling e-sourcing in all worldwide facilities.5. Accelerating and leveraging simplification of supply chain.6. Driving information and management.
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SUPPLY CHAIN ORGANIZATION
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•Unilever manages a number of
partnerships globally.
Customer partnerships
•Around one-fifth of Unilever’s sales are through ten major
retail chains.
•Our products are sold in over 10 million small shops in developing and
emerging markets.•50% of sales from
developing and emerging markets.
DISTRIBUTION AND RETAILING
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• The supply chain division installed two electronic communication system, one of which was Internet-centric.
• These systems were frequently used to collect and share information on all supply chain management activities in the company.
• The electronic systems were helpful as they provided ready access to information that enabled supply management executives to analyze projects based on their size, risk and resources.
• Unilever focused on fostering healthy relationship with its suppliers.
• According to an Unilever supplier, the company was forming collaborative rather than a traditional combative relationship.
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SOURCING
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• Sourcing (Sourcing Mgmt. Div.) had to take place at the Global level, it would ensure cost savings and leverage.
• Ensure that best practices in Supply Mgmt. were shared between the Food and Home & Personal Care product businesses. (Polcer)
• For production purchases Unilever setup more than 40 global commodity teams that included supply managers.
• Products Globally sourced included: Alkalis, Surfactants, Oils, Flexible Packaging and Plastic Molding
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• 1 Global Commodity team received the “Path to Growth” gold award for innovating the corrugated packaging material, used in 110 European factories, saving costs and reducing the supply base.
• Regional Commodity teams also setup because purchases at regional level at times better than global level. (Regional over Global)
• Global Commodity teams involved in Cross Divisional Purchases as well. (Production and Non Production items)
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• Sourcing for non-production items for both Food and Home & Personal Care Businesses were combined as they weren’t consumer related.
• Economies of Scale easily achievable for non-production items and these items were not involved in the Company’s innovation processes.
• Non production item executives encouraged by company in strategic sourcing of these items, as company believed that these executives knew better of industry than the Supply Mgmt. team.
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E-PROCUREMENT
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• Pre-restructuring SCM, Unilever’s various companies worldwide, managed procurement activities of their respective companies. Companies were independent w.r.t systems and staff.
• The above policy was costly, missed better opportunities at making deals in purchase with suppliers.
• 1990s, Unilever on acquisition spree, above process results in redundancies.
• 2000, procurement & distribution system through e-commerce and internet. Use of web-based applications.
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• March, 2000: Unilever partners with Ariba B2B platform.
• Ariba initially used for non-inventory and indirect expense areas. Simplifying and streamlining worldwide purchases from larger supplier base.
• According to Charles B. Strauss, President, NA, Unilever; benefits of Ariba:
- Consolidate purchase- Enhance scale for company and supplier- Guarantee quality merchandise- Automatically create information base to manage these materials
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• 2 major and several other web based applications used: Ariba ORMS B2B Procurement Ariba Network Commerce Service• Employees involved in purchasing were given access to Ariba
• 2002: e-procurement enters into more continents for purchase purpose.
• Oct, 2002: Unilever partnered with A T Kearney, leading global consulting firm to reduce costs in procurement and SCM.
• 2003: 20% of Unilever procurement activities web-based. Reverse auctions used for procurement, web based for cheaper purchases.
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OTHER INFORMATION TECHNOLOGY INITIAVES
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• Until 2000 Unilever had a decentralized IT infrastructure with multiple IT environments
• It was using many legacy systems and ERP systems(SAP, BPCS, MFG Pro and FOURTH SHIFT)
• It was using well established intranet services linked with 70000 desktops worldwide which helped the company executives across world access and share knowledge.
• The company felt that this infrastructure would not support the kind of Quick Information transfer needed.
• Hence it needed a global information network that will enable its executives to access actionable info on both regional and global basis.
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CHANGES BROUGHT IN IT STRUCTURE
• In late 2000, company launched the UIP program.• The major goal was to harness the data from seven regional
business groups and over 300 operating units which were supported by numerous IT environments.
Goals of UIP1. To understand consumer needs better and plan accordingly
with key suppliers2. Monitor the progress of the top 400 brands and their
respective competitors 3. Identify the means to achieve world class supply management
and to financial reporting and business intelligence services to Unilever mgmt.
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• “the data warehouse should be regularly fed with relevant information from sources without having any performance issues of OS” – President UIP
• Benefits of UIP were: Durable, Scalable, Easily maintained and flexible to changes that will occur over time.
• The major dynamic information system used was KALIDO, business objects data integrator and business objects rapid marts.
• KALIDO was used as a information integration solution to collect and store data from diverse global systems, it enabled commonality across its global systems, cross-referenced by the same master data warehouse ensuring accuracy and consistency of info.
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• Major function of Business Objects Data Integrator at Unilever was to extract data(worldwide), convert it into usable business information then load it in the master data warehouse.
It provided: 1. Business logic2. A prepackaged batch3. Real-time data movement for analytics and data-intensive
integration projects such as SCM & CRM, thus helping decision making in both areas.
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• In early 2001, Unilever decided to use RFID technology enabled to track the movement of consumer products
• According to Unilever, the RFID based system enabled the company to track the position of each products at all times.
• Its effective in collaborative planning, forecasting and replenishment(CPFR) which was tested in 3 Phases:
1. Pallets2. Goods3. Individual items.
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DISTRIBUTION
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UNILEVER RESTRUCTURING DISTRIBUTION NETWORK
•One warehouse in each region
•Operation handover to third party
Problem faced by warehouse
•High value & lower turn over products – special storage
•Low value & High turn over products - floor loaded
So, to solve this problem –
•Unilever built 5 regional mega distribution
That helped –
• Transfer order in 24 hours
• Reduced freight & warehouse cost
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Steps taken to eliminate inefficiency shipping process and to reduce cost
•Combined shipping process
•Transportation software tool - eRFX Solution
Prepared by Tigris consulting that reduce cost by 15%
Advantages of the Tigris’ eRFX Solution
•Customize supplier proposal
•Reduce truck load by 25%
•Provided data management and analysis tool
•Effective eye on supplier
•Better understanding of their service, capacity and risk management
•Provide countless permutation
•Helps how to act in unexpected scenarios
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SUPPLY CHAIN AND INNOVATION
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• Unilever had integrated SCM with its innovation process at Global and Regional level
Innovation• To improve existing products and create new ones that consumers love• Unilever R&D teams work on breakthroughs that will build a brighter future
for customer, company and environment
Global Level – SCM division appoint representatives who provide list of potential suppliers to innovation team
Regional Level – SCM division appoint innovation manager to help innovation groups to identify potential suppliers.
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BUILDING THE GROUNDS FOR LONG TERM BASE
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• Unilever achieved $14.24 billion in savings from its SCM and procurement initiatives in 2003
• Company mainly focuses on procurement technology and processes which helped in reducing procurement costs and strengthening its relationship with suppliers.
• Emerged as the leader in the consumer packaged industry for technology adoption with its e procurement and technology initiatives.
• Unilever came up with a project to extent the dove brand to deodorants. They tried to come up with a packaging for dove deodorant that fit for gentle image of dove.
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GROWTH OF UNILEVER IN OPERATING
PROFIT MARGIN
In 2002 fiscal, Unilever’s operating margin increase to 14.9%, 1%
and 3.8% increase over it margin in 2001 and 1999.
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• In the mid 2003 the 2nd mega distribution centre in North America, which began its operation in Carlisle and in north east region.
• Three mega distribution centers in Texas, Califonia and Illinois were schedule to be opened by the end of 2003.
• Unilever was moving ahead with its supply chain restructuring projects and expected to meet its target of $1.56 billion in late 2003.
• Company has adopted long term outcomes initiatives which it fits with the overall organizational restructuring program.
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ARUP RANJAN ROUT () PURNISHA DASGUPTA (32)
RAHUL AUDDYA (33) RAJPRITAM PARASAR (35)
RAKTIM RAJKHOWA (36) SANTOSH KUMAR DAS ()