Today’s highly globalized world increases competition in the market which is further

complexed by a fluctuating economy and the dynamic needs of consumers. Unilever's

transportation network alone supported half a million shipments per year in 2009, in the United
States. In order to handle specific facets such as warehouse management systems, warehouse
operations, layout, and warehouse rack design Unilever formed a strategic alliance with seven
companies. Only at 27 distribution centres, that too as a result of its mergers, Unilever knew
that to be world class, it had to bring costs down yet have a network that could supply any
customer in the country within 24 hours.
Unilever adopts a value-equation approach to outsourcing in order to assist their process for
evaluating outsourcing opportunities. As per this, the net value of outsourcing is defined in
three terms: Net Value = Internal Value From Focus + External Value From Provider -
Transaction Costs.
Internal Value from Focus
Outsourcing frees up a range of internal resources of the company to concentrate on more
important core processes and strategic activities. Management and employees can shift their
focus to more important activities. A fixed cost is converted into a more modest stream of
payments allowing the company to optimize its financial resources better and more
strategically. Outsourcing creates higher levels of internal value by directing resources towards
higher ROI strategic activities.
External Value from Provider
A key part of the value proposition for outsourcing is value created by the provider. Providers
create value by being more efficient, effective and innovative than the internal equivalent of
the outsourced activity. The provider's value can fall into one of two categories:
o value from high economies of scale
o value from high levels of expertise.
Aggregating the volume of activity from a number of companies through standardization is
when value from high economies of scale occurs. Instead of each company undertaking its own
low-volume process, the provider opts for a high-volume, high efficiency business on behalf
of a group of companies. When the provider accumulates large quantities of tacit knowledge,
value from high levels of expertise occurs as the knowledge cannot be easily transferred or
replicated.
Transaction Costs
Transaction costs of outsourcing are inevitable in nature. While internal co-ordination costs
may be negligible and latent, working with a partner involves formalized processes that lead
to higher, more visible costs.
Auxiliary transaction costs are a result of formally specifying what the partner has to do,
managing external activities, and then examining the results. Having a partner in another city
do some routine task is different from having an internal department on the next floor do that
same task. Outsourcing may often lead companies to underestimate the transaction costs as a
result of the internal analogues being hidden from view. Unilever decomposes transaction costs
into 3 categories:
1) Oversight costs: cost of managing the performance, information exchange, service delivery,
and relationships.
2) The switching costs: cost of changing from insourcing to outsourcing (as well as the potential
costs of changing the arrangement at a later date)
3) Risk: The potential costs of hinderances arising as a result of outsourcing arrangement.
Unexpected costs sometimes cause companies to oscillate between outsourcing and insourcing.
They outsource on the perceived cost benefits, realization of the magnitude of unexpected costs
may lead to insourcing.
Unilever retaining the first spot in Gartner Supply Chain 25 for the third consecutive year can
be attributed to its sustainable supply chain. Unilever’s hunt for sustainability has resulted in
the implementation of a number of eye-catching policies. Total alignment is a crucial
requirement for an effective and efficient supply chain. This means that all partners must be
willing and able to embrace the same commitment. This may include working closely with
governments in order to get an understanding of working conditions and start-ups which
inaugurate new innovations that drive sustainability. Partners must also be willing to end
relationships with those whose ideas do not align with the same principles For example,
Unilever issued its first human rights report in 2015, concluding that its contractors in India
were suffering with prevalent poor health and safety conditions, underpaid workers, and 87%
unresolved cases. The company collaborated with NGOs and union officials in order to review
its workers’ wages globally and establish more stringent requisites for suppliers.
In 1999 Unilever, becoming inflexible due to its huge operation and other inefficiencies
announced its decision to restructure its strategy. The process of repurposing the supply chain
and enabling it to become a source of competitive advantage began with a new, customer
service orientation that synchronized with the company’s overall growth strategy.
The process of in-sourcing services that have been done by 3PLs to reduce carbon and costs in
an attempt to efficiently manage waste. Unilever has integrated its economic, environmental
and social agendas:
o Providing education on health and hygiene
o Women empowerment
o Water management
o Rehabilitation of special or underprivileged children
o Care for the destitute and HIV- positive
o Rural development.
o Plays active role in natural calamities

Distribution Strategy – USE OF IT

o An IT-powered system has been implemented to supply stocks to redistribution
stockiest.
o The objective is to make the product available at the right place and right time in the
most cost effective manner.
o For this, stockiest have been connected through an Internet-based network, called RS
Net, for online interaction.
Unilever’s supply chain is referred to as a lesson in responsibility. The
company’s commitment to corporate responsibility is enhances all the characteristics
inherent in best-in-class supply chains. Sustainability lies at the very heart of Unilever’s
business model. Through its initiatives for sustainable power utilisation, 600 tons of carbon
was removed from the firm’s supply chain over three years. Their sustainable supply chain
also provided the added advantage of massive cost reductions. Unilever’s executive team
fully accepts and displays commitment to the need for change through its sustainable
strategy. Unilever also attempted to incorporate blockchain in order to improve and
enhance its sustainable supply chain. It was the first practical implementation of blockchain
in the industry and used high-end technology to manage transactions within its tea supply
chain. It was incorporated to make it easier to substantiate the farmers’ agricultural
practices in order to reward them.