CASAS, Moneia Brae E

Example 1: A Global View of Operations and Supply Chains

UNILEVER SUPPLY CHAIN MANAGEMENT: Restructuring of the Supply Chain

• Unilever is one of the world's leading suppliers of fast- moving consumer goods. It has its three major
global divisions - food, 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.
• 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.
• 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.
• 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.
1. Supply Chain Organization
2. Global Procurement
3. Supply Chain Executives
4. Supplier Involvement
5. e-Procurement and Information Technologies
• SUPPLY CHAIN ORGANIZATION
• Unilever manages a number of partnerships globally.
• Around one-fifth of Unilever’s sales are through ten major retail chains.
• Products are sold in over 10 million small shops in developing and emerging markets. 50% of
sales from developing and emerging markets.
• GLOBAL PROCUREMENT
• Sourcing had to take place at the Global level, it would ensure cost savings and leverage.
• Ensure that best practices in supply management were shared between the Food and Home &
Personal Care product businesses.
• SUPPLY CHAIN EXECUTIVES
• 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
• SUPPLIER INVOLVMENT
• Global Commodity teams involved in Cross Divisional Purchases as well.
• Sourcing for non-production items for both Food and Home & Personal Care Businesses were
combined as they weren’t consumer related.
• E-PROCUREMENT AND INFORMATION TECHNOLOGIES
• 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.
• 2000, procurement & distribution system through e-commerce and internet. Use of web-based
applications. 25.
• March, 2000: Unilever partners with Ariba B2B platform.
• Ariba initially used for non-inventory and indirect expense areas. The use of the platform was
for simplifying and streamlining worldwide purchases from larger supplier base.