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Unilever's Supply Chain Management Practices
Unilever's Supply Chain Management Practices
Management Practices
Final Test
By :
29112071
Bandung
2013
Unilever’s Supply Chain Management Practices
Introduction
Unilever is one of the world’s most successful international consumer goods
companies, employing 206,000 people in approximately 150 countries worldwide. The
company has over 300 manufacturing sites, producing a diversified portfolio of brands that
are popular across the globe. In late 1933, PT Unilever Indonesia Tbk (the company) was
established as Lever’s Zeepfabrieken N.V. Nowadays, Unilever Indonesia has grown to be a
leading Fast Moving Customer Goods of Home and Personal Care as well as Foods and Ice
Cream products in Indonesia. The Company seeks to manage and grow the business in a
responsible and sustainable manner “Touching the lives of Indonesian consumers &
customers everywhere”.
Unilever Indonesia’s portfolio includes many of the world’s best known and well
loved brands, such as Pepsodent, Pond’s, Lux, Lifebuoy, Dove, Sunsilk, Clear, Rexona,
Vaseline, Rinso, Molto, Sunlight, Wall’s, Blue Band, Royco, Bango and many more.
The Company owns six factories in Jababeka Industrial Estate, Cikarang, Bekasi and
two factories in Rungkut Industrial Estate, Surabaya, East Java, with its head office in
Jakarta. Its products consist of about 43 key brands and 1,000 SKUs which are sold through a
network of about 500 independent distributors covering hundreds of thousands of outlets
throughout Indonesia. Products are distributed through its own central distribution centers-
modern trade and general distributor -, satellite warehouses, depots and other facilities.
customer
Cost factors in SAP APO:
1. Late delivery and non
Supply Chain Collaboration
delivery penalties cost set into
In Unilever, supply chain integration as known as supply network collaboration
optimizer to deal with the
(SNC). SNC is a better system to collaborate end to end planning – bottom up planning from
demand from customer.
area and top down planning from company. SNC system fully integrated with SAP APO.
2. Safety stock and maximum
As a glimpse of collaborative planning in internal Unilever, forecast demand
stock level cost
generated by marketing (SOM MT) and demand planning (DP) as shown figure 3. Forecast
3. Production cost
as input for supply planning (SU) , distribution plan (DPG) and stock norm for
4. Storage cost
replenishment. Stock replenishment separated into two categories is primary sales and
5. Procurement costs
secondary sales. Primary sales based on sales from first tier customers and secondary sales
6. Transportation cost
from baseline and area promo. Forecast by customer divided by demand from modern trade
(MT) and demand from general distributor (GT). MT consists of Carrefour, Hypermart,
Lotte,Giant, Hero, Supermarket and others. GT consists of distributor partner. MSO as
central coordinator in supply chain are have collaboration with SOM as representative of
customer development (sales division).
Unilever using hybrid of push and pull strategies. The production stage are done in
push manner based on aggregate customer demand forecast so the uncertainty is reduced so
safety stock inventory is lower, cost minimization and effective resource utilization (see stock
strategy figure 3) . The next stage for distribution are done in a pull manner for replenishment
needed by distributor, by using sophisticated IT and customer relationship management under
CD area that they already have.
Medium
Procurement Strategies
Unilever Indonesia has developed sophisticated methods for managing supplier
relationships. This includes the Suppliers Quality Management and Assessment Programme
(SQMP), launched in 2000 as part of our international drive to build a world-class supply
chain. It measures suppliers' ability to achieve consistent quality in meeting company
specifications: on time and in-full delivery; cost competitiveness; reliability and flexibility.
These suppliers basically supply Unilever with all that company need to make
products from chemicals to food ingredients and from commodities to packaging
Unilever found it essential to have suppliers close to its eight factories in Indonesia
because the insufficiency of raw materials would bind Unilever from sprinting to meet the
future spurt in market demand.
Based on the Kraljic’s supply matrix, the raw material as a supply in Unilever’s
products commonly have low profit impact and supply risk as as at bottom left quadran - the
non critical items. Unilever need to simplify and automate the procurement process as much
as possible.
Take one example to give explanation about procurement as raw material of Unilever
product such as Dove. About 65 percent of palm oil bought by Unilever worldwide comes
from Indonesia. In 2009, Unilever announced it was suspending purchases of palm oil from a
major Indonesian supplier - SMART, following allegations by environmentalists the
company was engaged in widespread illegal deforestation. This case had shown the low
dependency with their supplier and commit with their commitment to sustainability
environment. At that time, Unilever only suspended the SMART but continuous the palm oil
supplies from local company in Indonesia.
Outsourcing Strategy
Since Unilever has independency with knowledge and capacity and their product as integral
product, thus company keeps production internal. The opportunity to reduce cost through
packaging has done outsource with other company since it’s not their competitive advantage.
Network Management
Network management based on SAP help the company to (1) find the right balance
between inventory, transportation and manufacturing costs, (2) match supply and demand
under uncertainty by positioning and managing inventory effectively and (3) uutilize
resources effectively by sourcing products from the most appropriate manufacturing facility
Based on figure below, we can see the circumstances of Unilever network. Company
provide the distribution plan by using the T-lane as line transportation, forecast split, ZTWC,
lead time and priority. All the variable as input into SAP Advance Planning Optimizer with
the result deploy stock to all point and ensure the availability stock at the right quantity, at the
right place and ther right time.
SULAWESI
Source: Unilever Supply Chain Division, 2013
The SAP calculate the optimization by using mathematical model lead to structured
poblems such as linear programming, mixed interger linear programming problems and
solved with considering variable as follows :
• Network design
– Number, locations and size of manufacturing plants and warehouses
– Assignment of retail outlets to warehouses
– Major sourcing decisions
– Planning horizon 26 weeks
• Inventory positioning:
– Identifying target and safety stocks
– Selecting facilities that will produce to stock and thus keep inventory
– Facilities that will produce to order and hence keep no inventory
– Related to the inventory management strategies
• Resource allocation:
International suppliers
Example for raw materials are produce by foreign suppliers is magnum, Unilever supplies
their chocolate from belgia’s supplier.
Global Products
The heart logo of ice cream product is common worldwide, each country retained the local
brand name so as to keep the familiarity built over the years. Unilever generally manufactures
the same ice-cream with the same names, with rare occasions of regional availability, under
different brands. Some of these ice-creams include Cornetto, Magnum, Twister and
Viennetta.