RESTRUCTURING OF THE

SUPPLY CHAIN MANAGEMENT

PRACTICES
 U
nileveris a British Dutchmultinationalconsumer goodscompany co-
headquartered inRotterdam, Netherlands, andLondon,United Kingdom.
Its products include food, beverages,cleaning agentsandpersonal care
products. It is the world's third-largest consumer goods company
measured by 2012 revenue, afterP&GandNestl.Unilever is the world's
largest producer offood spreads.One of the oldest MNCs, its products
are available in around 190 countries
Unilever claims that in 1 min. the world would have used 330,000
of its products.
Strong category positions

Unilevers portfolio of
categories

Leading category
positions
Homecare

Savoury,
Dressings
Personal Care & Spreads

Ice Cream &

Beverages
OVERVIEW &
BACKGROUND
 Unilever is one of the world's leading suppliers of
fast-moving consumer goods. It has its three major
global divisions - Foods, homecare andpersonal
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 1960s and 1970s it expanded by horizontal and

vertical integration emerging as a diversified conglomerate.

In 1980s 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-1990s 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
EASONS FOR RESTRUCTURING
OF SUPPLY CHAIN
1. Its announcement of special interim dividend
2. 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.
HORT TERM GAINS AND LONG
TERM PERSPECTIVE
1. In December 2001, Unilever was declared as the
winner in the Aberdeens 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.
Raw materials and ingredients

15.3 billion spent on

raw materials and
packaging from over
10,000 suppliers in 2009.

Our share of world volume:

Preliminary data pending audit.

SUPPLY CHAIN
RESTRUCTURING
 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.
NILEVER- THE WORLD CLASS SUPLY
MANAGEMENT INITIAVE
Focus Areas Project Methodology
Organization(Supply Chain Agree Targets
Organization)
Processes(Global Identify Projects
Procurement)
People(Supply Chain Provide Resources
Executives)
Supplier(Supplier Measure and Track
Involvement)
Technology(e-Procurement Ensure Enablers
& Information technologies)
 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.
SUPPLY CHAIN
ORGANIZATION
Customer partnerships

Unilever manages a
number of
partnerships globally.
ISTRIBUTION
AND RETAILING

Around one-fifth of
Unilevers 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.
 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.
SOURCING
 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
 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)
 Sourcing for non-production items for both Food
and Home & Personal Care Businesses were
combined as they werent consumer related.

Economies of Scale easily achievable for non-

production items and these items were not involved
in the Companys 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.
E-
PROCUREMENT
 Pre-restructuring SCM, Unilevers 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.
 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
 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.
OTHER INFORMATION
TECHNOLOGY
INITIAVES
 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.
 HANGES 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 UIP
1. To understand consumer needs better and plan
accordingly with key suppliers
2. 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.
 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.
 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 logic
2. A prepackaged batch
3. Real-time data movement for analytics and data-
intensive integration projects such as SCM & CRM,
thus helping decision making in both areas.
 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. Pallets
2. Goods
3. Individual items.
DISTRIBUTION
 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
 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
SUPPLY CHAIN AND
INNOVATION
 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.
BUILDING THE
GROUNDS FOR LONG
TERM BASE
 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.
 ROWTH OF UNILEVER IN OPERATING
PROFIT MARGIN

I
n 2002 fiscal, Unilevers operating margin increase to 14.9%,
1% and 3.8% increase over it margin in 2001 and 1999.
 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.
ARUP RANJAN ROUT () PURNISHA

DASGUPTA (32)

RAHUL AUDDYA (33) RAJPRITAM

PARASAR (35)

RAKTIM RAJKHOWA (36) SANTOSH

KUMAR DAS ()