RESTRUCTURING OF THE

SUPPLY CHAIN MANAGEMENT

PRACTICES
nilever 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
Unilever claims that in 1 min. the world would have used 330,000
of its products.
Strong category positions

Unilever’s 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, 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
 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 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.
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 Procurement) Identify Projects

People(Supply Chain Provide Resources

Executives)
Supplier(Supplier Involvement) Measure and Track

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
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.
• 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 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.
E-
PROCUREMENT
• 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.
• 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
NILEVER RESTRUCTURING DISTRIBUTION NETWORK

ne warehouse in each region

peration handover to third party

roblem faced by warehouse

igh value & lower turn over products – special storage

ow value & High turn over products - floor loaded

So, to solve this problem –

teps taken to eliminate inefficiency shipping process and
to reduce cost

ombined shipping process

ransportation software tool - eRFX Solution

Prepared by Tigris consulting that reduce cost by 15%

Advantages of the Tigris’ eRFX Solution

ustomize supplier proposal

educe truck load by 25%

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

n 2002 fiscal, Unilever’s 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 ()