A Brief Look Into The Supply Chain Management Of Unilever Essay.

This assignment tries to give in brief the supply chain management of the Unilever Company. It takes into the existing supply chain management with a specific lookout in its financial and product-lining department. The Company is lagging behind to its competitors such as nestle, Proctor & Gamble and many more in terms of profit margin.

Nevertheless, consumer surveys are one if the most effective weapon for the Unilever Company to propose some new ideas behind the product manufacturing. This might prove its worth in narrowing the difference between the profit margin of Unilever and its competitors.

Supply chain management is one of the most important aspects of an organizational operation, which needs to be assisted with the most advanced technology and process. Supply chain management is the complete process that governs the manufacturing of raw materials and guides this for the market entry. Manufacturing is not just about preparing something; it rather includes many factors before the final production of the product (Christopher, 2016).

Unilever is the chosen manufacturer for the assignment, which are the world largest consumer goods Company as measured by its revenue in the year 2012. It is the largest in world for the manufacturing of food products such as margarine. It is one of the oldest multinational companies, which have its presence in not less than 190 countries across the globe. It owns more than 400 brands in the world but focuses especially on thirteen selected brands such as Knorr, Rexona, Sunsillk, Lipton and many more. The four main divisions of the Company are Home Care, Personal Care, Foods and Refreshment. The research and development centers of the Company are wide spread into different locations across the globe such as the United States, India, the United Kingdom and the Netherlands. Most importantly, it was found in the year 1930 followed by a merger between the Margarine Unie of Dutch and the soap maker Lever Brothers of British. The Company made a significance impact on the world business by transforming its image from just a manufacturer of oils and fats to the global leader in numerous products (Unilever, 2017).

This assignment tries to look into the supply chain management of the Unilever Company by taking into consideration the key flows in supply chain, the make process and the supply chain forecasting.

Product Flow

Figure 1: Product Flow of Unilever

Source: (Tayur, Ganeshan & Magazine, 2012)

Unilever claims that in 1 minute, people across the globe would have their access to 330,000 of its products. The leading categories of the products are Dressings, Tea, ice Cream, Household Cleaning, Daily Haircare and many more. It is one of the top suppliers of fast moving consumer goods in the world. The vision is to serve people with extensive range of products and let them feel good. However, the Company could not sustain the same aspiration in its operation because of the production of a vast range of products. The supply chain management for the products becomes insufficient because of its focus on a large range of products. This is where the Company realized the urgency of restructuring its supply management. In course of doing so, they cut down on their products to have more focus on selected products. Food business recession in the US and the Western Europe has affected its business immensely. Moreover, many of the companies were shut down to increase the sales. It then started focusing on different products for different countries, which enabled them to enhance its capital (Fawcett, Ellram & Ogden, 2014).

Information Flow

Some other reasons were also responsible for the restructuring of supply chain of the Company such as growing popularity of internet. It affected its old mode of operation, which needed to be structured to respond to the changing business environment. To maintain the product flow and the income for the Company, Unilever initiated a world class management of supply that was divided into two parts such as focus areas and project methodology. Focus areas include such as supply chain organizations, global procurement, supplier, technology and many more. Project methodology includes such as identify projects, agree targets, provide resources etc (Monczka et al., 2015).

The information flow in Company is encouraged through different ways such as sharing practices in organization, training & awareness. Training & awareness helps in inducing such process that encourages the inception of awareness program to facilitate the reduction of environmental impact of the manufacturing. Apart from that, Unilever also encourages every people to be a part of this organization with his or her potential feedbacks and suggestions. However, Unilever seriously lacks in its environmental appeal as it is evident in several examples such as exposure of toxic element in India. It has to shut down one of its thermometer plant in India followed by lawsuit for becoming the reasons behind the high rate of mercury exposure (Ross, 2013).

Unilever has a very notable focus on its financial planning of which two factors are very important such as Cash flow and Return flow. The Company aims to make clear plans in order to achieve the maximum profitability through its financial management. It also believes in conducting a controlled monitoring and measuring process on the KPIs. Cash flow is one of the three elements of the financial planning for every year. It acts as one of the most important basis for the financial reporting of the Company every year. The cash flow and the return flow in the Company through its expenditures on different products line are only helpful in producing slight profitable margin. Some of its biggest competitors such as Nestle, Proctor & Gamble and many more (Wisner, Tan & Leong, 2014), always challenge the profit margin of the Company.

Figure 2: Comparative Cash Flow of Unilever

Source: (Mangan, Lalwani & Lalwani, 2016)

As per supply chain management theory, the management of flow of different operations includes the management of raw materials, inventory management and many more. Based on theory for supply chain management, the following recommendations can be postulated (Rushton, Croucher & Baker, 2014):

Cash & Return Flow

Some of the necessary recommendations for the Unilever Company would be as follows:

• Solid inventory management is necessary, which can be achieved with the help of procurement software
• Production sites need to be computerized to have an effective measure of the raw materials
• Value chain needs to be technologically advanced to produce an answer to the complex form of value chain management
• Taking examples from some of the ideal companies would be helpful in this regard
• Walmart is an example of such Company that has efficiently managed the complexity of value chain, which is also one of the potential strength of the Company
• Minimum wages needs to be appropriately paid to the labors to prevent any shortfall of labors

In spite of having a super position in the market, some of the weaknesses of the Unilever have affected its production up to a considerable level. Below are some of the weaknesses that have hampered its production considerably (Dyckhoff, Lackes & Reese, 2013):

• Imitable products
• Less diversification in business
• High rate of retailers dependency

Its competitors can easily copy some of the products, which is not a healthy sign for the production success, as this would affect the business of the Company. Other firms can easily copy its some of the products such as Rexona, Dove and many others. In the competitive era of business, imitation rate needs to be lower in order to provide the Company a solution against copy of the products. One of the best examples can be best derived from the production style in China where they have copy items for almost all kinds of goods such as mobile phones, electronic appliances and many more. They are very popular in copying the Smartphone as they have done it earlier in case of Galaxy series of Samsung phones (Waters & Rinsler, 2014).

The high rate of dependency on the retailers for having contact to the customers is not a safe move for the competitiveness in the market. Retailers would put forward their own demand and requirement before the commencement of the business. The requirements and the demands might not be as per the Unilever organizational values but the high dependency on the retailers would prompt them to agree on. This would lessen their control on the requirement of the customers. For an example, the retailer would try to present the requirements of the customers based on its judgment, which itself depends on the buying behavior of the customer. The buying behavior might be susceptive towards the particular product for several of reasons such as cheap pricing, product quality and many more. However, the high rate of sales of a particular product would only give indication towards its demands among the customers. This would not tell the prime cause behind the popularity of a popular product (Fernie & Sparks, 2014).

For an example, the high rate of selling of Lux soaps was only because of its different fragrance and smells. It did not have any clinical benefits in it; however, retailers would only look on the selling part and would convey the same message to the Brand. The conveyed message would then encourage them for more and more production of the same product line, which is bound to find saturation at some point in time once its competitor finds a better penetration into the customer requirement. A strategic penetration into customer requirement is of utmost importance to the business of the Company. It can prove its worth in analyzing the exact look out of customer on a particular product.

Recommendation for the different key flows in supply chain

Based on theory for supply chain management, which supports the management of inventories with utmost care, following recommendations can be postulated for Unilever (Heizer & Barry, 2013):

• Less reliance on retailers
• Needs to bring diversification in the production line by modernizing the production way
• Needs to have a procurement software installed on the system used in the warehouses, which is helpful in maintaining the inventories efficiently
• Computerization is necessary in all sorts of operation to protect the production from being imitated

Several of methods are there to forecast on the supply chain management such as follows (Fredendall & Hill, 2016):

• Opinions of executive
• Consumer surveys
• Opinions from managers and employees
• Market research
• Time-series Model

The above-cited techniques are effective in making forecast for the future management of the supply chain; however, not these all techniques can ever predict any guarantee of producing the desired result. Of all the above methods, market research on the relevant product demand and the time-series model are of utmost importance to the performance of supply chain in a Company (Schönsleben, 2016).

Market research is helpful in analyzing the strategies for the competitive edge in the market. It does so by giving suitable analysis of the competitor’s production and quality. For an example, if one Company is planning to launch some food related products, it needs to have information regarding the competitor’s product strategies. This is because of the fact that it would allow in making a counter response to the existing quality. It is not only concerned about the quality of the product; it is rather concerned about all the aspects of the products such as pricing, components, design and many more (Ross, 2015).

The supply chain management can be made effective by applying some of the following mentioned recommendations (Ross, 2015):

• Conducting an online based survey could be an effective move for the Company as it is relying more on intermediaries for its products line
• Gathering information from some of the e-commerce platforms to gather some data on the customer preference for the products
• Opening up an own e-commerce platform to get closer to the customers
• Including a wide list of products on the personal e-commerce platform
• Focusing more on the e-commerce platform of the Company as this would help it in lessening the reliance on intermediaries

Conclusion

Supply chain management is a broad task that needs supports from different theories and concepts for implementing this to the perfection at the organizational level. Unilever is one of the biggest brands in world; however, due to some issues in its SCM, it is not capable of deriving the same amount of profit as that of its competitors such as Nestle, Proctor & Gamble etc. Supply chain management can well be restructured based on certain improvements in the departments of financial, product lining etc to give it the most robust shape. Some of the factors such as the above-mentioned factors do affect supply chain management of Unilever. However, consumer surveys look the most feasible method to the Unilever for lessening their reliance on the retailers and enhancing a better customer experience.

References

"About". Unilever global company website. N.p., 2017. Web. 2 Apr. 2017.

Christopher, M. (2016). Logistics & supply chain management. Pearson UK.

Dyckhoff, H., Lackes, R., & Reese, J. (Eds.). (2013). Supply chain management and reverse logistics. Springer Science & Business Media.

Fawcett, S. E., Ellram, L. M., & Ogden, J. A. (2014). Supply chain management: from vision to implementation. London: Pearson.

Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan Page Publishers.

Fredendall, L. D., & Hill, E. (2016). Basics of supply chain management. CRC Press.

Heizer, R., & Barry, R. (2013). Operation Management, Sustainability and Supply Chain management (Vol. 11). Pearson, UK.

Mangan, J., Lalwani, C., & Lalwani, C. L. (2016). Global logistics and supply chain management. John Wiley & Sons.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.

Ross, D. F. (2013). Competing through supply chain management: creating market-winning strategies through supply chain partnerships. Springer Science & Business Media.

Ross, D. F. (2015). Distribution Planning and control: managing in the era of supply chain management. Springer.

Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.

Schönsleben, P. (2016). Integral logistics management: operations and supply chain management within and across companies. CRC Press.

Tayur, S., Ganeshan, R., & Magazine, M. (Eds.). (2012). Quantitative models for supply chain management (Vol. 17). Springer Science & Business Media.

Waters, D., & Rinsler, S. (2014). Global logistics: New directions in supply chain management. Kogan Page Publishers.

Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A balanced approach. Cengage Learning.