Unilever Restructures its Supply Management Practices

            
 
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Case Details:

Case Code : OPER027
Case Length : 15 Pages
Period : 2001 - 2003
Organization : Unilever
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"It is not about supply management delivering on its goals. It is about Unilever businesses delivering on our overall goals and what we can do to help do that. Meeting the €1.75 billion savings target puts a spotlight on the capabilities of the supply management organization."

- Gregory F. Polcer, Vice President, Global Souring Management, Unilever,
in September 2002.1

Short-Term Gains - Long-Term Perspective

In December 2001, Unilever, one of the world's leading consumer goods companies, was declared a winner in the Aberdeen Group's2 'Best Practices in E-Procurement' contest. Unilever won this contest for successfully implementing the Ariba Buyer eProcurement solution from Ariba Inc (Ariba).3 Implemented at Unilever since mid-2000, this solution was used to streamline the company's procurement activities throughout its worldwide facilities. Unilever also set up a Global Ariba Center of Competence (GACE) to promote best practices in procurement throughout the company. The company established the European Ariba Academy as well to provide multiple site implementation (of Ariba solutions) and virtual training in Britain.

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Commenting on Unilever's experience with Ariba Buyer, Frances Howarth, Research Director, e-Business Enterprise Business Applications, Aberdeen Group, said "In areas where implementation has taken place, disparate procurement processes are being replaced by a single business approach that will allow Unilever to benefit from further waves of strategic sourcing, enabled by e-procurement technology. Paperflow has already been reduced - particularly in its Research Labs where the number of invoices received, previously numbering several thousand, has been reduced to less than a few hundred."4

For Unilever however, the recognition of its efforts and the benefits were just short-term benefits accruing from the ongoing supply chain management (SCM) restructuring exercise. The SCM restructuring was itself a component of a large-scale five-year organizational restructuring exercise undertaken by Unilever in 2000. This initiative, named the 'Path to Growth,' aimed at achieving annual top-line growth of 5%-6% and operating margins of over 16% (as compared to 11% in 2000) by 2004.5 Unilever expected to achieve these results by focusing on its leading brands (by pruning the brand portfolio and divesting under-profitable businesses) and supporting them with strong innovation, enhanced marketing support, simplified processes and restructured SCM practices.

However, restructuring its complex SCM framework, which encompassed many companies and was spread across different countries, proved to be quite a challenging task for Unilever.

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1]  "Spotlight shines on supply management at Unilever," www.manufacturing.net, September 05, 2002.

2] The Aberdeen Group is a US-based leading information technology (IT) market analysis and positioning services firm. It holds the 'Best Practices in E-Procurement Contest' to recognize those companies in North America, Europe, Middle East and Africa that achieve outstanding results from e-Procurement projects.

3] Ariba Inc. is a leading global Enterprise Spend Management (ESM) solutions provider. Its Spend Management solutions offered a single point of visibility and control, which allowed companies to engage, manage and leverage the total spend lifecycle (analysis, sourcing and procurement across the company), while enabling systematic measurement, tracking and reporting of best practices.

4] "Aberdeen Group Best Practices in e-Procurement," EMEA report, December 2001.

5] A detailed description of the organizational restructuring undertaken by Unilever is covered in the ICMR case study, "Restructuring Unilever."

 

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