Unilever PLC.: Strategic Supply Chain Management

Introduction

Supply chain management defines the management of a network of businesses which are involved in the provision of products and services to end users (Mentzer et al. 2001, p.22). The aspects that are integrated in the system include storage and movement of finished goods from where they are produced to the point where they are consumed. The movement and storage of raw materials is also part of the supply chain management. Each organization has a strategy that it uses to ensure that raw materials and finished goods get to their destinations effectively and efficiently. The management comes up with a strategic supply chain strategy that will incorporate all the supplies in an organization. It is a major practice for an organization to take over other organizations that have been main competitors. Acquisition of such an organization increases the number of supplies and the organization has to come up with a supply chain strategy that will take care of the new turn over. The strategy must integrate supply chain management issues of the takeover into the strategic supply chain that already exists. Unilever is a multinational corporation that supplies consumer product brands all over the world. The company manufactures beverages, foods, personal care products, and breaching agents. The company acquires other companies and incorporates them in its operations. Acquisition of a main competitor would force the company to integrate the supply chain issues of the takeover into the supply chain of the organization. This paper will seek to analyze the issues to be considered in the supply chain management following the acquisition of a main competitor.

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Critical Analysis of Unilever

As stated before, Unilever is a multinational corporation that manufactures consumer product brands in beverages, foods, personal care products, and cleaning agents. It is dual listed where the Unilever N. V. has its head office in Rotterdam and the Unilever PLC has its head office in London. The two companies operate as a single business led by a single non executive chairman. The main competitors are Kraft Foods, Procter & Gamble, Danone, Nestle, Henkel, Reckitt Benckiser, and S.C. Johnson & Son. The company was formed in 1930 when soap making and a margarine making companies merged. The company has acquired other companies such as Calvin Klein Cosmetics, Faberge, Elizabeth Arden, Helene Curtis industries, and others. Elizabeth Arden was later sold to FFI Fragrances. Through acquisitions, the company owns over four hundred brands (Supply Chain Management Review 2008, para.4). The company concentrates on those products whose annual sales exceed one billion dollars. Some of these products include Blue Band, Omo, Rexona, Lux, Lynx, Dove, Lipton, Heartbrand, Knorr, Sunsilk, Flora, and others.

In the year 2006, the company acquired net sales of $50 billion in Europe, America, Asia, and Africa. It has operations in one hundred and fifty countries in different parts of the world. Its brands are trade marked and found in grocery stores in different parts of the world. Its supply chain strategies have been evolving for a long period of time. Earlier on, the supply chain strategy involved the transfer of finished goods from the factory to the retailer’s warehouse (Supply Chain Management Review 2008, para.5). The supply chain was later developed to include the acquisition of raw materials to the manufacturing premises. The alignment of the supply chain strategies with the broader business strategy began in North America due to the challenges that were offered by other companies. Multiple supply networks were used to supply different products to the consumers. The network selected for supply of a product depended on factors such as product technologies, sourcing, manufacturing, trade channels, and others. Each network used reflected different trade channels, product technologies, sourcing, manufacturing, and distribution networks. The company started a single supply chain program in 2005. The Supply Chain 2010 is a five year supply chain program targeting supply chain programs in North America. A. T. Kearney was involved in developing the vision. The program aimed at aligning supply chain so that it met the overall corporate strategy and address the changing product portfolio. The program was to integrate several supply networks that were used before (Weele 2009, p.49). All the networks were to be linked together through different aspects such as organizational structure and ways of working in the organization.

The 2010 Supply Chain Strategy

The strategy that the company used before 2005 was not efficient in ensuring an effective flow of goods to the consumers. This was because the organization concentrated on reduction of cost and productivity of capital. It was reacting to the overall business strategy instead of aligning with and supporting it. This made the management to come up with a system that would align the supply chain strategy with the business strategy. The new supply chain was to increase the competitive advantage of the company and the customer service orientation that was to improve the overall growth strategy (Supply Chain Management Review 2008, para.7). The new technology was also to be incorporated in the new supply chain. The first move involved combining the supply chain touching personal products and the foods and household divisions. The single supply ensured that products reached the consumers efficiently. Research conducted informed the management on future requirements and anticipated trends. Research was conducted on major shops where the consumers obtained the products. Areas covered in the survey included outsourcing, ordering and inventory management practices and techniques, distribution channels and service differentiation, collaborative planning, product customization needs and order profiles and frequency trends. The research led to implementation of the current strategic supply chain strategy in Unilever.

Impact of Takeover on the Corporate Strategy

Acquiring a main competitor whose current turnover and assets are forty percent of the Unilever turnover and assets has a great impact on corporate strategy. This is because the takeover will increase the amount of products to be supplied to different markets. The management will have more work and funds to manage. The current system can only accommodate the production in the main organization. For the company to perform well in the future, the supply chain management issues of the take over must be integrated into the strategic supply chain strategy of Unilever. There are certain issues that will be considered in integrating these issues.

Outsourcing

Currently, some consumer products are outsourced to third party manufacturers and logistic service providers (Lambert 2008, p.54). The products that will be manufactured in the takeover need to reach their destinations in good time and condition. The organization can collaborate with suppliers so that they can distribute these products into the warehouses in different parts of the world. So as to ensure efficient and effective supply of products to their destinations, the management in the organization has to strengthen its strategic alliances with key suppliers. This is because the suppliers may be required to increase their equipment so as to cope with the increased volumes of products to be supplied to consumers and the raw materials to be brought to the manufacturing centers. The relationships between the key suppliers may also be restructured because the company will begin producing new products. Some policies may be enacted to include the new product in the corporate system. Global sourcing is another important aspect that has to be put into considering (Barrett 2009, para.3). The supply across geographies will be conducted in a way that there will be a balance between supply and demand. This will increase profitability of the company as a result of the acquisition. Evaluation of best price for supply of products will be critical for the new products to generate profits. The company will need to renegotiate prices with current suppliers instead of hiring new suppliers.

The supplier should be involved in the joint improvement process (Harland 2000, p.22). This will be possible by ensuring that the supplier is involved in the program as early as possible. This will ensure that the supplier is fully set when time for operations will be come. Before manufacturing the products and taking them to the market, it is important to improve on their specifications through value analysis and engineering. Survey can be done so that the needs of the customers are determined. If the organization can produce better substitutes or alternatives that the consumers will prefer to the current, it is important to do so because it will increase revenue. The suppliers can also be redistributed to ensure that they supply of the product is efficient. This way, integration of the new takeover into the company will be very efficient.

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Duplications

When the company acquires a main competitor, it means that the company is the main competitor because it was producing products that some consumers preferred to the products of the company. For those products that have been performing well in the market, they company can continue producing them. In fact, the best thing is to improve on them. Research can be conducted so that the customers’ preferences are known.

Distribution Network Configuration and Strategy

Before integrating the takeover into the corporate strategy, it is important to consider the distribution network configuration. If there are several supply chains, where are they located relative to the location of the new company? Again, determination of the number of networks available and the network mission of suppliers will help in determining if the whether to use them or to implement a new one for the new product (Cooper, Lambert and Pagh 2000, p.12). The market for the company’s products could differ from the market for the new product. It is also important to determine the distribution strategy. This involves determining if the operations control will be centralized, decentralized or shared and the delivery scheme to be used.

Information

A lot of information is required before the integration of the takeover into the corporate strategy. The supply chain is supposed to bring information on demand signals, inventory, forecasts potential collaboration, transportation, and others (Larson and Halldorsson 2004, p.26). The raw materials available, work in progress, and finished goods that need to be integrated in the supply chain strategy need to be determined. This will determine the types of supplier that need to be consolidated. Entities in the supply chain will be exchanging money. The payment terms and methodologies that will be used in exchanging funds between entities need to be determined. The company acquired has forty percent of assets. The network of these assets plays an important role in integrating the supply chain management issues into the corporate strategy. Most of this information can be acquired though survey.

For the company to gain competitive advantage, the operations, channel, outsourcing, customer service, and asset network strategy and any other choices that the management will make should be aligned with the corporate strategy, consumers’ needs and company’s influence (Cohen and Roussel 2003, p.20). The company should also be adaptive because the market conditions do change affecting the competitive advantage of the company.

Conclusion

A strategic supply chain management ensures that the network of businesses which are involved in the provision of products and services to end users is effective and efficient. Finished goods, inventories, and raw materials are involved in a supply chain management (Murray 2009, p.32). Unilever is a multinational corporation that manufactures consumer product brands in beverages, foods, personal care products, and cleaning agents. The company came up with a supply chain strategy in 2005. It was named the 2010 Supply Chain Strategy aimed at aligning the supply chain strategy with the business strategy. Research conducted informed the management on future requirements and anticipated trends. The survey concentrated on major shops where the consumers obtained the products. Distribution channels, customer needs, outsourcing, and other major areas were studied. The takeover has many effects to the corporate strategy in that its integration will affect the company’s strategic supply chain management. Issues that should be addressed before the takeover is integrated include outsourcing, distribution network configuration and strategy, information available, duplication, and others. The components of the supply chain strategy should be aligned with the corporate strategy, consumers’ needs and company’s influence in the market.

Reference

Barrett, J., 2009, Six Best Practices for Building World Class Supplier Strategies: A Unilever Case study. (Online). Web.

Cohen, S, & Roussel, J., 2003, Strategic Supply Chain Management: Five Disciplines for Top Performance. Oxford: Oxford University Press.

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Cooper, M.C, Lambert, D.M, & Pagh, J. 2000. Supply Chain Management: More Than a New Name for Logistics. The International Journal of Logistics Management Vol 8, No. 1, pp 1–14

Harland, C.M., 2000, Supply Chain Management, Purchasing and Supply Management, Logistics, Vertical Integration, Materials Management and Supply Chain Dynamics. In: Slack, N (Ed.). UK: Blackwell.

Lambert, D. M., 2008, Supply Chain Management: Processes, Partnerships, Performance (3rd edition). New York: McGraw-Hill.

Larson, P. D, & Halldorsson, A. 2004. Logistics versus supply chain management: an international survey. International Journal of Logistics: Research & Application, Vol. 7, No. 1, pp. 17-31.

Mentzer, J.T. et al. 2001. Defining Supply Chain Management, in: Journal of Business Logistics, Vol. 22, No. 2, pp. 1–25

Murray, M. 2009. Strategic Supply Chain Management. (Online). Web.

Supply Chain Management Review. 2008. How Unilever Aligned Its Supply Chain and Business Strategies. (Online). Web.

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Weele, V. A., 2009, Purchasing and Supply Chain Management: Analysis, strategy, planning and practice. (5th Ed.). New York: Cengage Learning.

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