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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Supply Chain Restructuring

As part of the restructuring plan, Unilever decided to cut down its vast brand portfolio from 1,600 to 400. The reason was to enable itself to focus on these 400 key brands, which included names such as Dove soap, Lipton tea, Calvin Klein fragrances, Close Up toothpaste, Magnum ice cream, and Omo fabric detergent (See Exhibit I for major Unilever brands). Company sources expected this move to help improve supply chain efficiencies. According to Unilever Co-Chairman Niall FitzGerald (FitzGerald), "The consequence is that the tail brands will fall away in due course and we will be able to simplify and make major improvements to the supply chain and to the way in which we do business generally."

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

The SCM restructuring plan was built around five focus areas (See Table I). Unilever decided to make significant changes to its supply chain of 380 manufacturing plants across the world, by focusing on 150 key factories. Around 100 factory sites considered surplus were to be sold or closed.

According to company sources, the above two exercises were expected to cost around €2.3 billion. The major thrust areas were: implementing executive purchasing; attracting, developing and retaining world class supply management executives; professionalizing the purchase of non-production items; enabling e-sourcing in all worldwide facilities; accelerating and leveraging simplification of supply chain; and driving information and management...

Building the Ground for Long-Term Gains

By 2003, Unilever achieved €1.6 billion in savings from its SCM and procurement initiatives. According to company sources, the focus on managing companywide procurement technologies and processes not only helped in reducing procurement costs, but also in strengthening its relationship with the key suppliers. On account of its e-procurement and technology initiatives, the company had emerged as the leader in the consumer packaged industry for technology adoption...


Exhibit I: Unilever - A List of Major Brands (Partial)
Exhibit II: Growth in Unilever's Operating Margin

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