Sustainability in Global Supply Chain: Unilever - Case Study Example

Sustainability for the Future Global Supply Chain: A Case of Unilever

Introduction

Supply chain is the sequence of processes that is involved in the production and distribution of a products or services. It is a network between a firm and its suppliers for producing and distributing products. Supply chain comprises of every company that falls in contact with a specific product along with including firms that accumulate and transport component parts to the producer or manufacturer (Nidumolu,Prahalad and Rangaswami, 2009). In the current study, an overview of the overall supply-chain of Unilever would be provided. Based on the supply chain and operational processes of the company, two specific steps would be identified and developed for recommending more sustainable and future-thinking enhancement.

Overview of Unilever’s supply chain

Unilever is an international end-user goods firm.Its products include personal care products, cleaning agents, food and beverages. Eight disciplines that is; engineering, planning, manufacturing, logistics, procuring, customer service, quality and safety are leveraged by End-to-end supply chain of the firm. The company operates through 460 warehouses and 260 factories in 90 nations serving around 2 billion customers (Unilever, 2016b). However, it has been observed that recently,the company has been facing some sustainability issues with its supply chain. One issue is related with the speed of order fulfilment (Supplychainbrain, 2013). The customers have claimed that they have to wait for a long period of time to receive their ordered products. The reason for such an issue is due to problem in decline in the procurement process of resources and materials. This has created a delay in delivering the products to the customers. On the other hand, another issue found is related with the welfare of employees that are a part of supply chain of Unilever. A report by Oxfam showed that there is problem in wage levels, working hours, stability of employment and relations between labourers and management of Unilever(Morden, 2013).

Sustainability concept and its relationship with supply chain management

The concept of sustainability is designed around there elements, environmental, social and economic development. Embracing environmentally sustainable business practices provide a number of advantages (Reilly, 2009). It enables the firm to be more responsible towards its business and customers with whom they deal with. The organisations with proven records in local and global sustainability could make income through investments (due to good public reputation), employee productivity and better long-term public following (Bowers, 2010). Sustainability is not only restricted to environment but is well infused in employment, business practice and supply chain and other elements. In context to Unilever, the company also adopts the sustainability approach. The company not just includes environmental factors but also increases the experiences of workers and employees whoare involved in its supply chain. For being more sustainable corporate citizens, the company is aiming to drive recycling and efficiency and reduce carbon emissions from its manufacturing sites. It is evident that Unilever sourced 14% agricultural supplies sustainably in 2010, which has now increased to 48% (Sunlight, 2014). It indicates that the company has well understood and applied the sustainability concept, which is seen through its different operational activities.

On the other hand, it has been studied that there is a significant link between sustainability and supply chain management. The relation could be evaluated by analysing the impact of sustainability on supply chain management (Reilly and Weirup, 2012). Unilever promotes sustainable farming methods as it helps in increasing yields considerably, providing social and economic benefits to farmers, their families and adjacent communities and alleviating the impacts of environment change. This supports the company in procuring materials in a sustainable form and thereby, provides quality products to the customers. As a result, the company receives a positive feedback from the consumers for being a sustainable responsible corporation (Mirvis, 2011). On the other hand, it has been observed that Unilever’s sustainable sourcing approach helps it to secure supplies and limit the risk and volatility in its raw material supply chains (Unilever, 2016a). It offers prospects for innovation through concentrating on sustainable livelihood needs of people and consumer penchant. This helps in building a stronger brand name globally.

Further, Unilever gives high importance to sharing information with its stakeholders. Through informing about where its products come from, helps the company to meet the emerging desires of the consumers for more sustainable products. This helps in increasing the sales of the products desired by the people. Moreover, maintaining a sustainable supply chain has placed Unilever among the top 10 supply chains in the world. Due to a sustainable practice, the company has been successful to increase its customer base to 150000 globally by serving around 60000 products (Unilever, 2016a).

Key success factors to implement strategic SCM

To effectively compete, succeed and hold market share in the global market, organisations need to have a potential supply chain management. For implementingstrategic supply chain management, Unilever would require to focus on building a relationship with its suppliers and their level of commitment and trust. The environment setting of company relates to the organisation’s anticipations of quality, rivalry in the industry, on time delivery and the scale of competition among the companies (Kashmanian, Wells and Keenan, 2011). However, uncertainty could negatively impact the performance of the company. Therefore, building a strategic relationship with the critical suppliers would help Unilever to deal with the environmental uncertainties in the supply chain; thereby, help in executing an effective SCM.

The other factor could be reducing or eliminating organisational process inefficiencies and redundancies. It would support Unilever in having a standardised workflow process in its supply chain which would help in minimising customised procurement and other non-system processes (Trexler and Schendler, 2015). However, the company might require eliminating non-traditional vendor use and enable standardisation of products. Moreover, there is a need to decrease the transaction processing time from requisition processing via payment. This could enable Unilever to increase the efficiency of supply chain and gain expected benefits in terms of sustainability.

The importance of top management commitment in the field such as implementing information systems, ERP systems and SCM enables the organisation to gain a positive return. The primary responsibility of the top management of Unilever is to deliver adequate resources and required financial support for establishing a successful system (Hopkins, et al., 2009). Moreover, the engagement of the top management would ensure that implementation of SCM has high priority within the company. It is also important for the top management to provide behavioural and psychological support for the smooth execution of supply chain management particularly when there is considerable resistance from the staff engaged.

Further, it could be pointed that information technology has received high importance in implementing SCM in the recent years. From enterprise resource planning (ERP) systems and electronic data interchange (EDI) systems, supply chain operations increasingly are transforming to intranet or internet in order to support SCM (Dentoni and Peterson, 2011).Therefore, Unilever, through using modern technologies, in the supply chain management would be able to gain advantages such as quality improvement, cost saving, higher competitive benefit and delivery and support.

Map supply chain and identify segments

Figure 1: Supply Chain Map of Unilever

Source: (Author’s Creation)

Unilever follows a standard supply chain process from procuring materials to distributing products to its end customers globally. The supply chain of the company starts from procuring resources and raw materials from farmers and suppliers then using them for producing the products that are desired by the specific customers (Galpin, Whitttington and Bell, 2015). Unilever, through its supply chain is able to make the products available in the market which further supports in generating income. However, the company is required to focus on the sustainability improvement of its supply chain in order to make its supply chain process more leverage and thereby meet the demands of the customers. One segment that could generate business benefit from sustainability improvement is logistics. Focusing on enhancing logistics operations would positively influence the business performance of Unilever. Sustainable logistics management would enable Unilever to deal with efficient management of day-to-day activity in producing finished goods and services (Nidumolu,Prahalad and Rangaswami, 2009). Through sustainability improvements, the company would be able to maintainrapidity with the demands of an increasingly global economy. On the other hand, it has been studied that logistics transportation of Unilever is majorly carried through roads. Therefore, a considerable sustainable improvement would help in usingthe fuel efficiently in all the activities for keeping emissions from road transport as low as possible (Nishat, 2010). Furthermore, from sustainability improvements, Unilever could redesign its logistics and supply chain network and can also establish green corridors between Unilever’s major logistics locations. It would help in delivering fewer and friendlier distribution miles in different regions (Dauvergne and Lister, 2012). Moreover, it would decrease the road journey per year and could be able to increase the use of rail and sea for moving goods to the targeted markets. Sustainability supply chain improvements would make the logistics network of the firm to deliver real business benefits through reducing costs, lower GHG emissions and providing improved service to the customers (Nikoloyuk, Burns and de Man, 2010).

Another segment that could produce business benefit from sustainable supply chain improvements is high engagement of skilled labour globally. Unilever follows some well-organised sustainable policies and practices for maintaining and holding its key staffs across the supply chain and logistics network (Vermeulen, 2010). Employees would be allowed to have the right proficiency sets for managing and controlling the business through a period of growth by concentrating on a sustainable supply chain (Pettit, Fikseland Croxton, 2010). Further, sustainable improvements would enable Unilever in identifying the key capability requirements of employees for accelerating the firm’s growth and attaining business strategy. This would support the company to receive a productive contribution in maximising growth opportunities and in providing quick and quality service to global consumers.

The other suggestions that could be followed in line with the existing practice are:

• Implement stricter rules for all the channel partners and retailers that sells Unilever products across the globe.
• Use sustainable packaging FSC verified bags for storing products.
• Ensure that suppliers of raw materials are using sustainable packaging materials.
• Reduce truck transport and increase other means of transport for moving goods.
• Introduce energy saving programs in stores and warehouses.
• Focus on improving VLM methods via streamlining supply of raw materials for decreasing redundant storage in the warehouses. It would support in increasing productivity and attaining higher sustainability.
• Incorporate manufacturing leadership development programme for improving the skills of factory leaders.
• Enhance radio frequency controlled carton flow in the warehouses.

The most valuable recommendation could be further appraised through assessing its impact on the work flow of the company. Unilever would require monitoring the outcome of the recommendation on business performance and productivity and on its global supply chain network.

Supply chain risk

It is studied that supply chain risk could severely affect the overall operational process of the company and if there is failure in predicting risk, then it can further lead to decline in the outcome. In case of such situations, the organisation could require to adopt a critical approach in mitigating supply chain risk. One strategy that could be followed is focusing on compressing global shipping time and cycle time variation. It would help in mapping the value-stream process of the end-to-end global shipping upon which the company can further develop ways of reducing and eliminating delay and desecrate at each phase (Tang and Musa, 2011).

Furthermore, for managing the supply chain risk, the company can use visibility tools for tracking shipments closely and take action when required. Unilever could use supply chain event management technology for sending alerts to key employees when there would be a need to take action in the global supply chain for correcting delays (Trkman and McCormack, 2009). On the other hand, using sophisticated tools would deliver visibility on price as well as performance measures. Shippers could also be able to monitor carrier performance and relationships in specific lanes. It would decrease the time between measuring response and risk. Moreover, the company would be able to respond to each disruption in the supply chain by measuring performance more often (Tummala and Schoenherr, 2011).

Soliciting information about the internal processes of the suppliers not only offers visibility into the security but also the controls could be placed during the progression of creation or manufacturing (Colicchia and Strozzi, 2012). Unilever would require asking its suppliers in brief about the processes how visitors are tracked and monitored while on-site, how keys are checked out, and ways of controlling electronic data and computers and how access to cargo is confined. This would help in eliminating supply chain risks and the supplier network could be strengthened as well (Pettit, Fiksel and Croxton, 2010).

Conclusion

In current global business environment, it is crucial for Unilever to promote its business strategy of sustainability. It would support the company to sustain and maintain its market share. It has been found that Unilever has been some sustainability issues in its supply chain which impacted its image to some extent. Therefore, it becomes important for the company to focus more on the sustainable approach in order to place itself as a sustainable global corporate citizen. For attaining sustainability, Unilever would require to infuse the importance of sustainability within the organisation so that operational work could be carried in sustainable way.

Personal Reflection

From the overall study, I have understood that sustainability could significantly help in leveraging the supply chain process. Sustainability in supply chain is not only restricted to reducing energy, decreasing carbon footprint and resource consumption but also improves the image of the companies in the market and among customers. I have assessed that sustainable supply chain improvements can enhance bottom line financial results through adhering to sustainable practices. Further, I have learnt that companies through working with their suppliers can develop a more sustainable supply chain which helps in cutting down costs, generate new sources of revenue, manage risks and boost the value of their brand. According to my level of understanding, organisations that can identify and implement sustainable supply chain practices more likely experiences positive feedback and public relations as such firms would be perceived as a good global citizen that could yield higher benefits. Moreover, the firms would face less supply chain risk and could counter such risks efficiently.

Reference List

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Colicchia, C. and Strozzi, F., 2012. Supply chain risk management: a new methodology for a systematic literature review. Supply Chain Management: An International Journal, 17(4), pp.403-418.

Dauvergne, P. and Lister, J., 2012. Big brand sustainability: governance prospects and environmental limits. Global Environmental Change, 22(1), pp.36-45.

Dentoni, D. and Peterson, H.C., 2011. Multi-stakeholder sustainability alliances in agri-food chains: a framework for multi-disciplinary research. International Food and Agribusiness Management Review, 14(5), pp.83-108.

Galpin, T., Whitttington, J.L. and Bell, G., 2015. Is your sustainability strategy sustainable? Creating a culture of sustainability. Corporate Governance, 15(1), pp.1-17.

Hopkins, M.S., Townend, A., Khayat, Z., Balagopal, B., Reeves, M. and Berns, M., 2009. The business of sustainability: what it means to managers now. MIT Sloan Management Review, 51(1), p.20.

Kashmanian, R.M., Wells, R.P. and Keenan, C., 2011. Corporate environmental sustainability strategy: Key elements. The Journal of Corporate Citizenship, 1(44), pp.107-131.

Mirvis, P., 2011. Unilever’s drive for sustainability and CSR—changing the game. Organizing for Sustainability, 1(1), pp.41-72.

Morden, J., 2013. Lessons from Unilever’s global supply chain challenges. [online] Devex. Available at: <https://www.devex.com/news/lessons-from-unilever-s-global-supply-chain-challenges-80348> [Accessed 30 November. 2016].

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Appendices

Option Appraisal

Sustainability Improvement Suggested

Impact

Magnitude

Probability

Logistics

Facilitates raw material exchanges & joint use of services

Positive

Moderate

High

Building components designed for easy disassembly

Positive

High

High

Flexible internal partitioning

Very positive

High

High

Diverse transport modes

Positive

High

High

Positive C2C brand & marketing value

Neutral

Moderate

Medium

Engaging skilled labour

Readily adaptable to future requirements

Neutral

Moderate

Medium

Sustainable use of resources

Positive

High

High

Support operational decision making

Neutral

High

High

Improve supply chain

Positive

High

High

Gantt Chart

Task Name

Month 1

Month 2

Month 3

Month 4

Month 5-6

Review Supply Chain

Review Logistics Plan

Analyze market trends

Assessing growth options in SCM

Designing advanced model of SCM and logistics

Test advance model

Implement model in the supply chain operation

Set Standards

Review standards

Implement Sustainability practice

Budget

Particular

Amount

Wages

350000

Employee benefit

400000

Commission

500000

Advertising

300000

Bad Debts

200000

Cash Discounts

150000

Delivery costs

200000

Depreciation

100000

Dues and Subscriptions

50000

Insurance

130000

Interest

200000

Legal and auditing

100000

Maintenance and Repairs

450000

Office Supplies

80000

Rent or mortgage

410000

Sales expenses

35000

Shipping and storage

30000

Supplies

500000

Taxes

300000

Utilities

140000

Total

4625000