Improvement in Supply Chain and Inventory Management at Unilever

This research paper explores the strategies and technologies used by Unilever to improve its supply chain and inventory management, with a focus on just-in-time (JIT) approach. It also discusses the risks associated with the improvement and proposes mitigating actions. The paper further examines the use of financial concepts and evaluation techniques to inform investment decisions.

Running head: SUPPLY CHAIN MANAGEMENT
Supply Chain Management
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Introduction:....................................................................................................................................2
Part 1. Planning of improvement:....................................................................................................2
Part 1.1. The supply chain planning techniques and technologies to be applied:.......................3
Part 1.2. Project planning approach:............................................................................................5
Part 2. Risks associated with the improvement and proposed mitigating actions:..........................6
Part 3. Use of financial concepts and range of financial evaluation techniques techniques to
inform the decision whether to engage in this project:....................................................................7
Part 3.1. The differences between capital and revenue expenditure:...........................................8
Part 3.2. Application and evaluation of appropriate investment appraisal techniques:...............8
Conclusion:..................................................................................................................................9
References:....................................................................................................................................10

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Introduction:
Improvement project in supply chain and inventory management have require immense
planning, financial investments and risks. Multinational companies improve their respective
supply chains and inventory to gain efficiency in their manufacturing process as well as
marketing of goods. In other words, these two aspects lead to revenue generation and
competitive advantage in the global market. The paper would visit a supply chain and inventory
management strategy which multinational companies apply to boost their manufacturing and
marketing operations. The research would take into account the application of just in time (JIT)
in the global FMCG giant Unilever Plc to boost its supply chain and inventory management. The
research would draw its strength from the article titled ‘Unilever’s Supply Chain’ published in
May 2018 (Unilever.com. 2019).
Part 1. Planning of improvement:
Unilever uses techniques and technology using JIT to manage and improve supply
chain and inventory management. Lai and Cheng (2016) in his book titled ‘Just-in-time
logistics’ defined just in time or JIT as the operational process which manufacturing firms
undertake to eliminate unwanted steps in the entire manufacturing process so as to shorten the
manufacturing cycle, use raw materials more efficiently and reduce wastage of raw materials.
Boyce et al. (2018) mention in their work that JIT can also be used to monitor agricultural sector
as well. These two pieces of literature can be be synthesized to point out that just-in-time can be
used in fast moving consumer goods companies like Unilever because they source a major
portion of their supplies of raw materials from the agricultural sector of different nations. It can
be pointed out that Unilever markets four main types of products namely, homecare, personal
care, food and refreshments and water purifiers. It can be pointed out that the home care products

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and food products which the firm manufactures and markets require sourcing of raw materials
like palm oil, milk and coffee, all of which are raw materials derived from farmers. Considering
the global demand for Unilever products, it can be pointed out that the company has to ensure
strategic management of its global supply chains to ensure continuous supply of high quality raw
materials into its manufacturing facilities in appropriate quantities. This business requirement to
ensure uninterrupted production of high quality products necessitate Unilever to incorporate just-
in-time strategy to manage its supply chain and inventory management.
Part 1.1. The supply chain planning techniques and technologies to be applied:
Unilever uses advanced technology and techniques to manage its supply chain and
inventory management. ‘Unilever’s Supply Chain’ mentions that the multinational company
manages its supply chain using six approaches. The first criterion which the company considers
while managing its supply chain is operating with purpose. This means that company aligns its
SCM with its business requirements. The company takes into account the market demands for
different goods it markets to decide the amount of finished goods to be produced. The company
then uses digital monitoring of supply chain to ensure sourcing of raw materials from suppliers
located in different markets at economic rates. de Jong et al. (2017) point out that this use of
digital technology to manage its global supply chains enables the company to acquire raw
materials at economies of scale which result in low costs of production. The pie chart below
shows that about 32 percent suppliers are based in Asia followed by Europe, Americas, Middle
East and Africa. This means that the company has to mobilise funds towards management of
supply chains in these markets in the same order. The company uses advanced technology like
cloud computing to manage the suppliers. The apex management based in London and
Rotterdam hold meeting with the regional offices situated in these markets to ensure efficient

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acquisition and management of suppliers. A late 2017 edition of the Fortune Magazine reports
that Unilever has adopted block chain technology to manage its supply chain (Fortune.com.
2017). It can be inferred from the use of these two advanced technological strategies namely,
cloud computing and block chain strategy that the company use technology to plan its supply
chain strategies. Ramanathan, Subramanian and Parrott (2017) point out the third technology
which Unilever uses to apply JIT, social media. The company gains feedback from customers
regarding their expectations from the products it markets. The managers situated in different
markets like India and China provide the apex management about forecast of future market
demands for products. The block chain strategies enable the company to transport raw materials
from distances by just shifting the goods from one mode of transportation to the next (raw
materials imported using marine ports can be then trucked) without actual handling or
dismantling of the goods. This enables the company to ensure that raw materials and work in
progress reach the manufacturing facilities in appropriate conditions. This enables the company
to use most of the raw materials procured for production which reduce losses due to wastage of
raw materials. Thus, it is evident that Unilever uses applies advanced technology like block chain
chain, cloud computing and social media to adopt just-in-time in its manufacturing facilities.

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Figure 1. Pie chart showing the major supply markets of Unilever
(Source: Unilever.com. 2019)
Part 1.2. Project planning approach:
Unilever uses total quality management or TQM to plan its project approaches. Machado
et al. (2016) define total quality management as the approach of management of projects in
business organizations in ways that would facilitate continuous improvement in the production
process which would be aligned to the needs of the customers. Unilever in order to implement
TQM considers the requirements of the customers as quality parameters which it incorporates in
product strategies. The multinational company in order plan supply of specific raw materials like
palm oil carries out a detail market analysis which is followed by a stringent monitoring of the
suppliers by the senior managers. Unilever has laid down a strict supplier assessment system
called Unilever Supplier Qualification System which is determined by the apex management.
The customers today demand companies to operate in more ethical and legal ways. The company

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in response of these requirements of customers, clearly mentions that suppliers of goods and
services irrespective of the location have to comply with the supplier sourcing policies. Unilever
mandates its suppliers to comply with laws, abstain from indulging into corrupt practices of all
kinds and to enter in contracts as per the legislations in power in order to supply goods to the
company. Dubey et al.(2017) mentions in this respect that its centrally management and strict
approach to procurement projects enable the company to manage its supply chains very
strictly. This ensures that the company is able to acquire timely stock of raw materials to ensure
sufficient availability of inventory. This strong inventory management ensures smooth
manufacturing process. Thus, it can be inferred from the discussion that project management
approach to supply chain as well as inventory management enables the company to ensure
continuous flow of raw materials into its manufacturing plants to ensure smooth manufacturing
of finished products (Christopher 2016). The project planning approach strategy shown below
would follow the project planning steps marked as stages 1 to 8. The starting date of the project
would be April 1, 2019 (Gantt chart attached)
Activity
nos Project Planning approach Time(mons)
Improvement of supply chain and inventory
management at Unilever(including its subsidiaries) 9
Stage 1. Analysis of market opportunities 2
The apex management of Unilever holds meeting with
the senior managers of all the locations to decide on
the strategies to improve supply chain and inventory
management. 1
Apex management approves finance department of
sanction to conduct external market analysis and
internal market analysis 1
Stage 2. Identifying the aim of project 1
The top managers meet the discuss on the findings of
the market analysis against the aim of the project
identified. 1

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Stage 3. Exploring options 1
The managers discuss to the options of
improvemement the supply chain and inventory
management 1
Stage 4. Selecting the most appropriate options 1
Stage 5. Detailed planning 1
Stage 6. Evaluating of the plan and its impact 1
Satge 7. Implementation of the plan 1
Stage 8. Closing the plan 1
Unilever should conduct a GAP analysis after closing projects like supply chain projects.
The company after closing the projects would measure the actual return from it against the target
return. The management should take steps if the actual return or benefits from a project falls
below expectations. For example, it is expected that after acquiring a supplier, the company
would be able to reduce its cost of production by $100000. If the reduction in cost of production
actually achieved is $ 10000, the management needs to take steps to deal with the gap of
$90000(100000-10000)
Part 2. Risks associated with the improvement and proposed mitigating actions:
Improvement in supply chain and inventory management by Unilever attract several
risks. The following table would show that risks which the company might face in order to
improve its supply chains:
Risk nature Risk description Mitigation
Financial risks Augmentation of supply chains and
inventory management require high
capital expenditure. Market changes
like economic downturn or political
tension may result in total termination
Unilever should hold acquire new
suppliers which would enable it
acquire the raw materials from
different markets, thus lowering
financial risks of losing amount

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of supply orders without any refund
which means that the resources spent
towards ordering supplies cannot be
gain back
allocated towards procurement of
raw materials.
Technological
risks
The company in order to adopt SCM
management techniques like JIT
require to continuously upgrade its
technology in use.
Continuous advance the version
of technology in use
Supply chain
risks
Shortage of raw materials Unilever should maintain
contingency stocks of raw
materials in order to deal with
supply chain risks.
Data theft risks Data theft risks lead to loss of data the
company’s managers share on
technological platforms like cloud.
The company should protect its
data bases with strong antivirus
and firewall.
Part 3. Use of financial concepts and range of financial evaluation techniques techniques to
inform the decision whether to engage in this project:
Unilever prior to investing in procurement, use financial evaluation techniques to decide
whether the supplier procurement would be profitable for the company in the long run.

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Part 3.1. The differences between capital and revenue expenditure:
Capital expenditures refers to expenditure companies bear to expand its fixed assets.
Muda and Naibaho (2018) define capital expenditures or capex as the expenditures which
companies carry out to expand their fixed assets.
Revenue expenditures are expenditures which would be considered as expenses for the
accounting periods during which they actually take place. Yinusa, Aworinde and Oseni (2017)
define revenue expenditures as expenditures which would be considered once they actually take
place in future in contrast to capital which consists of expenditures taking place at present.
The second point of difference between capital expenditures and revenue expenditures lie
in the items considered. Capex considers only those expenses borne to acquire fixed assets
whereas revenue expenditure consider expenses borne to acquire both fixed and current assets.
For example, if Unilever acquires a plant for $ 1 billion in 2019, it would be considered as a
capex. However, if the company plans to service the plant in 2020, it would be considered as
revenue expenditure then which would be added to the expenses of 2020.
Part 3.2. Application and evaluation of appropriate investment appraisal techniques:
Unilever should apply and evaluate appropriate investment appraisal techniques to judge
the actual profitability of procurement projects. The company should use the following
appropriate techniques to appraise its investments:
Accounting rate of return or ARR:
The accounting rate of return takes into account the net income which business
organisations can earn on investments. For example, the ARR of a particular investment asset is

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20 percent. This means that if Unilever invests in that asset, it would earn a return rate of 20
percent.
Net present value:
Net present value is the method of measuring the difference between the investments at
present and the value it would fetch in the future. For example, if Unilever invests $ 10000
today, the value of the investments would change. This different between the investment and its
future value presents NPV.
Conclusion:
The above discussion brings to the forefront certain salient findings. The first finding
from the discussion is that supply chains hold great significance for consumer goods companies.
The second finding from the discussion is that multinational consumer goods companies like
Unilever use technology to a great extent to manage and monitor their supply chains. The third
finding from the discussion is that Unilever uses JIT to manage its suppliers. The global
consumer goods marketing has in fact integrated its SCM with inventory management. It can be
recommended to the company to make its supplier qualification criteria even more stringent. The
company should maintain strict vigilance over its global supplier base to ensure that they
suppliers comply with the codes set by it.

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References:
Boyce, W., Srinivasan, M.S., Turner, J., Percy, H. and Fielke, S., 2018. Combining a cognitive
framework and a co-innovation research strategy to address water use efficiency. Rural
Extension and Innovation Systems Journal, 14(1), p.137.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Cumming, D.J., Grilli, L. and Murtinu, S., 2017. Governmental and independent venture capital
investments in Europe: A firm-level performance analysis. Journal of corporate Finance, 42,
pp.439-459.
de Jong, S., Hoefnagels, R., Wetterlund, E., Pettersson, K., Faaij, A. and Junginger, M., 2017.
Cost optimization of biofuel production–The impact of scale, integration, transport and supply
chain configurations. Applied energy, 195, pp.1055-1070.
Dubey, R., Gunasekaran, A., Papadopoulos, T., Childe, S.J., Shibin, K.T. and Wamba, S.F.,
2017. Sustainable supply chain management: framework and further research directions. Journal
of Cleaner Production, 142, pp.1119-1130.
Fortune.com. 2017. Fortune.com. [online] Available at: http://fortune.com/2017/08/22/walmart-
blockchain-ibm-food-nestle-unilever-tyson-dole/ [Accessed 15 Apr. 2019].
Lai, K.H. and Cheng, T.E., 2016. Routledge.
Muda, I. and Naibaho, R., 2018, March. Variables influencing allocation of capital expenditure
in Indonesia. In IOP Conference Series: Earth and Environmental Science (Vol. 126, No. 1, p.
012066). IOP Publishing.

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Ramanathan, U., Subramanian, N. and Parrott, G., 2017. Role of social media in retail network
operations and marketing to enhance customer satisfaction. International Journal of Operations
& Production Management, 37(1), pp.105-123.
Unilever.com. 2019. Unilever.com. [online] Available at:
https://www.unilever.com/Images/unilever-supply-chain-overview---may-2018_tcm244-
523172_1_en.pdf [Accessed 15 Apr. 2019].
Yinusa, O.G., Aworinde, O.B. and Oseni, I.O., 2017. The revenue-expenditure nexus in Nigeria:
asymmetric cointegration approach. South-Eastern Europe Journal of Economics, 15(1).