Global Procurement: A Study of Unilever's Tea Supplier Management

This report provides a comprehensive analysis of Unilever's global procurement practices, specifically focusing on its tea supply chain. The study begins with an abstract summarizing the importance of procurement management, particularly in the context of competitive markets and outsourcing. It examines Unilever's procurement strategies, emphasizing sustainable sourcing and its impact on brand reputation. The report delves into Unilever's organizational overview, highlighting its growth and operational models, followed by a detailed examination of its existing procurement practices, including direct and indirect procurement. The methodology includes a mixed-methods approach, incorporating secondary data from company documents and primary data from employee surveys. The discussion section covers Unilever's organization overview, procurement strategies, and the company's approach to selecting suppliers and maintaining ethical standards. The report also includes a survey analysis to validate the collected data. The report concludes with areas for improvement and recommendations for enhancing Unilever's procurement processes, ensuring sustainability, and maintaining strong supplier relationships. The report uses figures and tables to provide a clear picture of the company's revenue, strategies, and procurement processes. The findings of this report are valuable for understanding the complexities of global procurement and sustainable supply chain management.

Running head: GLOBAL PROCUREMENT
Global Procurement
Name of the Student
Name of the University
Authors note

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Abstract
A company could reduce their costs and increase their brand impact through understanding
the relevance and importance of procurement management. The high competition in the
market has popularized the outsourcing in the business world. Suppliers are playing a crucial
role in determining various aspects of business like manufacturing cost, increase product
quality, company reputation, and the confidence of stakeholders. This paper aims to
understand the procurement management of Unilever in respect to their tea suppliers. This
company has established itself as the highest buyer of tea all over the world. To sustain their
reputation in tea selling, the company depends on sustainable sourcing. This company has
outsourced tea for their reputed brand from all over the world. To get the ultimate benefits
from its suppliers, the company uses strategic management of their procurements. The
customers are more informed and knowledgeable about the age of the internet. A
knowledgeable customer shows its interest in every aspects of the brand they are using. The
tea suppliers of these organizations are part of various sustainable projects. They also
participate in sustainable programs of the NGOs and national and local governments.
Unilever is a member of ETP or Ethical Tea Partnership. The company works for the welfare
of the tea garden workers and make sure that their suppliers are gathering tea leaves form the
Rain Forest Alliance farms. Unilever shares the information of their tea suppliers and how
they buy from them to keep their procurement process transparent.
Keywords: procurement management, sustainable suppliers, procurement strategies, supplier
selection, criteria, ethical, environment friendly, tea suppliers

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Table of Contents
Introduction....................................................................................................................3
Methodology..................................................................................................................3
Discussion......................................................................................................................4
Organisation Overview..............................................................................................4
Existing Procurement practices and their effectiveness.............................................7
Areas of further improvement....................................................................................9
Conclusion....................................................................................................................11
References....................................................................................................................12
Appendices...................................................................................................................14

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Introduction
Companies in modern business employ a number of management techniques to make
their operations and functioning intact. Procurement management is the part of management
where the services and goods are obtained from different firm or organization. Procurement
management ensures the optimization of organizational spend. The process of procurement
management consists of getting the best deals from the suppliers at the lowest cost and on or
before time. Most of the companies have to rely on their suppliers to get the raw materials
and other goods for their business. Procurement is important to find the right deals and
agreements in services and goods that are to be acquired from external sources. Procurement
includes competitive bidding and tendering for decisions in good buying. The management of
procurement have some integral steps like sourcing, ordering, requisitioning, expediting,
inspection, and reconciliation.
Companies attain various methods to manage their procurement requirements. This is
done in some steps. In general terms, the first step of procurement management is planning.
The management team has to plan what their requirements are and how they want to do it.
The sellers or the suppliers then get the required contracts. Among various tenders, the
company chooses the best deal. Follow up of the contact is the part of procurement
management as well. The procurement process does not end with the sign of the contract. An
organisation that has started working with a supplier have to keep an eye on the fulfilment of
quality and quantity promised. The challenges that the companies face in their procurements
could be based on various factors including the delays in supply, finding effective tools and
strategies, managing stakeholders, risk mitigation, managing RFx process and getting
accurate data.
Buying procurement form the suppliers is a normal and regular process for any
organization. This business activity becomes crucial as it helps the company to flourish and
stay in the competition. Basically, it is about maintaining a relationship with the suppliers and
vendors for getting the required goods and services. Understanding the need of the customer
and stakeholders is necessary to have successful procurement management. Organizations
need to look outside their known market as well to have innovative ways for their
procurement process. It is a process that needs specialized personals and team. The
procurement team in a company should have the experts who can evaluate suppliers, connect
them with stakeholders and customers need, negotiate logically with the suppliers about the
contract and make sure that the supplied goods are meeting the specific standard and needs of
the company. The company policies of the services and goods need to be well-known by the
procurement management team. The ethical issues in selecting the right vendor and not
showing any favouritism attitude to the suppliers is another important part of this
management. All these aspects of procurement management are highlighted in this report
through the case study of Unilever tea providers. The study will evaluate the procurement
strategies of the company, compare them with the most effective ones according to the
researches, and would suggest some changes wherever necessary.
Methodology
This study is done using mixed methods that involve both secondary and primary
analysis. This is qualitative research, and the data are collected from the company balance
sheets, documents of procurement, and employee survey.
The first step for collecting the data was to understand the research requirements. This
study is dedicated to understanding the procurement management of the Unilever Company’s

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tea manufacturing department. The data about the suppliers are available in the company
record and website. Fort those data were collected and also the past few years balance sheet
of the tea manufacturing department is studied. The company data has been useful to
understand the deals and contracts that the company have with their tea suppliers. As the
highest manufacturer of tea, Unilever is connected to a number of suppliers of tea all around
the world. The data collected from the company documents have the details of the name of
suppliers, their operational methods, and relationship with the company.
A survey was conducted with the employees of the procurement department to
evaluate the authenticity of the data collected from the company website and documents. The
questions of the survey were close-ended and structured. Five employees of the procurement
team were selected in the random sampling method for this survey, and the questionnaire was
built on the tea procurement strategies, breach issues and their impact and contract
negotiation of the company. Analysis of this data was done in a qualitative approach.
Discussion
Organisation Overview
Organization strategy
Figure 1: growth of Unilever revenue worldwide
(Figure: statista.com)
Unilever is one of the most renowned retail brands in the world. The headquarters of
this company is situated in the UK and Netherlands. Founded in 1929, this company has been
successful to mark its presence in the consumer goods industry. Unilever owns about 400
brands, including famous brands like- Dove, Knorr, Lipton, Magnum, Lux, Surf, and Sunsilk.
These are the highest-grossing brand in consumer goods section along with some others. It is
the highest suppliers of tea brands in the world. The company has its research and
development units in London, China, Netherlands, United States, and India. The tea brands
that the company owns are PG tips, Lipton, Pure Leaf, Lyons, and Scottish Blend
(unilever.com 2019).

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Figure 2: Emerging power of Unilever regarding gross profits to assets
(Source: https://seekingalpha.com/article/4035989-unilever-emerging-power)
As shown in the graph, Unilever is rapidly growing to become highest gross profit
gainers. The company follows intensive growth and generic strategies for its operations. The
generic strategy is based on Porter’s model that is used to gain competitive advantages in a
stiff market. This company concentrates on the product development strategy to address the
market demands (Lintukangas, Hallikas and Kähkönen 2015). Customers are at the heart of
strategy development. The company also believes in growth using a number of intensive
strategies as well. The success of Unilever in the global market is based on the combination
of these two strategies. The operations model of this company is flexible, and that changes
according to the need and mode of the market (Ghadimi et al. 2016).
Unilever is quite specific and strategic for the selection of the suppliers. The
procurement department of this company works in different teams for different sections.
Management understands the importance of green sourcing and its impact on business
turnover. Therefore, the suppliers are selected who fulfill their goods and services
requirements in a sustainable way. Unilever is trying to project its image as a customer-
oriented and sustainable company. They are infusing the customer social responsibility and
ethical aspects in each department of their company. The company uses a differentiation
strategy to sustain competition. They have associated their products with a number of ethical
and social responsibility campaigns of their own (Sajjad, Eweje and Tappin 2015). The
management takes special care of the customer requirement and designs the products
accordingly. The price of the products by Unilever is slightly high than the other companies
in the market. In spite of the fact, consumers tend to prefer Unilever products for their unique
features. Like if we take the example of Dove brand, the company has done its market
research and designed the Dove Cream bars more for the moistening than the cleansing
effects. Thus the company aligns its product to its mission of global sustainability and
increasing product values to the customers.
Procurement strategy

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Procurement of Unilever is managed in two categories – direct procurement and
indirect procurement. Direct procurement is related to raw materials and packaging materials.
On the other hand, indirect procurement consists of the supplies of non-productive materials
(de Souza Dutra et al. 2017). The vision of the company, as stated on the company website, is
to the growth of their business by casting a minimum impact on the environment and
development of the surrounding society. The company partners with the suppliers who
develop their products in an environment-friendly way. Business and procurement ethics is
given special importance by the managers.
Sales (In
million euro)
2011 2010 2009 2008
Unilever US 15,200 14,600 12,700 12,900
Unilever Global 46, 500 44,200 40,000 40,000
Unilever Tea
revenue
1,170 1,157 1,100 1,027
Unilever
beverages (US)
2,900 2,800 2,470 2,500
Table 1: sales revenue of Unilever in different categories
(Created by author)
Among the product categories, about 19% of the whole business products of this
company are based on refreshment products. This is a massive share in Unilever business.
The company is the highest supplier of tea all over the world. Its tea brands are unique for
their quality and price. As this report is about the tea supply chains, we would discuss the
procurement strategies of Unilever tea brands. This company gets its supply of tea leaves
from India, Sri-Lanka, Kenya, Switzerland, Rwanda, Vietnam, Uganda, Malawi, and
Tanzania. Most of the large-scale tea suppliers of these countries are part of the Unilever
suppliers list.
2011 2010 2009 2008
0
500
1000
1500
2000
2500
3000
Unilever
Tea
revenue
(in
million
Euro)
comparison of Unilever Beverage and tea revenue in US
Unilever Tea revenue (in million Euro) Unilever beverages (US) (In million Euro)
Graph 1: comparison of Unilever Beverage and tea revenue in US
(Source: created by author)

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The procurement strategy of this company is divided into four steps- planning the
procurements, selection of suppliers, administering the supply process and finally closing the
contract, with keeping all the ethical aspects of the contract intact (Grandia, Steijn and
Kuipers 2015). The tea procurement management team is led by the experts that have an
understanding of the requirement. Good negotiation with the suppliers is another component
of Unilever’s sourcing strategies. Use of technology keeps the company’s procurement
management strategy at the place. The management uses a number of tools and software to
collect and save the details of the suppliers. The company believes in long-term partnerships
with its suppliers. This is the reason, the highest tea selling company of the world have signed
a contract with suppliers who are trustworthy and obtains sustainable practices in tea
harvesting. The sustainability aims of the company include better work and life scopes for the
tea garden workers and ensure minimal environmental impact (Wong, San Chan and Wadu
2016). This strategy not only improves the brand equity; at the same time, but this also
enriches the community lives as well. [Referred to Appendix 1]
Survey analysis
1. What, according to you, is the most important problem while managing supplier
selection?
ANSWER CHOICES– RESPONSES–
–
Contract breach 80.00%
4
–
Communication gap 0.00%
0
–
Lack of availability 20.00%
1
–
Poor negotiations 0.00%
0

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ANSWER CHOICES– RESPONSES–
TOTAL 5
Analysis- From the analysis of the survey, it could be understood that the majority of
people, i.e., 4 out of the 5 respondents agreed that contract breach has been the major
problem associated with the selection of suppliers. Only one out of 5 respondents stated that
lack of availability is a major problem, which demonstrate that the contract breach has been
the problem of supply selection.
2. The issues associated with the selection of supplies often negatively impact
the process cycle and consumer lot of effort and time during contract
negotiations
ANSWER CHOICES– RESPONSES–
–
Very likely 20.00%
1
–
Likely 40.00%
2
–
Neither likely nor unlikely 20.00%
1
–
Unlikely 0.00%
0
–
Very unlikely 20.00%
1
TOTAL 5

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Analysis- From the survey analysis, it is understood that most of the respondents, i.e.,
6 out of 11 respondents reacted on a positive note while 3 out of the 5 respondents did not
provide positive or negative response. Only one out of 5 respondents reacted negatively,
which ensures that the statement is true and the entire process of supply selection is time
consuming and can affect the overall process cycle largely too.
3. Do you believe that the procurement process can result in strategic implications
related to the various functional units of the organisation?
ANSWER CHOICES– RESPONSES–
–
Strongly agree 40.00%
2
–
Agree 20.00%
1
–
Neither agree nor disagree 0.00%
0
–
Disagree 20.00%
1
–
Strongly disagree 20.00%
1
TOTAL 5
Analysis- The analysis showed that the majority here has been the positive responses,
which were provided by 3 out of 5 respondents while only 2 out of 5 respondents provided
negative responses. Thus, the statement is partially true and it can be believed that the

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procurement process can result in strategic implications related to the various functional units
of the organization.
Existing Procurement practices and their effectiveness
Existing Practices
Unilever has developed its unique practices in the field of procurement management. As the
basic strategy, the company also follows the four-step procurement management. But it has
applied some selection process and used some of the ERP software for its sourcing of tea
materials.
Figure 3: steps of existing procurement practices in Unilever
(Source: created by author)
The procurement procedure is completed in the following steps-
Planning
The procurement managers first work on the forecasting. In this level, the trends of
the supply market are evaluated. The official management plan for the procurement of the tea
is developed. The amount and items for outsourcing are decided to understand the financial
requirements and budgets (Ferri et al. 2016). Identifying the needs of the customer and
directing the outsourcing in that direction is the part of the planning section of Unilever tea
procurements.
Selection
After the principles and requirements are finalised, the second step in the selection of
tea suppliers. As opined by Grandia (2015), a company has to be more conscious and specific
about their tea suppliers as that would affect their brand name. The company is well-aware of
its brand reputation and therefore, gives special importance to their outsourcing partner’s
selection. There is an internal selection process of Unilever called “Unilever Supplier
Planning Selection Administration
Contract
Closing

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Qualification System” or USQS. After the posting of the requisition, applications are invited
in the USQS from the interested tea suppliers. The tea suppliers have to enroll themselves in
this system. The company then assesses the requirements, tenders, and principle standards of
the company. From the list of the USQS applicators, the most suitable one are chosen.
Recently the company has announced that they have given the context of ethical and
sustainable tea supplier’s greater preference in their procurement management system. The
company has Unilever Responsible Sourcing Policy that ensures that the suppliers have
maintained the criteria and quality the Company is expecting from them. In a document
published by the company, it is clearly written that the company ensures that 100% of their
tea, sold in the UK and Ireland comes for the farms having Rainforest Alliance certificate.
The tea is bought from the suppliers through auctions or the brokers.
Administration
Unilever administrates the supplies finalizing the contact. It is important for the
company to see that all the principles that are promised by the suppliers are fulfilled in the
quality and sustainability context. The company uses some software to manage the data of the
suppliers. SAP Ariba buyer is one of such tools that the company uses to manage its
procurements. This tool is used to maximize the efficiency of procurements, improving
negotiations, and tracking spending (Meehan and Bryde 2015). On-time and at place delivery
is important so that there would be no barrier in manufacturing or other parts of the process.
The company takes special care that there is an ethical buying of the supplies; no favouritism
is practiced in the tea procurement buying form any of the managers. Regular audit of the
procurement is done to control the possibility of terms fraud.
Closing Contract
Unilever tea brand procurement managers tend to run some simple audits at the end of
the contract with the suppliers. Procurement closing is not confined in ending the term. It
includes noting the weaknesses, success proceedings documentation, and evaluating the
future needs from the audit results (Whyles, van Meerveld and Nauta, 2015). The audit is
based on the performance matrices of the supplier and the company as well. The payment
clearance and ending the contract is the final stage of the procurement procedure of Unilever.
Comparison with best Practices
Various researchers have directed their researches to determine the best practices in
procurement management. The results are not the same for every industry and even if it
differs in various researches. A common pattern could be determined if one takes most of the
research results in to consideration (Chkanikova 2016). The first thing that gives a base to
procurement management is the assessment of customer needs. The trends and demands of
the markets decide the type of resources and materials that has to be outsourced. In the case
of Unilever, the company has evidently been successful in understanding the market needs
and molded their procurement policies accordingly. The company also takes the matter of
sustainability seriously in its operations. As shown in the graph below, it is one of the
sustainability leaders of business world.