Supply Chain Management Analysis: Unilever Inventory Strategies

This report examines Unilever's inventory management practices, focusing on two key methods: the Kraljic matrix and the bullwhip effect. The Kraljic matrix is used to categorize raw materials based on their criticality and profitability, ensuring a continuous supply for production. The report categorizes items into non-critical, leverage, bottleneck, and strategic products, providing examples such as packaging cartons, fragrances, cocoa butter, and basic chemicals. The bullwhip effect is employed to manage the production of finished goods by estimating demand and adjusting material purchases accordingly, leveraging customer relationship management through surveys, reviews, and social media data. The analysis highlights the strong link between inventory management, marketing management, and customer relationship management within Unilever's supply chain.

Running head: INVENTORY MANAGEMENT
Inventory Management in Unilever
Name of the Student
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Author note

Unilever uses two important Important methods of inventory management namely,
Kraljic matrix and bullwhip effect. The following are the ways in which Unilever uses the two
methods for inventory management:
Kraljic Matrix:
The multinational company in order to ensure continuous supply of materials for
production of goods and ensure seamless customer satisfaction use Kraljic effect. The
manufacturing department of the company categorizes the raw materials into groups based on
their role in the production process. The first category of raw materials consist of non-critical
items which consists of items which if insufficient would have low risk to the manufacturing
process. As far as the production process of Unilever is concerned, the packaging cartons can be
categorized as non-critical items (Narsimhan and Prasad 2016).
The next category of items consists of leverage items which have high profitability but
low risk to the final product. The main role of the leverage item is to give the product distinct
characteristics in the market. The fragrances used in the products of Unilever come under this
category. For example, the floral essence bear low risk to the production of the final products
like Lux bar. Similarly, the masculine scent of Axe products would create low risk to the actual
finished products but enable Lux and Axe to gain the differentiation attribute in the market in
comparison to competitor products (Odehammar and Bui 2018).
The next category of raw materials consist of bottleneck items which consists of
expensive items. The inventories belonging to this category are expensive, give low profit but
their scarcity pose threat to the manufacturing process. Unilever uses a variety of bottleneck
items which give the products their individual attributes. For example, the cocoa butter used in

the creams, the moisturizing cream used in the Dove bar and the special bear softening agents in
Axe shaving cream all come under this category. These ingredients are expensive and without
them production is not feasible.
The last category of inventory consist of strategic products without which manufacturing
cannot proceed. These items are bulk items which have to be sourced from a large number of
suppliers. for example, the basic chemicals used in each product come under this category.
Bullwhip effect:
Unilever uses Bullwhip effect to producer sufficient amount of finished products in the
market. The inventory manager estimates the amount of products which can be in demand during
a particular time period. IT obtains the same to ensure smooth manufacturing process. When, the
demand is lpow, the amount of materials acquired falls. When the demand rises, the amount of
materials purchased increased to meet the customer demand (de Almeida et al. 2015). The
multinational company gains uses Bullwhip effect to boost production in response to increase in
demand for finished goods by the virtue of its strong customer relationship management. The
company gains information about future demand using surveys, customer reviews and social
media websites. Thus, the study can be closed by mentioning that strong inventory management
is strongly related to marketing management and customer relationship management.

References:
de Almeida, M.M.K., Marins, F.A.S., Salgado, A.M.P., Santos, F.C.A. and da Silva, S.L., 2015.
Mitigation of the bullwhip effect considering trust and collaboration in supply chain
management: a literature review. The International Journal of Advanced Manufacturing
Technology, 77(1-4), pp.495-513.
Narsimhan, S. and Prasad, D., 2016. Competitive negotiation tactics and Kraljic portfolio
category in SCM.
Odehammar, M. and Bui, A.T., 2018. Supply Chain Integration in the Swedish Wooden House
Industry.