Unilever’s Relationships Supply Chain Management Thales Fonseca Nogueira

AGENDA Company overview Unilever’s Supply Chain Kraljic’s supply positioning matrix Supplier and partners selection - Partner to win Final considerations and Q&A *According to Gartner European Supply Chain Top 25

General facts[1] [2] COMPANY OVERVIEW Fast Moving Consumer Goods (FMCG’s) Turn over of €49.8 billion in 2013 160,000+ suppliers worldwide ~48% of agricultural raw materials sourced sustainably Fast moving consumer goods (FMCG) manufacturing is very much as the name suggests: high quality products that fly off the production lines as fast as they fly off supermarket shelves. Typical products include home cleaning items, personal hygiene goods and foodstuffs, such as crisps and ready meals. Unilever’s turn over fell from ~51bi Euros in 2012 to 49.8bi euros in 2013 due to slowed growth in emerging markets as a result of the impact of economic uncertainty and currency depreciation on consumer demand. *According to Gartner European Supply Chain Top 25

Worldwide operations[1] COMPANY OVERVIEW Worldwide operations[1] Unilever’s operates all around the globe, with products sold in 190 countries. Unilever’s turnover in the Americas is of 16.2 billion euros, whilst its turnover in Europe is of 13.5 billion euros and in Asia/Amet/Rub is of 20.1 billion euros. It is to be noticed that unilevers turnover fell in every single region of the world, because of the before mentioned reason that includes uncertainty in demand and variation in emerging countries currencies. Another interesting fact is that unilever is focusing much of its sales efforts into emerging countries. In 2012 ~50% of its turnover was based on D&E countries. In 2013 this number rose to 57% and they expect this number to rise up to 75% by 2020. [3] [1] http://www.unilever.com/aboutus/introductiontounilever/unileverataglance/ - 12/11/2014 [3]http://www.supplymanagement.com/news/2014/unilevers-innovative-supplier-collaboration-programme-looks-to-the-future *According to Gartner European Supply Chain Top 25

Savoury, Dressings & Spreads COMPANY OVERVIEW Brands[3][4][5] 400+ brands Savoury, Dressings & Spreads Personal Care Ice Cream & Beverages In order to achieve global reach, unilever counts with a diverse portfolio of products, which sums up to more than 400 brands, of which it is global number 1 in savoury, dressings, tea, and others and is the world number 2 in laundry and daily haircare. Their product portfolio includes personal care, foods, refreshment and home care sectors, of which foods and home care are the most representative ones, being responsible for 27 and 36% of their revenues, respectively. But how does unilever manage to have such a worldwide operation working, managing so many brands and dealing with such different publics? *According to Gartner European Supply Chain Top 25

4th best supply chain globally[7][8] End-to-end globally aligned supply chain Unilever Supply Chain Company - 2005 *According to Gartner European Supply Chain top 25 Unilever was recognized as the best supply chain in Europe by Garner European Supply Chain Top 25 and is recognized as the 4th best one in the world by the same ranking in 2014 and, besides others factors, is why it is able to manage such worldspread operations. It owns a end2end globally aligned supply chain. Exemplifying how it works, 2005 aiming a better control of its supply chain, Unilever Supply Chain Company was created, an operational unit of unilever which is responsible for the European supply chain of Unilever and will buy raw and packaging material and coordinate the planning of production, the transport and warehousing of finished products from the European manufacturing sites to the end-user markets. * http://www.supplychainbrain.com/content/industry-verticals/food-beverage/single-article-page/article/unilever-bases-its-european-scm-hub-in-switzerland/ *According to Gartner European Supply Chain Top 25

KRALJIC’S MATRIX SELECTING PARTNERS AND SUPPLIERS HIGH LOW LOW HIGH Supply risk Leverage products Alternative sources of supply available Substitution possible Bottleneck products Monopolistic market Large entry barriers Routine products Large product variety High logistics complexity Labour intensive Strategic products Critical for product’s cost price Dependence on supplier Tough competitive stance by buyer Competitive systems tendering + E-commerce Performance based partnership Secure supply + search for alternatives Supply’s impact on financial results Buyer Strength To understand how uniliver selects its suppliers, we need to understand where it is positioned in Kraljic Matrix of Supply Positioning. This concept has been created to guide managers and business owners in recognising and analysing the weaknesses of their purchasing approaches. When evaluating where unilever would fit into this matrix, we could say easily that it fits the left column, once its number of suppliers is extremely big, as mentioned before in the company overview. Thus, we can deduce that it would fit “Leverage products”, once Unilever has got a considerable amount of buyer strength when selecting its suppliers. Reference: Lecture slides LOW LOW HIGH Number of available suppliers *According to Gartner European Supply Chain Top 25

SELECTING PARTNERS AND SUPPLIERS Compromised to sustainability[9] Unilever sustainable living plan - Double the size while reducing environmental impact Works for suppliers and costumers Aims 100% agricultural raw materials sustainably But besides having operations all over the world, Unilever does not accept any suppier. It is a totally compromised to sustainability company, and in 2009, they initiated an objective to double their turnover, whilst reducing environmental footprint by half by 2020. Therefore, being sustainable is a required quality for its suppliers and costumers. Besides that, they aim to source 100% of their agricultural raw materials sutainably by 2020. Unilever’s turnover in 2009, 2010 and “2020” *According to Gartner European Supply Chain Top 25

Managing Suppliers[10][11][12] SELECTING SUPPLIERS Managing Suppliers[10][11][12] Unilever Supplier Qualification System (USQS) Helps standardizing and streamlining engagement with suppliers Responsible Sourcing Policy Certifications and audits in order to create good partners As a multi-national company, unilevers Procurement team is purchasing from tens of thousands of suppliers worldwide. They made the strategic decision to introduce a global Supplier Qualification System (USQS) to manage the complexity of our supplier information. First suppliers are selected, then those selected are invited to register in USQS and this system is how they qualify those suppliers to do business with Unilever. To be chosen as a supplier, 12 fundamental principles to unilever must be fulfilled. After a supplier is selected and accepts the invitation, certifications are given to them and every 24 months (12months if it is a risk envolved product) an audit is done to check if everything is still fitting unilever’s criteria. http://www.unilever.com/aboutus/supplier/usqs/ http://www.unilever.com/mediacentre/pressreleases/2012/longtermsupplierpartnershipskey.aspx http://www.unilever.com/sustainable-living-2014/enhancing-livelihoods/fairness-in-the-workplace/advancing-human-rights-with-suppliers/responsible-sourcing-policy/ *According to Gartner European Supply Chain Top 25

PARTNERSHIP WITH SUPPLIERS Partner to win[13] Created in 2011 More long-term partnerships Co-creating new capabilities Joint Business Development Plan (JBDP) Value created > 1Billion€ p/a Unilever launched a specific programme, called ‘Partner to Win’, to work more closely with its key suppliers. ’Partner to Win’ has enabled the company to create more long-term partnerships in co-creating new capabilities. Every year since then this programme has become bigger and bigger. Joint Business Development Plans (JBDP) are a key element of the ‘Partner to Win’ programme. Each JBDP sets out Unilever’s strategic business plans and provides a clear framework of how the two organisations will work together to deliver them over the long term. The plans cover all areas of procurement including packaging, chemicals, commodities and services. In the first edition, about 40 JBDP have been submitted. In 2012 about 60 and in 2013 90 were submitted. This number is relatively small compared to unilevers number of suppliers, but the reason behind this is that this programme only works with its bigger suppliers. In future years, the goal is to have a even bigger number of participants. http://www.unilever.com/aboutus/supplier/usqs/ http://www.unilever.com/mediacentre/pressreleases/2012/longtermsupplierpartnershipskey.aspx http://www.unilever.com/sustainable-living-2014/enhancing-livelihoods/fairness-in-the-workplace/advancing-human-rights-with-suppliers/responsible-sourcing-policy/ http://www.unilever.com/sustainable-living-2014/enhancing-livelihoods/fairness-in-the-workplace/advancing-human-rights-with-suppliers/targets-and-performance/ *According to Gartner European Supply Chain Top 25

PARTNERSHIP WITH SUPPLIERS Collaborative development[14] Unilever helps suppliers to Reduce duplicated effort Free up resources to focus implementing improvements within the supply chain Case Study – Hazelnut suppliers in Turkey Set up projects to share best practices Labour conditions *According to Gartner European Supply Chain Top 25

QUESTIONS FINAL CONSIDERATIONS Are partnerships common in this industry? In the FMCG industry partnerships are very common, once strict criteria must be fulfilled, those suppliers who manage to are more likely to become partners. Do participants in this supply chain trust each other? Yes, in this kind of industry trustworthy relationships are essential to get continuous improvement. Are relationships likely to change in the next 5 years? Relationships are not very likely to change, once this industry is extremely based on supplier – buyer relationships. How can relationships be improved? More collaboration with smaller suppliers *According to Gartner European Supply Chain Top 25

REFERENCES http://www.unilever.com/aboutus/introductiontounilever/unileverataglance/ [1] http://www.unilever.com/aboutus/supplier/ [2] http://www.unilever.co.uk/brands-in-action/view-brands.aspx[3] http://www.statista.com/statistics/254217/global-revenue-share-of-the-unilever-group-by- product-segment/[4] http://www.unilever.nl/Images/mc_facts-financial_tcm13-269250_tcm164-316123.pdf [5] http://www.gartner.com/newsroom/id/2843417 [6] http://www.gartner.com/technology/supply-chain/top25.jsp [7] http://www.unilever.com/images/ir_2_9_European_Supply_Chain_P_Ernsting_web_tcm13- 86740.pdf [8] http://www.unilever.co.uk/sustainable-living-2014/unilever-sustainable-living-plan/[9] http://www.unilever.com/aboutus/supplier/usqs/[10] http://www.unilever.com/mediacentre/pressreleases/2012/longtermsupplierpartnershipskey.asp x[11] http://www.unilever.com/sustainable-living-2014/enhancing-livelihoods/fairness-in-the- workplace/advancing-human-rights-with-suppliers/responsible-sourcing-policy/ [12] http://www.unilever.com/mediacentre/pressreleases/2012/longtermsupplierpartnershipskey.asp x [13] http://www.unilever.com/sustainable-living-2014/enhancing-livelihoods/fairness-in-the- workplace/advancing-human-rights-with-suppliers/targets-and-performance/[14] *According to Gartner European Supply Chain Top 25

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