Supply Chain Resilience and Sustainability: Unilever's Strategic Approaches and Challenges
Part 1:
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Introduction: Unilever's Strategic Approaches and Challenges
Unilever is a multinational consumer goods company that was founded in 1929 and has its headquarters in London, UK, and Rotterdam, Netherlands. The company operates in over 190 countries worldwide and employs more than 148,000 people (Unilever, 2022). Among the many consumer goods that Unilever manufactures and distributes are food, drinks, cleaning supplies and personal care items. The company's brand portfolio includes household names like Dove, Axe, Lipton, Knorr, Hellmann's and Ben & Jerry's. Unilever is dedicated to ethical and sustainable business practices, and it has set out to realise its ambitious sustainable living plan, which includes reducing its environmental footprint, improving the lives of those in its supply chain, and advocating for ethical and sustainable sourcing and production practices.
To obtain materials and distribute goods, Unilever, a multinational consumer goods corporation, significantly relies on a convoluted and enormous supply chain. Obstacles in the supply chain, such as delays in transportation, a lack of raw materials, or a labour shortage, can cause production to be delayed and costs to rise (Devex, 2013). Supply chain resilience affects Unilever's business by influencing its ability to meet customer demand. If a disruption occurs, such as a shortage of raw materials or shipping delays, it can lead to a delay in product delivery to customers. This can result in lost sales, reduced customer satisfaction and potentially damage to Unilever's reputation (Pettit, Croxton and Fiksel, 2019). Supply chain resilience can also affect its customers. For example, if a disruption occurs, customers may experience delays in receiving their orders, which can lead to frustration and dissatisfaction.
The supply chain for Unilever is made up of several important components, such as raw material suppliers, producers, distributors and retailers (Saher and Oleksiivna 2019). For the provision of raw materials and other inputs, the company depends on a sizable network of suppliers, including agricultural producers, chemical manufacturers, packaging suppliers and shipping service providers. Distributors transport and deliver items to retailers who then sell them to end customers, while contract manufacturers create products following Unilever's specifications. To ensure product availability, quality, and sustainability, Unilever must collaborate closely with these partners, who are essential to its supply chain.
Part 2: Main Section
2.1 Securing the Supply Chain and Enabling Continued Trading
To secure its supply chain and enable continued trading, Unilever needs to take several actions, including:
Diversifying its supply chain: Unilever might look into other sources of components and raw materials to lessen its reliance on particular suppliers and the dangers of supply chain interruptions. This may entail collaborating with regional vendors, forging long-term agreements and making investments in ethical and sustainable sourcing methods (Delabre, Alexander and Rodrigues, 2020).
Improving visibility and transparency: By leveraging technology like blockchain and data analytics to trace the flow of commodities and keep an eye on supplier performance, Unilever can improve visibility into its supply chain. This can assist the business in locating possible hazards and bottlenecks so it can take preventative action to lessen them (Sodhi and Tang, 2019).
Strengthening relationships with suppliers: Strong supplier connections may support Unilever's efforts to promote cooperation and trust, as well as better communication and problem-solving. Regular meetings and site inspections, collaborative sustainability initiatives and rewarding suppliers for effective performance can all be part of this (Escamilla, Fransoo and Tang, 2021).
Investing in resilience and agility: Unilever can make investments to create a supply chain that is more adaptable and resilient so that it can handle unforeseen interruptions and changing market conditions. This may entail creating backup plans, varying the types of transportation available and making investments in automation and digitalization(Ladeira, 2021).
Addressing sustainability and ethical concerns: Unilever can give priority to ethical and sustainable supply chain processes in order to meet the rising consumer demand for such products. Setting and accomplishing sustainability goals, collaborating with suppliers to enhance their sustainability practices and creating traceability mechanisms to guarantee adherence to ethical standards are some examples of how this can be accomplished (Delabre, Alexander and Rodrigues, 2020).
Ultimately, Unilever must secure the supply chain in order to conduct business and preserve its market edge. By putting these steps in place, Unilever can strengthen the resilience of its supply chain, lower risks, and guarantee that its products will continue to be available to customers all around the world.
2.2 Assistance to Support its Business and Supply Chain
Unilever has received various forms of assistance to support its business and supply chain, particularly during the COVID-19 pandemic. These include:
Government support: In many countries, Unilever has received financial assistance from governments to help mitigate the impact of the pandemic on its business. For example, in India, the government announced a stimulus package that included tax relief and loan guarantees for businesses like Unilever (Pereira, Temouri and Vaz, 2022).
Industry collaborations: Unilever has participated in industry collaborations to address supply chain challenges during the pandemic. For example, the company partnered with the UK government and the food industry to develop a national strategy to ensure the continued supply of essential food and household goods during the pandemic.
Logistics support: Unilever has received logistical support from various organisations to ensure the continued flow of goods through its supply chain. For example, the company partnered with the World Food Programme to use its logistics network to deliver essential goods to vulnerable communities (Srinivasan, 2022).
Employee support: Unilever has provided support to its employees during the pandemic, including paid leave for those affected by COVID-19 and additional health and safety measures in its facilities. This has helped ensure a healthy and stable workforce to maintain operations in the supply chain (Chanana, 2021).
This assistance has had a substantial impact on Unilever's operations and supply chain. Government funding has enabled the business to continue operating and lessen the pandemic's negative effects on its sales and profits. In order to maintain the availability of its products to customers despite supply chain disruptions, Unilever has worked in collaboration with other industry participants and received logistical support. The continuity of supply chain operations has also been ensured via employee assistance, which has contributed to the maintenance of a healthy and stable staff. Overall, the support given to Unilever throughout the pandemic allowed the company to keep running and do business during a difficult time.
2.3 The Key Current Risks to the Organisation
Unilever is a multinational consumer goods company that operates in several countries with a diverse range of products including food, personal care, beverages, cleaning and sanitising products, and many more. There are few issues that Unilever has been facing lately and those are described below.
Supply Chain Issue: The company sources raw materials from different suppliers and operates in several countries which exposes it to supply chain risks like disruptions due to natural disasters, geopolitical tensions, trade barriers and supplier bankruptcies. These risks can impact the company’s ability to produce and distribute its products, leading to increased costs and revenue losses.
Market Risk: Unilever operates in highly competitive markets and is vulnerable to changes in consumer demand, preferences, and trends. It also faces price competition from local and regional brands and changing regulatory and compliance requirements in different countries. According to Dyer (2018), Unilever decided to 10% increase the price of Marmite and PG Tips in the UK in the immediate wake of Brexit. As a result, Tesco, the biggest store in Britain, engaged in a well-publicised dispute by refusing to pay the increased price. The so-called "Marmite Wars" were ultimately short-lived because Tesco gave in. The fact that Unilever benefitted from price elasticity and bargaining leverage in this instance almost probably means that its less well-known, price-inelastic items will see diminished profitability. To lessen the impact on its profitability for these products, Unilever will rely more heavily on currency hedging. Market risks can lead to reduced market share, lower revenues, and reduced profitability. Some major competitors of Unilever are Nestle USA, PepsiCo Inc, Procter & Gamble Co., GSK, Johnson & Johnson and many more (GlobalData, 2023).
Brand Reputation Risks: Unilever’s reputation is a crucial asset that can impact consumer trust and loyalty, as well as investor confidence. The company is exposed to brand reputation risks such as product recalls, quality issues, and ethical concerns related to labour practices, environmental impact, and social responsibility. These risks can damage the company’s reputation and lead to financial losses and legal liabilities.
Cybersecurity Risks: As a large multinational corporation, Unilever faces cybersecurity risks related to data breaches, cyber-attacks, and other cyber threats. These risks can lead to the theft of sensitive information, loss of intellectual property, and disruption of business operations. The company needs to invest in cybersecurity measures to protect its IT infrastructure and data assets. Loten (2020) stated that Unilever CISO Boby Ford said that Unilever has hired a separate dedicated team to fight such cyber breaches.
2.4 Strategies Implemented by the Organisation to Assess the Key Risks
Unilever, like many other companies, faces a range of risks in its supply chain. These risks can include raw material shortages, supply chain disruptions, price volatility, environmental risks, social risks, and reputational risks. To assess and manage these risks in its supply chain, Unilever has implemented several strategies, including:
Supplier risk assessments: Unilever analyses the risk of its suppliers by evaluating factors like financial stability, regulatory adherence, environmental and social performance, and the ability to deliver products completely and on time. This helps Unilever identify and manage supplier risks proactively (Hopkin, 2018).
Supplier audits: Unilever frequently audits its suppliers to ensure they uphold the organisation's sustainability and ethical requirements. These audits include both site visits and evaluations of supplier performance concerning a set of predetermined criteria.
Supply chain mapping: Unilever maps its supply chain to identify potential risks and vulnerabilities. This helps the company identify key suppliers and locations that might be more susceptible to disruptions brought on by disasters, political upheaval or other events.
Continuous improvement: Unilever promotes a culture of continuous development in order to make sure that its supply chain risk management solutions are still applicable and efficient. This requires developing and implementing new risk management policies, practices and supplier and employee training initiatives.
Collaborative partnerships: Unilever collaborates closely with its partners and suppliers to build cooperative relationships built on trust, openness, and shared values. The organisation is better positioned to identify and reduce risks by working together to build more reliable and sustainable supply chains.
Part 3: Conclusion and Recommendations
All the risks mentioned above are foreseeable. A company like Unilever they have market researchers and experts to analyse the market and they can easily anticipate these risks. Giant companies like Unilever are susceptible to such issues and generally, companies prepare themselves to combat those risks. In terms of Unilever, they have a separate team for protecting the company from the data breach. Moreover, Unilever fosters both a balanced temporal view and a balanced stakeholder perspective among its business partners. They Encourage strategic alignment with their business partners as well as co-creation activities.
As stated by (Dora et al., 2022) Personal belief indicates that the implementation of the discussed strategies for the mitigation of the discussed supply chain challenges cannot be sufficient for Unilever in the future. Supply chain across various industries has started to be enabled with artificial intelligence, which contains the potential to make organisational supply chains automated across multiple activities of the supply chain. Therefore to remain competitive artificial intelligence factors can be used:
Demand forecasting: AI can be used to analyse historical sales data, market trends, and other relevant data to forecast future demand for products. This can help organisations optimise their inventory management and production planning, reducing waste and costs.
Predictive maintenance: AI can be used to monitor the condition of machines and equipment in real time, predicting when maintenance is needed before a breakdown occurs. This can help organisations reduce downtime and extend the lifespan of their equipment.
Quality control: AI can be used to identify defects and anomalies in products, ensuring that only high-quality goods are shipped to customers. This can help organisations reduce returns and improve customer satisfaction.
Supply chain optimization: AI can be used to optimise the supply chain, identifying the most efficient routes for shipping and reducing transportation costs. It can also help organisations identify potential disruptions in the supply chain, allowing them to take proactive measures to minimise the impact.
Chatbots and virtual assistants: AI-powered chatbots and virtual assistants can be used to improve customer service by providing quick and accurate responses to customer inquiries. This can help organisations improve customer satisfaction and reduce the workload of customer service representatives.
Overall, incorporating AI into an organisational supply chain can help improve efficiency, reduce costs, and improve customer satisfaction. However, it is important to ensure that the AI systems are properly implemented and managed to avoid any negative impact on the supply chain.
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