Supply chain management is an important process for integrating the management of supply and demand within as well as across the companies. It includes various variables and factors, such as planning and management of all the activities that are involved in the process of sourcing and procurement, logistics, collaboration with channel partners, etc. Channel partners can include suppliers, third party service providers, intermediaries, etc. Supply chain management is an essential component of possessing operational efficiency. At the global level, SCM is necessary because it touches major issues, including partnerships at the strategic level, rapid growth of multinational corporations, sourcing and expansion at the global level, concerns related to the environment, fluctuations in gas prices, etc. (Coyle, Langley, Gibson, Novack & Bardi 2008)
Owing to the reason of emergence of all the above-mentioned trends at the global level, supply chain management has become a very critical discipline to study. Supply chain management systems can vary from country to country. In order to understand the working of supply chain management, complexities, problems and solutions associated with it, two companies are chosen- Unilever Australia and Nestle India. Both the companies are in FMCG sector. There analysis will provide the overview about the approach of every company towards monitoring and controlling its supply chain management in the respective countries.
Usually in cases of large multinational corporations, companies rely on multiple product streams that go into multiple product lines. A company has to do two things over and over again- firstly it has to find the most appropriate tools so that it can prioritize a suitable starting place. Secondly, it has to dig deep to find evolving toolbox of various items that can drive the concept of sustainability down the whole supply chain. Unilever operates in Australia and New Zealand under the name of Unilever Australasia. It started working from Sydney in 1899. Today, it employs more than 1800 people in its regional offices in Australia generating sales of $1 billion each year. It is aimed at meeting everyday needs of people regarding personal hygiene, nutrition and personal care (Introduction to Unilever 2014).
In regards to packaging and material handling, it has shifted its focus from old metrics of right product, time, place and cost to speed of order fulfilment, sustainability and strategic partnerships with suppliers at the local levels. In concern to waste and material handling, Unilever Australasia has the commitment to halve the waste that is associated with the disposal of the Unilever products by 2020. Since 2010, the company’s waste impact per consumer use has been reduced by 7% since 2010. For the waste commitment in material handling, Unilever Australasia has set three targets- reduction of packaging, increase in recycling, recovery rates, and an increase in the recycle content (Unilever named number one in global sustainability survey 2011).
Packaging plays a significant role in the protection of the products of the company. But, it can also end up as a waste in the dumping grounds and landfill. Due to an increase in the resource scarcity, it has become more urgent than ever to go on with the process of packaging and finding solutions for dealing with phenomenon of post consumer waste. For Unilever Australasia, it is the case of clear business- it reduces the packaging so that the company can make the profits by gaining cost benefits in areas such as materials, transport and energy.
Since 2009, the company has reduced like-for-like packaging by almost 1620 tonnes. It makes sure that it does the reductions keeping in line with the commitments for Australian Packaging Covenant. It has reduced its packaging by 50% in liquid for Small and Mighty laundry products, and 40% in the powder detergents. Across the range of plastic packaged personal care products, the company reduces the packaging through designs that are more efficient and lightweight. For instance, it has reduced the plastic weight of Dove shampoo and conditioners by almost 20% and has also reduced packaging by 15% in deodorant roll-on and the new body wash range of Dove. As another part of the material handling and packaging strategy, the company is aimed at increasing its range of larger value packs, as these formats are able to reduce the packaging per consumer use (Sustainable sourcing 2014).
Nestle India is another popular company in the sector of nutrition, health and wellness. It has the mission of good food and good life that aims at providing consumers with the best tasting, most nutritious choices in the wide range of categories including beverage and food. Nestle India has been in industry since 1961. Today, it has 8 manufacturing facilities and 4 branch offices. In India, Nestle focuses on its theme of integration and collaboration across the value chain of packaging to improve the sustainability, productivity and return on investment in the material handling and packaging industry (The Nestlé Supplier Code 2013).
Nestle realized that dictation of a single automation supplier for the entire packaging line is not vital and practical. It believes that best results can be attained when builders of the machine use the technology that is best suitable to them. Nestle India emphasizes on integrating these machines into creation of a functional packaging line (In India, Nestlé and B&R promote open technology standards for packaging 2013). Considering the approach to material handling, Nestle India makes sure that the supplier shall identify chemicals and substances, hazardous materials along-with following all the applicable laws and regulations related to the handling of hazardous materials. During the whole process of material handling including sourcing, production and incorporation into the Nestle product i.e. the country of use, the supplier of Nestle India has to comply with all the ethical trade regulations and laws (The Nestlé Supplier Code 2013).
In supply chain management, the company has to monitor and control various functions such as inventory management, warehousing, storage and activities related to transportation. Effective management of these activities ensures the efficiency and effectiveness of the whole supply chain because these are the focal points for flow of product and information between sources of supply and beneficiaries. Companies usually control and monitor these activities by managing every aspect related to these activities and they can cover controlling stock movement, documentation flow, detection and dealing with stock losses, management of rejection material, storage of goods, quality control and processes related to verification, etc. (Coyle et al 2008).
Considering the case of Unilever Australia, the company is a consumer product giant. It has developed a glass pipeline for managing the inventory and creating visibility across the whole network. It uses a web-based application for enabling supply chain visibility that enables the co-packers for Unilever Australasia Personal Care and Home division to view the deployment order, register the activities of production and send the ASNs (Advance Shipment Notices) to Unilever. McHugh software is a visibility tool that the company uses and has integrated with the warehouse management applications of Unilever. Another aspect of the supply chain management that makes inventory management, warehousing and transportation activities more effective and efficient is adoption of lean quality approach. It leads to elimination of hold time of the product and throughout the phase of manufacturing (Operational Savings: How P&G, Unilever Benefit from Shorter Product Hold Times 2012).
Millions of dollars are saved using this lean approach and it is attained by the use of rapid screening technology on raw materials, work in process goods and finished goods. It comes in the category of supply chain improvement-project. The key target of this lean initiative is the identification and elimination of idle time, the time when materials just put on wait to move onto the next step, which is value-adding step in the production cycle. Process manufacturers that focus on the activity of holding goods in their inventory or in their distribution system while they await the results of quality testing just keep on accumulating multiple days that are worth of costly idle time present in the production cycle (Operational Savings: How P&G, Unilever Benefit from Shorter Product Hold Times 2012).
Although there are benefits of lean quality approach, but it is not much supported by suppliers in the value chain due to risks of disruptions in the supply chain when the supply is from just one source and there is presence of technological complexity of the product including the number of available suppliers. There is lack of contingency in the implementation of the lean approach at the processes on the shop floor. The other aspect is response to the demand from side of customers. The manufacturer has the fear of losing the customer owing to which it keeps higher safety stock with the approach of build-to-forecast and the inventory goes on waiting to be sold. It increases the costs in the progressive manner. In addition, the company has to face with the challenge of coping with variety. The best measure to manage the issue of variety is to be found within the process of implementation itself, which would add value to the demand, and desires of customers. In cases where there is variability in demand, lean approaches such as level scheduling and model scheduling can be developed (Coyle et al 2008).
Nestle India also focuses on reduction of waste and keeping the inventory up-to-date so that cost are reduced and the company does not run out of stock. Nestle India considers cost of power as a very important cost of holding inventory of materials. It does purchase forecasting to meet the demands of production and to get the assistance in the process of determination of the quantity on hand and on the order during the lead times. It also does the purchase forecasting to take care of the safety stocks. Management of supplier contacts is done based on trust. For contacting, contracting and controlling the suppliers, the cheapest channel of communication is used. Forecasting of quantity is done to on hand and on order. The company has its own distribution network that is well equipped with all the essential transport facilities in India. It transports its products at major regional sales offices that are situated at different cities of India. They work as the distribution centres of the company. These centres have their own vans with appropriate sales people who then sell and transport the goods to the small retailers (Baig 2009).
Regarding the distribution channel, the finished products are sent to the C&F agents from the manufacturing unit. From there, the products flow to distributor and super stockist. The distributor has the sole responsibility of managing the availability of the product in his prescribed area. The super-stockists supply the finished goods to the re-distributor who is the in-charge of management of availability of Nestle product outside the region of the distributor. As per the storage policy of the company, the distributor has to maintain cold storages and deep freezers for getting the products stored. All the infrastructure requirements to maintain the product in storage are to be borne by the distributor (Baig 2009).
The company, unlike Unilever Australia does not adopt the lean policy approach. Contacts with the suppliers and their control is also done on the basis of mutual understanding and trust, while Unilever Australia believes in written contracts and controlling suppliers through lean approach. These differences in SCM are due to differences in the culture of these two countries as trust forms a base in Indian business scenario, while quality, performance and written contracts are important in Western nations (Coyle et al 2008).
With the advent of internet and expansion of information society, business activities and processes have also been started to be performed with the help of technology. Various software and SCM tools in the enterprise resource management help companies to keep track of their inventory and always produce right product at the right time. Unilever Australia uses the Toll-MTS (managed transport services), which is the joint transportation and logistics solution for providing benefits to leading retailers in Australia. There is use of G-log software for providing the company with a single automated solution for all the local as well as global transportation needs. MTS assists Unilever in planning, execution, collaboration, visibility, and event management across the whole supply chain of the company right from the moment when the order is placed through the settlement of the freight. The company has thus been able to deliver the improvements in the key areas, such as load balancing, delivery on time, and proper utilization of the vehicle. In addition to this, Unilever Australia has also been able to streamline its logistics and transportation process in order to manage its operations in a more efficient manner. It, thus, allows its customers in retail to take on full benefits of reduced safety stock levels of inventory and thus driving significant costs out of the supply chain (Unilever Uses Toll-MTS; Joint Toll/G-Log Transportation and Logistics Solution To Provide Benefits to Leading Retailers 2003).
Similar to Unilever Australia, Nestle India uses technology and software to make the supply chain effective and efficient. Considering the production capacity, Nestle India invests billions of Indian rupees in order to increase the capacity, install SCM software, setting up new factories and modernising and leading the expansion of existing manufacturing facilities in India. For inbound logistics, the company announced in 2013 that there it would increase the number of R&D facilities in the emerging market (Nestlé invests in India to boost production capacity and create jobs 2014).
In the supply chain management, companies need to find out solution to challenges they face in the supply chain. For Unilever Australia, sustainability has been an important concern as supply chains today need to be sustainable rather than just aiming at providing the right product at right time and right place. Facing the issue of sustainability and environmental concerns in relation to the sourcing of raw materials as half of the raw materials of the company comes from various farms and forests. Therefore, the decisions that the company make create a profound effect on the global resources, livelihoods of farmer and climate change (100% of Palm Oil bought will be traceable to known sources by end 2014 2013). Unilever Australasia has a critical responsibility to make the source its raw materials in a sustainable manner (Sustainable sourcing 2014). It launched the Unilever Sustainable Agriculture Code in 2010 and the sourcing programme of the company relies on the matter of sustainability. In concern to packaging, the company sources 75% of its paper and board from only certified managed products or from just the recycled material by the year 2015, thus reaching the target of 100% by 2020 (Unilever named number one in global sustainability survey 2011).
Considering the case of Nestle India, the major concern lies in the agricultural supply chain of the company carrying the biggest water impacts and risks. The challenges that the company has faced include management of sustainable supply chain while the water is becoming increasingly scarce, and improvement in the consistency in the way in which impacts of water are measured for development of a new standard, ISO 14046 (Water in our supply chain 2014). In order to resolve the challenges, Nestle India has launched SAIN (Sustainable Agriculture Initiative at Nestlé) for supporting farmers and promoting sustainable development. Chicory supplier of Nestle India, Vimsons Chicory Corporation, has installed a tank for the collection of rainwater. It has led to improvement in the availability of water. Nestle India has also collaborated with the Department of Agriculture of Gurdaspur and rice flour supplier of the company (Dada Cereals) for evaluation of advantage of the SRI (Systems of Rice Intensification) techniques over the non-SRI techniques. Similar measures have been taken to reduce the stress in the sugar supply chain (Highlights and challenges 2014). It has supported coffee farmers in India to improve the quality and production of coffee by setting up first demonstration coffee farm in 2012 (Nestlé supports coffee farmers in India as demand for Nescafé grows 2012).
Supply chain management is an important part of the business activities of any company. Every company aims to attain and maintain an effective supply chain so that it can reduce the wastage and reduce the costs related to the inbound and outbound logistics in the supply chain. Both Unilever Australia and Nestle India are operating successful supply chain management in their respective regions. Unilever Australia focuses on the issue of sustainability in the long run and has modified the supply chain patterns accordingly. Its supply chain activities are inclined towards reduction of wastage and sourcing the raw materials from certified farms and forests only. It also adopts the lean approach to bring upon improvements at every level of the supply chain. On the other hand, Nestle India relies on purchase forecasting as its main activity in order to be safe in stocking the inventory. It also aims at making its supply chain sustainable, but the monitoring and control of the suppliers is based on trust. Both the companies invest heavily in technological aspects of the supply chain by installing latest software and information systems. On analysing the supply chain of both the companies, it is inferred that whether it is a emerging or a developed market, companies aim at attaining sustainability in their supply chain.
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