I first wanted to understand where supplier management/supplier performance management sat as a priority for Unilever relative to other procurement/supply chain initiatives? How interested was Marc's overall management and board of directors in these activities relative to cost management, cost reduction, etc.?
Marc told Spend Matters that the first area of activity for procurement -- and his organization -- must always be cost reduction and working capital management (i.e., "cash increase"). Marc suggests, "Procurement plays a vital role in the success of Unilever's business; the supply chain function makes up two thirds of Unilever's total profit and loss so reducing costs in order to provide the oxygen to fund advertising and promotion, as well as product development is at the top of our agenda in Procurement". Given this, "supplier management will never replace these two priorities, but working with suppliers as partners, and helping them to reduce costs as well as environmental impact is a vital part of delivering these savings to the business" Given that Unilever's procurement organization has been able to double and triple the company savings rate and "generate more cash than before," the board of directors is strongly supportive of current initiatives.
But in Marc's words, "we also need to work with our suppliers, forging collaborative partnerships to encourage co-creation and innovation, and ensure continuation of competitive costs." The entire management structure of the company is actually committed to this cause. Marc notes that "we had almost 3/4 of the board of directors" at the supplier development day. How's that for high interest in supplier management? What is driving this management and executive oversight and enthusiasm for working more closely with suppliers? It's a simple argument: "our consumers are continually looking for new and innovative products and we recognize that many of our suppliers have industry leading innovation capabilities -- we listen to them and work with them to bring the best innovations to consumers in order to remain a world leader in our field."
Unilever also recognizes the vital role that their suppliers play in achieving their vision, to "double the size of the business whilst reducing its overall environmental impact." Marc comments that "in order to achieve this vision we need to work with our suppliers. The sourcing of raw materials and consumer use of products represent the largest proportion of our footprint so collaboration with suppliers to reduce the environmental impact of our raw materials and to develop innovative products to reduce consumer footprints is a crucial part of achieving our goal."
Yet where is the best place for suppliers to contribute to this effort, and what specifically is Unilever measuring/monitoring/reporting on?
Marc suggests "there is a lot of effort behind our target to double the size of the business whilst reducing environmental impact. We had shared [this goal] internally, but our recent event was a chance to share it with suppliers. This was the first topic of conversation, and then we laid out how we can work together to achieve this goal in a way that is mutually beneficial to suppliers." Specifically, Unilever has defined a set of 50 published key performance indicators (KPIs) that comprise their "sustainable living plan" including waste water management, C02 reduction, sustainable sourcing, better livelihoods, etc. As part of this effort, Unilever defined what it needed from suppliers on an end-to-end basis -- "across the whole development and usage of a product, looking up and looking down" the supply chain, and how Unilever can help them to achieve these goals, particularly through the use of technology, for example the Cool Farm Tool -- a green house gas calculator that helps farmers find simple ways to reduce their environmental impact.
As Marc sums it up, "Unilever cannot grow without our suppliers. We need support in every area -- from food ingredients to packaging. The purpose of supplier management and our supplier day was in essence to share how we can work together and grow together, but most importantly, to talk about innovation. On the second day of the event, we gave suppliers the opportunity to present their innovative ideas to us. This structured facilitation generated over 100 ideas. We had 20 Unilever groups with 200 people. It was really supplier management speed dating, you could say, that in a single day created an enormous idea generation factory in terms of working in partnership with our suppliers to bring innovation into the company, so that in the future we can share it with the world."
Stay tuned for the next part of this interview with Unilever's CPO, Marc Engel.
- Jason Busch