23 Jul 2020
Is agility the ‘new normal’ for supply chains?
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Unilever’s Chief Supply Chain Officer, Marc Engel, answers questions on how the organization has met the challenges of the COVID-19 crisis.
Unilever, the Anglo-Dutch consumer goods group, has over 400 brands to its name. It’s a business that involves a €35 billion annual spend working with over 70,000 suppliers and 1.5 million farmers in 190 countries around the world. In recognition of its long-term excellence in supply chain management, the group recently retained its place in the “Masters” category for the second year running in the annual Gartner supply chain rankings. Chief Supply Chain Officer Marc Engel talks to Lucy Harding, Partner and Global Head of the Procurement & Supply Chain Practice at Odgers Berndtson, about the lessons learned from running a global supply chain during the coronavirus pandemic.
Lucy Harding: Many companies and their suppliers have been able to respond decisively and swiftly to the challenges posed by this pandemic, and there is now a recurring question in business: if we can do this in a crisis, why not in normal times? Are you thinking along these lines at Unilever?
ENGEL: The crisis has definitely been a learning experience for us. We are lucky we have a large footprint in China, which taught us a lot about how we responded in the rest of the world with great speed. The crisis has opened up several new opportunities to serve our consumers and customers more effectively and efficiently. We’ve been able to significantly simplify our SKU [stock-keeping unit] portfolio, fast-track innovation, and onboard material sources with speed and agility, which will become the new normal for sure.
Going forward, we will absolutely embed the speed, agility, and responsiveness that we have unlocked, in our end-to-end value chain.
We believe that in the “new normal”, purposeful brands will grow, purposeful companies will last, and purposeful leaders will thrive. Supply chains will be driven by agility and resilience and operations from farm to shelf will continue to be an engine of cash generation for the business. All of this will need to be enabled by the power of partnerships, great talent, and significant digital muscle.
Lucy Harding: Are there aspects of your operating models that are changed forever now?
ENGEL: ‘Agility trumps forecasting’ was our belief before COVID-19, and has proven even more right in the last three months. For example, we have changed our sales and operations planning cycle from a four-week cycle with a 13-week horizon to a one-week cycle with a four-week horizon. We are able to respond and adapt just as swiftly as our consumers’ buying patterns right now.
We have also implemented a tiered physical distancing protocol in all aspects of our operations – factories, offices, and distribution centers. This “2-meter economy” will have a lasting impact on the way we are organized for work now and in the future.
E-commerce has seen phenomenal acceleration, and our supply chains and digital transformation programs have adapted fast.
Lucy Harding: What steps have you had to take to help your suppliers since the start of the crisis?
ENGEL: Unilever has offered €500m of cash-flow relief to support livelihoods across its extended value chain, through early payment for our most vulnerable small and medium-sized suppliers, to help them with financial liquidity and by extending credit to selected small-scale retail customers whose business relies on Unilever, to help them manage and protect jobs.
Lucy Harding: Is there an argument now for strengthening relationships and communications with suppliers?
ENGEL: The new normal will demand agile responses to changes in the marketplace. The power of partnerships will be critical to unlocking agility and innovation in the end-to-end value chain. If there ever was a need to strengthen value-chain collaboration and partnerships, it is now. And that can only be enabled by real-time communication.
Lucy Harding: Given all the pressure on global supply chains, are we heading for a new era of procurement for resilience rather than cost – in other words, near-shoring?
ENGEL: I do not believe there is any pressure on global supply chains. It is time for global supply chains to be in the spotlight. Think about the state of the world if the global supply chains had stopped operating. Where do you think the majority of the world's face masks, face shields, gowns, gloves, COVID tests, ventilators, hospital equipment in the world all come from? Yes, China and Southeast Asia. We have been fortunate that the crisis has spread in waves and China is two to three months ahead of many other places.
In procurement, we are heading for resilient solutions as well as quality, cost, innovation capability. The era of “all eggs in one basket” is over. Resilience does not equal near-shoring. That’s what the politicians would like you to believe. We would put the world 40 years back if we think nationalization and near-shoring is going to put us on a better footing.
In short, thank God for global supply chains and the heroic efforts by all to keep them running. Yes to resilience, and don’t believe that resilience equals near-shoring.
Lucy Harding: What do you think will be the lasting legacies for supply chain management?
ENGEL: Over the last decade, supply chains have been seen by many as a given, an undifferentiated commodity. This crisis has highlighted that agile, and adaptive supply chains are very much a competitive edge for businesses, and a real opportunity to do well by doing good, for the millions of people who have been affected by this crisis.
Supply chain teams are working around the clock to ensure communities have access to essential food, health, and hygiene products during this challenging time so that society doesn’t collapse. And they are receiving the well-deserved thanks and right across the world. That’s a pretty strong legacy.
How are companies and their leaders adapting and reimagining their organizations’ strategies through the immediate impact of the coronavirus pandemic? In this series, OBSERVE investigates The Great Reset.
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