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Focus: Sourcing/Procurement

Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

- July 24, 2012 -

 
Supply Chain News: Unilever Says Its Supplier Partnership Program is Paying Big Dividends

 

Half of Innovations in Progress Now Come from Suppliers; Moving Away from "Procurement of the Past"

 

SDigest Editorial Staff 

 

In 2001, consumer package goods giant Unilever announced an ambitious "Partner to Win" program design to help it work strategically and collaboratively with key suppliers.

Well more than a year into the initiative, chief supply chain officer Pier Luigi Sigismondi says the program is already starting to pay big dividends.

SCDigest Says:

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By divulging plans very transparently and being very honest about where things stand, since Plan to Win was launched, Unilever says and says it has managed to build trust from suppliers over the past two years.

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"We used to be very opportunistic, transactional buyers, shifting from one supplier to another to leverage a lower price; now it is different,” Sigismondi recently told Europe's CPO Agenda. “We are defining business plans and looking for ways to have those long-term relationships, so suppliers come to us in a structured way to provide ideas about how to reduce cost. We also share our business plans with them so they know where to invest and become more competitive in the long term."

More than 30 suppliers are now officially part of the program, Unilever says, covering more than 3 billion euros in annual spend.

In May, the company held its second annual Partner to Win Supplier Summit in London. Unilever invited 160 strategic suppliers to meet senior managers from across the organization, gain a deeper understanding of the company’s strategic priorities, and to share latest innovations.

Among a number of objectives for the program, two seem to stand out: (1) to partner on sustainability efforts to help Unilever meet ambitious goals, such as reducing by half the environmental impact of its products, the company has committed to under another program it calls the Sustainable Living Plan; and (2) "co-creating" innovations in products, processes and manufacturing/materials engineering that impact the top and bottom lines.

"We used to be very opportunistic, transactional buyers, shifting from one supplier to another to leverage a lower price; now it is different," Sigismondi said. "We are defining business plans and looking for ways to have those long-term relationships, so suppliers come to us in a structured way to provide ideas about how to reduce cost. We also share our business plans with them so they know where to invest and become more competitive in the long term."

Of course, many companies have announced similar goals and programs in the past, but for many the reality just never caught up with the rhetoric. Unilever seems to really be walking the talk. For example, the 2011 summit results in more than 250 innovation ideas that were taken into joint development. Unilever says that half of its innovation pipeline now comes from these supplier ideas.

A foundation of the program are Joint Business Development Plans (JBDP). Each JBDP sets out Unilever’s strategic business plans and provides a clear framework of how the two organizations will work together to deliver them over the long term. The plans cover all areas of procurement, including packaging, chemicals, commodities, services and more.

(Sourcing and Procurement Article Continues Below)

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"Partner to Win is not an initiative or project. It is a new way of doing business that is led by our procurement organization," Sigismondi says. "It engages suppliers around the world for long-term business development and growth for both companies."

It is moving suppliers into much more strategic levels with the company - and its products. The program aims to generate a wealth of specific proposals to reshape Unilever's products and actually increase the functionality and the properties of its brands. Few companies have really let suppliers that far inside a company.

The program involves various forms of gainsharing, and new - or at least rarely used - thinking about supplier relationships.

“We are moving away from the traditional buying activity that leverages volume, provides scale benefits and asks for the suppliers to reduce their margins so we can be more cost competitive. That is the procurement of the past," Sigismondi says.

He adds that suppliers were initially dubious, having heard similar words from buyers before, but them saw the same opaque strategies and processes that limited the opportunities to innovate and collaborate.

But by divulging plans very transparently and being very honest about where things stand, since Plan to Win was launched, Unilever says and says it has managed to build trust from suppliers over the past two years.

The Unilever program seems in a sense simple - why don't more companies embrace such programs? What are the barriers? Let us know your thoughts at the feedback section below.




Recent Feedback

Thanks for sharing Dan.

This "Partner to Win" program of Unilever's is patterned very similar to the Vested Outsourcing concept promoted by Kate Vitasek and the University of Tennessee.  A win-win relationship based on achieving a desired outcome versus the traditional opportunistic, transaction based win-lose relationship that Unilever is moving away from.  A relationship where the well being of both parties is a goal, and one that fosters innovation and investment by the supplier.


Steve Murray
Principal Consultant and Chief Researcher
Supply Chain Visions
Jul, 26 2012

Interesting, this action from Unilever is totally effective with the supplier. In Ecuador we are introducing this culture or competence, although it is still difficult due to the actual operation in Ecuador, but it is on the way.


Ricardo Monteca
Economista DIRECTOR of Supply Chain Consulting Ecuador
UCM
Jul, 27 2012
 
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