Supply chain efficiencies boost profits at Unilever

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Unilever has reported savings of 1.4 billion euros in 2010 through savings in supply chain costs and indirect costs – well ahead of the 1 billion euros the group was targeting at the start of the year.

“This comes after savings of a further 1.4bn euros in 2009 – nearly 3bn euros taken out of our cost base in two years,” said chief financial officer Jean-Marc Huët at the announcement of the group’s results for last year.

Group chief executive Paul Polman pointed out that the Unilever supply chain had changed dramatically over the past three years.

Pier-Luigi Sigismondi, the group’s chief supply chain officer, had driven a steady transformation in its supply chain capabilities, he said.

“We now have a globally led Supply Chain organisation, with executive buying authority. Our systems and processes are much improved, allowing for quicker and higher quality information availability and decision making. In Asia Africa CEE for example, the ambitious U2K2 project to harmonise our systems and processes on a single platform is nearing a successful conclusion,” said Polman.

“We have also been building capabilities in key areas. In engineering for example, we have centralised our operations in India as we develop expertise in driving the capital needs of our repeatable model initiatives. Also, our new centralised commodity risk management team leaves us better placed to deal with the volatility we are experiencing with input costs.

“In addition to these many changes, we have also brought our new performance culture to bear on our cost base. We are faster, more disciplined and more aggressive than we have ever been. You see this in our savings numbers; nearly 3 billion Euros over the last 2 years as you heard from Jean-Marc, with confident expectations of at least a further billion in 2011.

“Our indirect structure is also far leaner. Our cost discipline is much improved. The mindset is right, and now the structure also, with the Unilever Enterprise Support organisation fully in place and starting to drive change. Most impressive of all has been our work in getting working capital down to best in class levels, and keeping it there,” said Polman.

Group turnover was up 11.1 per cent at 44.3bn for 2010 with underlying sales growth of 4.1 per cent. Operating profit was up 26 per cent to 6.3bn euros. Underlying operating margin up was up 20bps.


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