Segmentation proves crucial for the supply chain

“Supply chain is a central part of our business,” commented Pier Luigi Sigismondi, Chief Supply Chain Officer at Unilever, during the Supply Chain Executive Conference in London in the middle of September 2011.

“One size supply chain doesn’t fit all.” These were the words used by Matt Davis from research bureau Gartner to summarise one of the Supply Chain Executive Conference’s most important messages in London this September. Pier Luigi Sigismondi, Chief Supply Chain Officer at Unilever, also emphasised the importance of segmented supply chains as the best way to serve clients’ needs. He presented Unilever´s product pyramid with exclusive products per unit with high service at the top, and the low cost products per pallet at the bottom.

Formula 1
According to Tim Payne from Gartner, the ultimate goal of supply chain management is orchestration. He compared this to Formula 1 racing. “Flawless performance should be second nature. The Ferrari team knows how different components work together on different race circuits, each with its own strategy. The race is the implementation phase in which Ferrari carries out multiple simulations. The championship, with its 21 races, represents the strategic level.”

Payne commended Unilever as a shining example of progressive supply chain management. “Unilever is one of the first companies to have created the position of Chief Supply Chain Officer in the board of directors. This company has actually gone from financial reorganisation to creating value in the supply chain. In eighteen months, this company has improved its performance.”

Added value
Pier Luigi Sigismondi, Chief Supply Chain Officer at Unilever, underlined the strategic role the supply chain plays at Unilever during a very convincing presentation. “We don’t always want to focus on costs. This year, we are trying to create value in our supply chains. In the next two years, we want to become the best whilst heading towards demand-driven value chains.”

Increasing pressure from retailers like Walmart, Ahold, Carrefour and Tesco has led Unilever to set up complete test shops for consumers, so-called Customer Integration & Innovation Centers, in order to improve packaging. “We will use retail data to help us grow,” Sigismondi explained. “Forecasting based on point of sale (POS) data reduces the chance of false predictions. The consequences of forecasts that are too high are wastage and too much stock. We have already managed to halve our stocks at Walmart using POS data.”

One crucial element to having the best supply chains is talent development, according to Sigismondi. “The current technology puts us in a position to set up global, virtual teams. We need each other and, at the end of the week, each and every member of staff needs to ask themselves what their added value has been. Make sure you have found the answer by the following week at the latest, otherwise someone else will find it for you – and that may just be too late.”

European Gartner Supply Chain Top 25
Gartner compiles a global Supply Chain Top 25 every year. In the top 5 this year, apart from Apple, are Dell, Procter & Gamble and two newcomers: Research In Motion (the maker of the BlackBerry) and Amazon. For the fourth time in a row, Apple has taken first place in this global Top 25, initiated by AMR Research which has recently been acquired by Gartner.

Recurring criticism of the annual Supply Chain Top 25 has been how American businesses seem to dominate it. In response to this criticism, Gartner will be organising an Asian Top 25 and an EMEA Top 25 in 2012. Brazilian companies will be included in the American Top 25.