Unilever Partners To Win

In 2010, Unilever unveiled “The Unilever Sustainable Living Plan,” a business strategy designed “to build a sustainable business for the long term and to find new ways to operate that do not just take from society and the environment.” In a nutshell, Unilever’s ambition is to hit several targets that may, at first glance, seem opposed to one another: The company aims to double the size of its business, while reducing its overall environmental footprint (including sourcing, consumer use and disposal) and increasing its positive social impact. Unilever says it is committed to helping more than a billion people take action to improve their health and well-being, sourcing all our agricultural raw materials sustainably by 2020, and decoupling its growth from its environmental impact. There are specific targets encompassing social, environmental, and economic areas under the Unilever Sustainable Living Plan. You can read more about this at www.unilever.com/sustainable-living/.

The CPG leader recognizes that it can’t reach those goals in a vacuum. In February 2011, Unilever launched Partner to Win, a strategic concept of building value relationships with selected key suppliers to deliver Unilever’s ambitions. The initiative carves a path for Unilever to become the customer of choice for suppliers, which it believes is crucial to receive preferential access to resources, ideas, and innovations. It also represents a mindset shift for procurement professionals from the traditional transactional approach to procurement into a Business Relationship Manager.

Last week I spoke to Dhaval Buch, Unilever’s Chief Procurement Officer, following the company’s 4th annual Partner to Win supplier conference, held this year at Wembley Stadium.

SCMR: Dhaval, thank you for taking the time to speak with us. You’ve just come off the company’s 4th Partner to Win conference. It seems as if this represents a real change from it being a privilege to do business with Unilever to it being a privilege for Unilever to do business with suppliers, especially those who share your values and commitments. Tell us about the initiative.

Dhaval: Partner to Win came about in 2011. I was not the CPO at the time, but the idea was to move our thinking from transactional procurement to a partnership with our suppliers. We wanted to move from negotiating on costs to something more meaningful for both of us. We have about 10,000 suppliers who provide material that goes into our products. Of those, 1,000 suppliers constitute 80% of our spend. We asked who are the people we can start with first and then migrate this program out. As a result, we picked about 250 suppliers who could be long-term partners under this program. And, within that select group, we chose about 100 suppliers with whom we develop a Joint Business Development Plan that provides a clear framework of how the two organisations will work together to deliver over the long term. The plans cover all areas of procurement including packaging, chemicals, commodities and services.

SCMR: Since you just finished your conference, tells us a little about what happens there.

Dhaval: It’s a two-day event and this year it was held at Wembley Stadium. We’ll have senior leadership from those top 250 suppliers, including CEO’s and board members, as well as top executives from Unilever, including our board members. You have to remember that some of our suppliers are bigger companies than Unilever. On the first day, there are presentations from Unilever about what we’re doing; we get supplier feedback; there are question and answer sessions, and then there is an awards dinner to celebrate our suppliers. Day two is more interactive. There are one-on-one meetings as well as meetings with Unilever and a community of five or six suppliers where we can talk about innovation, costs and engage with our suppliers on a specific set of projects.

SCMR: Why are these strategic relationships so important to Unilever?

Dhaval: Our supplier relationships are really key to the Sustainable Living Plan. Through events like this, our suppliers know that this isn’t something that we do on a Friday afternoon; it’s central to our company and is part of our entire business model. We’ve not only charged the Unilever troops, it’s important for our partners as well. What’s more, our suppliers help us create innovation that drives our growth. Over the last four years, about 70% of our innovations have come from partnerships with our suppliers. The second reason its so important is that suppliers are a big part of our environmental footprint. Half of our agricultural products are sourced sustainably now, but we have a commitment to deliver 100% sustainable agriculturally-sourced materials by 2020. We can’t do that without our suppliers.

SCMR: Unilever also has a commitment to have a positive impact on people and communities. What role does procurement play there?

Dhaval: We have declared a responsible sourcing policy that moves beyond procuring sustainable materials to also creating a positive social impact. We have done that by setting standards for worker rights, women’s rights, and land rights across our supply chain. We began this with our nucleus of 250 suppliers. We are moving up the ladder from doing no harm to doing good to doing great.

SCMR: How do you measure that?

Dhaval: We need to ensure our supplier partners collaborate, understand and embrace the criteria in the Policy, and move up the continuous improvement ladder. To make this a reality, for our existing suppliers, we will initially focus on our ‘Partner to Win’ suppliers (approx. 200 large companies) who need to meet the Policy’s Mandatory requirements by the end of March 2015. We will work with them to move to Good Practice by the end of 2016. These ‘Partner to Win’ suppliers cover about 1,200 sites globally. For the remainder of our strategic partners, our intention is that these 1,000 suppliers, who cover up to 10,000 sites, 80% of our production material spend and 50% of services and indirect materials spend, move from Mandatory by the end of March 2016 to Good Practice by the end of 2017. We will track progress of the implementation through an internal software tool (Aravo) on a quarterly basis. The overall implementation timeframe is designed to allow, and complete, site specific audits and follow up as per our Policy for all strategic suppliers. Our existing supplier compliance programme will continue to run in parallel with the new Responsible Sourcing Policy roll out covering all raw and packaging material suppliers. We strive for continuous improvement with all suppliers.

SCMR: Procurement has traditionally been focused on price. How do you move from that transactional view of purchasing to the strategic partnerships and Joint Development Plans you’re talking about.

Dhaval: There are a number of steps. First, you have to reposition procurement at the strategic center of the company. We use our partner event to get that across. Our board and leadership is there and they are visible. The executive committee stands on the podium and gives out awards. That animates the commitment. The second step is to communicate a consistent strategy. Our suppliers tell us that our messaging is very consistent: They know what we’re going to do and how we’re going to partner with them. Internally, we now have two sets of measurements for our procurement team. One is a financial measurement: Price is still important, but we look to drive down the cost by improving the process and not just negotiating. But then there are also non-financial KPI’s. For instance, one of your goals may be to develop a joint development plan with five key suppliers; for someone else, it may be to create an information platform so that our suppliers have one point of contact on the web.

SCMR: Can you measure the success of the Partner to Win program?

Dhaval: Yes. There are five deliverables that will signal the success of the program. The first two are about growth and including driving innovation, and capacity and capability. The third is linked to quality and service, or how we deliver growth into the market. The fourth is linked to value, or driving down the cost through process improvement. And the fifth is responsible and sustainable living. One of the things I came to realize after the meeting at Wembley Stadium is that we have built very credible relationships with these 250 suppliers. There will always be some tough discussions, but our suppliers understand that there is a long-term commitment. Without that, we’re not being responsible to the P&L.

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