The coronavirus pandemic has presented Unilever with a series of stress tests, according to Chief Supply Chain Officer Marc Engel.
National lockdowns have affected the company's global supply chain at every level from production to distribution. Absenteeism in factories and a shortage of delivery drivers added to the stress. Factor in demand swinging away from commercial customers to consumer products and the ability to see what was coming next became secondary to making decisions in the moment, Engel told the Reuters Transform Europe virtual conference Wednesday.
"Agility does trump forecast[ing]," the CSCO said. "At the end of the day, every dollar we spent on agility has probably got a 10x return on every dollar spent on forecasting or scenario planning."
The first test of this theory came early in the pandemic when demand for Unilever's more essential products, such as cleaning supplies, shot up 600% in some cases. To deliver, the company converted production lines and reduced the number of total SKUs it produced by 65%.
"A much simpler portfolio was required in order to make sure that we keep ourselves running," Engel said.
An emphasis on agility over forecasting meant shortening planning cycles — the company reduced its planning horizon from 13 weeks to four. The weekly planning meeting became a daily meeting. Existing demand baselines and even artificial intelligence programs no longer applied as consumer spending and production capacity strayed farther from historical trends.
The CSCO drew a firm distinction between agility and resilience in recent months.
"Resilience is more around sourcing," Engel said. "Where do you get your products from? How many markets do you source from? But agility is really about how well are you equipped to respond to uncertainties." And it's that skill that the company will use to decide when to bring back the SKUs it put on hold.
The agility Engel described was made possible by digital transformation work already in-progress — work that accelerated as a result of the pandemic. The company is working toward connecting its supply chain via 20 billion devices (including some that are internet of things-enabled), automating processes and leveraging the data collected.
"You know the digital transformation has been accelerated no-end through [COVID-19] and you do need an end-to-end digital transformation strategy to do all of this — also on the climate side," Engel said.
The same digital tools and agility that are keeping Unilever's supply chain going through coronavirus lockdowns will allow the company to keep its sustainability initiatives on track, the CSCO said. This was a sentiment echoed by several other supply chain professionals at the event who updated supplier governance systems to monitor production capability on top of human rights and sustainability standards.
Unilever has committed to reducing emissions from its own operations to net-zero by 2030 from a 2015 baseline and from its products, taking into account their entire life cycle, by 50% by 2030 from a 2010 baseline. The commitments are still in place, in fact the company released further detail on how it will bring suppliers in on these goals as well last month. But, the company wasn't always so sure sustainability ambitions could hold through the pandemic.
"We had a real deep discussion saying do we pause or do we accelerate?" Engel said. "And we said this is a time to accelerate."
The decrease in overall emissions during the early months of global economic shutdowns reminded Engel and the company that it is possible to affect climate change in a big way.
"While the world's dealing with the devastating effects of the COVID-19 pandemic, and it's grappling with serious issues of inequality, we cannot let ourselves forget that the climate crisis is still a threat to all of us," Engel said.
