Analysis of the case
Unilever Australian Petone is a striking example of the up-to-date managed company which implements the modern management techniques to keep up with the times. New principles and techniques such as JIT and ECR allow the company to be more effective to satisfy the customer demand, to decrease the ‘waste’ costs including time, resource and materials. At the same time the usage of these techniques involves the thorough understanding and proper implementation of sophisticated methods which demand well coordinated work of the company staff, suppliers and retailers. Any glitches occurred in the work of any sections of the chain can lead to the failure of the whole system. Thus these new techniques can be both good and evil.
There are several critical issues which the Unilever has faced. The most critical issue is the postponed deliveries from overseas. As the company always deals with the small frequent batches without creating a large stock any delays in delivery can lead to the exhaustion of stock. Probably one of the main reasons for all these process malfunctions was the improper work of the suppliers. For companies like Unilever the smooth work of the suppliers is very critical. All the deadlines of the deliveries should be specified in the contracts between Unilever and suppliers. In case of the delay through suppliers’ fault the strict measures (fines) should apply. As Unilever is a big company with large volume of purchases made on a regular basis it can dictate its own will to the supplies rather than agree on their terms.
The contract with suppliers also should specify their responsibilities in case of the absence of the required Certificate of Analysis or non-correspondence of the supplied goods to the required standards of Unilever. The fines applied in case of the default on contract commitments should cover the company’s expenses on the storage of goods in case of the detecting problems with these goods. Thus all the fines should be accurately calculated in full correspondence with the losses the company may face in case of the non-performance of suppliers’ duties. At the same time the high rate of the fines will stimulate suppliers to do their best to perform the contract.
After careful reading of the case I found that Unilever does not seem to have a lot of problematic issues. Probably that is the result of competent management which reveals the problems on a daily basis and quick solve all the issues. No doubt the most problems-creating thing for the company is the JIT technique. The wish to be quick to the market responses is the tactics which require a lot of efforts and well coordinated work of all the participants. The company also sacrifices the low ordering costs to the wish to be quick and flexible. At the same time the glitches in the work are absolutely inevitable and the only possible thing is to minimize the losses occurred from these glitches. This can be done by the implementation of the sophisticated system of fines embodied to the contracts with suppliers or by improvement in delivery system which may significantly increase the shipping costs. Beside Unilever can make a step forward in its JIT implementation to JIT II .
This concept supposes making the position of the supplier in-plant representative. His or her duties will include issuing purchase orders on behalf of the buyer. Because of the unique New Zealand geographical situation the logistics (and inventory management) is on the first place in the process of ordering goods. The in-plant representative will be fully responsible to the coordination of process of delivering the goods to the Unilever site. According to the case about 20% of the materials (mostly high valued) come in from overseas. As the value and volume of the purchases made by the company is rather significant ($68 million NZ worth of raw materials only) the suppliers should be very interested in successful cooperation with the company. The...
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