Unilever Unifies Globally with Enhanced ERP

Unilever is the third largest consumer goods company in the world behind Proctor & Gamble and Nestlé. This Anglo-Dutch multinational boasts more than 400 brands, sells its products in more than 190 countries, and employs more than 175,000 people worldwide. Unilever has operating companies and factories on every continent and subsidiaries in almost 100 countries. Twelve Unilever brands-including such recognized names as Knorr, Hellman's, Lipton, and Dove-generate revenues of more than 1 billion Euros (US $1.15 billion) each year. Unilever is organized as two separate holding companies: Unilever PLC (public limited company), headquartered in London, United Kingdom, and Unilever N.V., headquartered in Rotterdam, The Netherlands. The two legal divisions operate as nearly as possible as a single economic entity-the Unilever Group. To grow its business in developing and emerging markets, Unilever needed to unify its core business processes. Standardized processes were essential to manage volatile prices and changing commodity supplies effectively. However, prior to 2007, ambitious companywide goal setting such as this was not feasible. At that point, almost every business in each of the more than 190 countries in which Unilever operated functioned as an independent division. Every transaction for each order Unilever receives, material it produces, item it ships, and invoice it issues runs through ERP systems. Ten years ago, there were 250 different ERP systems trying to do this work, which was too complicated for running a global business that was doubling its transaction volume. Unilever has been trying to consolidate and simplify its technology platform so that it would support the company operating as a single global entity. Unilever transitioned to running its worldwide business on only four instances of SAP ERP, with the ultimate goal of managing these landscapes as one global platform by 2015. With transactions slated to reach the 60,000 per minute worldwide, Unilever sought additional tools to increase transaction processing speed. At the end of 2012, the company started to use SAP HANA in-memory computing tools for some key SAP ERP applications. SAP HANA is very well suited for performing real-time analytics and processing extremely large numbers of transactions very rapidly (see Chapter 6). Using HANA reduced the number of days to produce the month-end close from three to just one. HANA also made it easier for Unilever to input raw material costs and quickly calculate product price. Understanding its margins-the percent profit after all costs have been deducted- helped Unilever analyze ways to improve them. Unilever's enterprise data warehouse (EDW) system extracts, transforms, and integrates ERP transaction data with external data for use in reporting and data analysis. A profitability analysis accelerator analyzes reams of financial data and outputs valuable statistics about cost and profit drivers. By mid-2013, the SAP CO-PA (Controlling Profitability Analysis) HANA Accelerator had been added to all four Unilever regional ERP centers. Profitability Analysis (COPA) is a module of SAP ERP software that allows users to report sales and profit data by using different customized characteristics (such as customer, country, product) and key figures (such as number of units, price, cost, etc.). The HANA Accelerator works with a firm's existing SAP CO-PA system. Transactions remain in the ERP system, but queries are processed using HANA. SAP CO-PA Accelerator makes is possible for firms to perform real-time profitability reporting on large data volumes; conduct instant analysis of profitability data at any level of granularity, aggregation, and dimension; and run cost allocations at significantly faster processing times. Cost Center assessment time was reduced 39 percent, pushing this data into CO-PA in 6.7 hours rather than 11 hours and speeding profitability reporting. Overall, controlling and profitability reports were produced ten times more quickly. The Material Ledger Accelerator reduced run time for period-end closing reports by 66 percent, and cost reduction opportunities were identified by the Overall Equipment Effectiveness (OEE) Management platform. Four and a half billion records for General Ledger line items and more than 400 million controlling and profitability analysis records are now run through the CO-PA Accelerator. Next, SAP Cash Forecasting was added to SAP ERP Financials to maximize the use of working capital and cash. Product Cost Planning was incorporated to help Unilever plan the costs for materials independently from orders; set prices for materials, operations, production lines, and processes; analyze the costs of manufactured materials; and assess product profitability. The time to analyze the approximately 150 million records produced each month was halved, and product cost forecasts could be generated in 30 seconds, down from seven minutes. Unilever wanted to maximize product availability on store shelves during new product launches and promotional campaigns. Since trade promotion processes drive a significant portion of its sales, Global ERP Vice President Marc Béchet wanted to enhance the speed and efficiency with which they could be planned, budgeted, and executed and in how stock was allocated. Previously, Unilever used a process in which stock was sequentially assigned to orders as they were received. There was no mechanism for assigning limited stock between customers running a promotion and those who were not. Using HANA-accelerated trade promotion management tools, different inventory matching scenarios are instantly available. Allocation options can be compared and the most profitable chosen. Inventory shortfalls can be handled while safeguarding current promotions to the maximum extent possible. Plans are now underway to add in-memory technology to the rest of the SAP Business Suite. By significantly cutting the time it takes to calculate product costs, the HANA in-memory database accelerators fast-track raw material sourcing decisions and pricing analysis. Unilever estimates that time spent tracking raw materials has declined by 80 percent. Without the ERP enhancements Unilever devised and implemented, the company would have had a difficult time tracking the 10,000 home and personal care products that use the 2000 chemicals that must be reduced to meet the European Union's REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) regulations and its own more stringent sustainability goals. Consolidation of its ERP platforms and the transaction and processing speed of the HANA platform are the keys to improved performance, reporting, and scalability that will enable Unilever to fulfill its ambitious.

Case Study Question

1. Identify the problem facing Unilever in this case. What people, organization, and technology factors were responsible for this problem?

2. How is enterprise resource planning related to Unilever's business strategy? How did consolidating ERP systems support Unilever's business strategy?

3. Why was using SAP HANA so helpful?

4. How effective was the solution the company chose?

5. How did Unilever's new systems improve operations and management decision making? Give two examples.