Unilever, the consumer goods giant, has revealed how it uses data about the availability of products on shop shelves to reduce waste and contribute to a growth in profitability.
Pier Luigi Sigismondi, Unilever's Chief Supply Chain Officer, said that after 10 years of focusing on cutting costs, the company is now investing in developing a business and demand-driven "value chain".
"We don't want to remain cost-focused.
"It is more important to have your stock out there than to try to reduce distribution costs. [The latter] has a more damaging effect on the bottom line," Sigismondi told the Gartner Supply Chain Executive Conference 2011 in London.
For Unilever, creating a demand-driven value chain means having a supply chain that is based on what retailers sell, rather than on what Unilever can sell to the retailer. The company, which manufactures brands including PG Tips tea, Persil washing powder and Bertolli olive oil, believes that its supply chain ends with the consumers of its products, rather than with its retailer customers.
To access the point-of-sale (POS) data, and to have better insight into its inventory and demand, the company is currently rolling out demand-sensing software from supply chain solutions provider Terra Technology across the business.
Earlier this year, it said it had completed the implementation of global supply chain and procurement systems based around its SAP enterprise resource planning platform. Other key technology at the company includes Oracle databases, where all the data is stored, and CA database management.
By basing forecasts on the PoS data, Sigismondi said that the forecasts are noticeably more accurate than if Unilever were to base forecasts on how much is being pushed out to the retailers.
"The consequence of basing on what you want to sell is waste and stocks you don't need. By working closely with customers, we can have an end-to-end perspective," he explained.
"[By using PoS data] we reduce loss, take waste out, lower distribution costs and create value for both of us."
In Unilever's Latin America operations, for example, Sigismondi said that this strategy helped to reduce business waste by 85 percent and distribution costs by 15 percent. Meanwhile, business growth went from single to double digits.
As well as having the sophisticated technology required to gather and understand the data, Sigismondi said that Unilever had to be "credible".
It needs the credibility to work with retailers to develop joint business plans, and works to improve on shelf availability by implementing strategies such as the continuous improvement discipline TPM [Total Productive Maintenance or Total Process Management], already present in its factories, to the placing of products on store shelves.