Unileverage: consumer goods groups have lagged behind their industrial equivalents when it comes to harmonising their processes. Graham Hibbert explains how Unilever bit the bullet and ran a tightly controlled programme to simplify its European processes and release fuel for growth

Financial Management (UK), Feb, 2004 by Graham Hibbert

Two key drivers of shareholder value creation are growth and margin improvement. To deliver these, consumer goods companies are ramping up their innovation programmes, cutting the time to market of new innovations, and increasing their marketing and promotion expenditure. Many have also introduced process simplification programmes aimed at increasing process efficiencies and cutting out local complexities that hamper innovation. They aim for world-class efficiency in the basic transactional processes of the business, such as purchase to pay, order to cash, production scheduling and production specification/bills or materials management.

In Europe many industrial companies harmonised their processes in the mid-1990s. Consumer goods companies, however, have tended to lag behind them. This is probably because they have more complex internal operations--for example, local IT architectures that involve hundreds of interfaces across Europe--and specific ways of doing business with local customers, including significant promotional activity.

Different local laws and practices also make process harmonisation difficult for consumer goods companies. In France, the price of each consumer unit has to be shown on the invoice because retailers must sell to the public at this price or above. In Italy, the local fiscal authorities require strict numerical control of output documents and the law demands a complex last-in-first-out stock accounting convention for taxation accounting.

Order-taking processes also differ. Large retailers in northern European countries mainly order by electronic data interchange and are likely to get their order right first time, so their suppliers can adopt high-productivity "no touch" order process. Orders from smaller customers in southern Europe are more likely to need individual checks to avoid errors in supply and billing.

Lastly, consumer goods companies have approached process harmonisation cautiously because changing entrenched ways of working can involve substantial risk and a large investment in resources and money. Some firms have lost control while attempting to harmonise long-standing processes and others found the benefits did not outweigh the costs (Financial Times, 31 March 2003).

The vision is clear: to simplify the business by standardising processes while complying with local legislation; and to allow the organisation to use its scale and scope to greater effect to achieve more growth. The challenge is to achieve this in a way that makes it an operational and commercial success.

These were the challenges faced by Unilever's Home and Personal Care Business Group in Europe (HPCE), which has manufactured and marketed consumer products for many years throughout the region. We began by identifying four phases for the programme: ideas, feasibility, capability and roll-out.

The ideas phase

The idea that we should harmonise processes across Europe, supported by a common transaction system, came from the IT function in 1999. But we soon realised that successful pan-European process harmonisation is about business change and not only IT. If all you do is bring many existing ways of working

into one software package, you end up with complex configuration and no simplification. In this case the programme is not only likely to take longer and cost more; it is also much more likely to fail. We realised that it would be better to create a single set of processes from the existing local systems and to change the businesses to comply with it. The question was whether this could be done successfully.

The feasibility phase

By 2001 we had assembled a team of 60 people from across Europe and built the future transactional process model. About half the team were line managers from the customer, finance and supply-chain functions across Europe and half were IT managers. Our aim was to build an integrated model of supply chain, finance and customer-facing processes that could be adopted quickly by both our smaller and larger companies in Europe.

We defined the scope tightly by identifying 160 individual processes that were essential for day-to-day operations. For example, the purchase-to-pay process was split into requisitioning goods, ordering goods, receiving goods, quality-checking receipts, quarantine periods etc. Throughout the rest of the programme no changes were made to this authorised scope without fully evaluating all the consequences. This was crucial to our aim of keeping within cost budgets and timelines.

Our brief was first to harmonise existing processes--quickly. Upgrading these to world-class processes will be a second step and will require further time. This meant that some companies' processes became more sophisticated and others had to take a step backwards. Existing practices in our firms varied widely and, in total, the design took just over a year to complete. The next challenge was to make the model work in practice.

The capability phase

The choice of pilot companies to be the first to adopt the new process model was key to its successful acceptance. In the ideas phase it was assumed that we would start with one of the smaller companies in order to prove that the system worked technically. But this would not have proved that the processes were also appropriate for larger companies. We therefore decided to face the major challenge and go live with the larger companies first.