Financial Management (UK)

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.
By Graham Hibbert | Feb, 2004 |
(Dr Graham Hibbert is SAP programme director at Unilever)
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, qualitychecking 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.
The UK business led the way, shortly followed by our Italian operation. The two companies operate in very different
economies and fiscal environments, and success with these would give us the confidence to bring the remaining
companies quickly on to the common process model. So what seemed like a high-risk approach at the start would in fact
reduce the risk to the total programme.
We started preparations to roll in these two countries in early 2001 and completed the task by mid-2002. To achieve this,
the team was expanded to 200 members.
It was critical that line managers supported the new ways of working, so it helped that the UK business was keen to use
the common process model to simplify its own internal operations. People were also convinced by the business need for
regional common processes. We anticipate that the growth of regional retailers will present opportunities that we can
exploit only if we have the ability to act when required as a single business and not merely as a group of national
businesses.
The roll-out phase
Having proved the effectiveness of the process model and our ability to deliver it, we immediately took it to the remaining
countries. By end of the first quarter of this year we will have brought 11 further countries on to the model. We will be
going live with groups of between two and four countries simultaneously without significantly damaging customer service.
The European and local country teams co-operated seamlessly to overcome obstacles and we avoided potential
functional barriers by ensuring that IT and line managers worked side by side.

To minimise the impact on the supply chain, must groups have gone live over public holidays. This has increased stress
on the team and their families and we have recognised this in whatever ways we could.
We have also managed to control the scope strictly, which meant that only very limited changes were made to the
process model. Non-critical change has been deferred until the end of this phase, at which point the business ease will be
evaluated and, if agreed, made just once for all countries. If we had allowed more change earlier, we would have had to
have gone back and re-implement in countries that had already gone live.
Continuous learning from each implementation has allowed countries to get back to normal faster. The order-to-cash
process in later implementations was fully functioning within a couple of days, for instance.
Programme governance
A programme that spans several years needs a strong group of senior line managers to steer it. It is vital to maintain this
coalition when key people move jobs. Our sponsor and steeringcommittee chairman is the general line manager
responsible for a number of countries in the region, not a functional head. This emphasises the cross-functional nature of
the programme. The regional functional heads for finance, supply chain and customer development were also members of
the steering committee, along with external representatives who had experience of similar programmes.
We established from the start the line structure of European process owners who would take over responsibility for the
management of the model as the programme ended. These senior line managers helped the team to finalise the process
model in the feasibility stage and will lead when it is upgraded to world-class efficiency levels in the future.
Although the main business drivers for the programme were regional, we reviewed local costs and benefits after each
country implementation. The programme will finish on time early this year and we are on track to achieve a direct financial
return on our investment (because of savings in resources and lower local working capital etc). In addition, the model
gives the business a platform from which to realise business growth with regional cost and simplification benefits.
KEY LESSONS FROM THE PROJECT
An ability to learn continuously from earlier actions and from the experience of others has been vital to our success. This
learning process has revealed two things that we couId have done better.
* We could have spent more time at the start defining how to document processes. This would have reduced the time that
we took to specify the model and would have eased the task of training.
* We could have scoped the IT task better and earlier. Unless you know the IT architecture you are going to build, you
cannot properly scope the task. This results in unwelcome extra costs and time later in the process.