Published on May 13, 2005

Consumer goods giant Unilever Thai Trading yesterday launched a “revolutionary” supply chain system which allows it to deliver goods to stores directly from its factories.

The system will allow the company to reduce substantially the amount of inventory in its warehouse as it gets close to perfecting the art of supply-chain management. The system will be used for 40 per cent of the company’s products and eventually increased to 60 per cent.

The company would not say how much it expects to save by using the new system. Nevertheless, the payback period expected from the Bt240-million “Synchronised Dispatching Facility” inside its production complex is around two years, said Somchai Tosomsakul, outbound logistics manager for Unilever Thai Trading.

“However, the benefits go beyond [cost savings]. We’ll also gain from reducing ‘opportunity losses’,” he said.

Prior to this, all goods manufactured at the Unilever production complex in Min Buri, one of the firm’s largest facilities in the world, were transported to a distribution centre 25 kilometres away in Chachoengsao province before delivery to customers nationwide.

Under the new system, Unilever will send goods directly from its factories to customers, bypassing the need to use the distribution centre. The facility will serve as the shipping point for delivering goods to customers.

“To our knowledge, we’re the first among Unilever subsidiaries worldwide to implement this programme, which was initiated by ourselves,” Somchai said.

“Within a year or so, we may put in some racks or build a conveyor to sending goods in here, but we’re not going to store any goods here. The goods will come here just to wait for delivery,” added a Unilever executive at the new facility.

A distribution centre the company built only two years ago in Chachoengsao will not become obsolete. By the end of the year, products that account for 40 per cent of Uniliver’s total sales will be ushered through the new supply chain system, while the rest will continue being distributed from the company’s central distribution centre, Somchai said.

Unilever Thai generates sales of about Bt25 billion a year.

“We expect to increase the proportion [of products using the new dispatch centre] to 60 per cent in the future,” he said. Unilever is not able to use the new system for all of its goods. Imports from abroad and goods that are manufactured by subcontractors are among the items the central distribution centre in Chachoengsao will continue handling.

A Unilever survey has found when consumers visit a store and are unable to find goods in the sizes and brands they want, 31 per cent of them would insetad buy other brands. Another 27 per cent would instead buy the products at other stores, 26 per cent would delay the purchase, and 16 per cent would choose to buy the same brand but in a different size.

Hence, with its new ability to synchronise its production and distribution to precisely meet customer demands, Unilever expects to reduce its loss of sales opportunities. Somchai said the company aims to improve its “service level” to 98 per cent from 95 per cent at present, meaning that only two per cent of its goods will not be there when customers need them.

The new supply chain system includes an electronic “vendor managed inventory” system, which Unilever has used since 2004. The system links all of the firm’s 64 exclusive distributors and its five superstore clients.

The Unilever factories have been adjusted to use a more flexible manufacturing system by producing fewer quantities of goods in each lot in bid to meet the zero-inventory requirement.

A Unilever subsidiary in Indonesia, meanwhile, is also planning to embark on a similar project, while the company’s Philippine subsidiary is considering the possibility, Somchai said.

Mark Holloway, supply chain director for Unilever Thai Trading, said consumers would benefit from “fresher” products under the new supply chain initiative and would also achieve better service levels from improved availability of products on shelves.

Comprising seven separate plants for different products – including detergent, shampoo, soap, dishwashing liquid, and ice cream – Unilever’s main Thai manufacturing complex covers some 130 rai in the Lat Krabang Industrial Estate in Min Buri. It has an annual production capacity of some 400,000 tonnes – or 2 million boxes of product per month. The company also operates a food plant in Chachoengsao, where it makes Knorr and Best Foods products.

Unilever’s products include Breeze detergent, Comfort fabric softener, Sunlight dishwashing liquid, Vim floor cleaning products, Axe and Rexona deodorant, Close-Up toothpaste, Sunsilk and Clinic Clear haircare products, Lux soap, Lipton, and Wall’s ice cream.

Pichaya Changsorn

The Nation

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