Gartner release annual reports which rank supply chains against each other according to relevant and highly topical criteria. In September, Gartner announced their 2017 European rankings of the top 15 supply chains. This year Unilever, Inditex, and H&M have claimed the top 3 spots.
However, what is particularly interesting is that Unilever is not just crowned champion of the European Gartner Supply Chain Rankings, but they have also taken the top position in the Global Supply Chain Rankings for 2017.
This ranking obviously is an even tougher accolade, and, in fact, lists the top 25 supply chains for this reason. Also of particular interest is the fact that Unilever isn’t new to the top spot of the European list. They are returning winners, despite some notable movements lower down the rankings.
So why does Unilever top the Gartner European Supply Chain Top 15? What are they doing and what business practices sets them apart and enables them to be leaders in supply chain management?
The Gartner Rankings – What Do They Assess?
Gartner uses some quite complex methodology for its rankings, which gives them real weight and accuracy. Predominantly, the assessments they make are made up of two key components: a quantitative measure of each business’s performance in the marketplace alongside a qualitative measure looking at both peer, and Gartner analysts, views and opinions. Together, these components create an overall score which in turn leads to the ranked position.
Before the measurements and analysis are taken, Gartner look carefully at which companies to include in their assessments. To do this they look at both the Fortune Global 500 and the Forbes Global 2000 list. There must be a $12bn minimum revenue threshold to be considered.
In addition, these are businesses that have supply chains for actual physical products. They remove ‘anomalies’ and those without publicly available financial data. The final list for assessment by Gartner is typically in the region of around 300 companies. Therefore, to take the top spot, as Unilever has done, is an impressive feat.
In order to accurately conduct their quantitative assessment, Gartner looks at the following metrics:
- Return on Assets (ROA) (net income/total assets using a 3-year weighted average)
- Inventory Turns (cost of goods sold/inventory using a one-year quarterly average calculation)
- Revenue Growth (change in revenue priority from their prior year)
- Corporate Social Responsibility (index of third party CSR measures looking at their commitment and success in socially and environmentally responsible supply chains)
Gartner uses opinion-based qualitative assessment to identify the leadership aspect which it then applies to the rankings. This means that to score highly on the qualitative assessment, a business isn’t only engaged in advancing their own processes and techniques, but actively sharing this with the wider supply chain community. In other words – they dynamically lead others in the industry.
To ensure fairness in the qualitative assessment, two independent panels are used: the global peer panel (comprised of customers and suppliers) and the Gartner analyst expert panel, which are given equal weighting.
Why Unilever Tops the Rankings
So, for Unilever to top both the European and the Global Supply Chain Rankings, they must be scoring extremely high across the board. At its heart, this is likely due to Unilever’s approach of sustainable sourcing, localised distribution hubs, logistics ‘control towers’, and other processes and actions which form the central tenets of Unilever’s Sustainable Living Plan.
As Neil Humphrey, Senior Vice President of Unilever’s European Supply Chain stated: “In the supply chain at Unilever, our purpose is to deliver sustainable and profitable growth… We are looking beyond financial results to our impact on the world around us, from reducing our environmental footprint to improving the livelihoods of small farmers and the communities in which we operate”.
A key driver for Unilever’s success in the Gartner rankings, which rate corporate social responsibility so highly, is likely to be Unilever’s Sustainable Living Plan. The purpose of the plan is to ensure and facilitate sustainable growth over time and for the future, whilst also ensuring those in and around the supply chain are also positively impacted.
The Sustainable Living Plan has three primary goals:
- Health and Wellbeing
- Reducing Unilever’s Environmental Impact by 50% by 2030
- Enhancing Livelihoods
These primary goals aim to encompass the following:
- Health and Wellbeing: This includes both health and hygiene programmes and provision, as well as improving nutrition for more than a billion individuals.
- Reducing Environmental Impact: This includes taking strategic steps to positively reduce Unilever’s contribution to greenhouse gasses, conservation of water, reduction in waste and packaging as well as more sustainable approaches, and sustainable sourcing strategies.
- Enhancing Livelihoods: Unilever aims to enhance the livelihoods of millions by ensuring fairness in the workplace, opportunities for women in the workplace, and inclusive business strategies.
Unilever brands cost more than the prolific number of discounted brands available in Europe, so corporate social responsibility is what sets them apart from the rest. There are some challenging areas covered by this approach, such as palm oil production, so Unilever is leading the way on different approaches.
In addition, Unilever has established a European ‘control tower’, which is responsible for ensuring complete visibility with regards to their European logistics. It’s a complete end-to-end transportation management system focused on deep insight into customer service, carbon footprint, and costs. It has also developed five distribution hubs in Europe with a view to global expansion in order to consolidate shipments and therefore reduce their carbon footprint.
When looking more closely at Unilever’s approach to its own supply chain, and how it aims to lead others in different and more socially responsible ways of operating, it is possible to see why Unilever has topped the 2017 Gartner European Supply Chain Top 15.