Literature Review and Company Analysis 1

STATE OF THE ART LITERATURE REVIEW, INDIVIDUAL COMPANY ANALYSIS

 Literature Review and Company Analysis 2

Part A

Introduction to Inventory Management

Inventory management encompasses the oversight processes of efficiently holding

inventories to balance relevant costs against the benefits of buffer inventory stocks across supply

chain networks spanning manufacturers, distributors, wholesalers, retailers, and transportation

intermediaries (Eveline et al., 2019). The genesis of scientific inventory management dates to the

early 20th century when factory stores relied primarily on manual verification procedures to

record inventory receipts and shipments for accounting purposes with minimal visibility on

actual demand patterns or replenishment triggers. In the 1930s, mathematical models emerged to

determine optimal procurement, production, and inventory parameters by leveraging historical

demand data.

Over the decades, inventory planning has progressively transformed from isolated

independent decision-making per organisation locally optimising inventory-related metrics

towards holistic system-wide supply chain coordination mechanisms focused on responsiveness

and customer centricity leveraging emerging technological interventions like blockchain,

internet-of-things (IoT), machine learning-based predictive analytics, simulation modelling and

blended online-offline retail channel integration (Albayrak Ünal, Erkayman and Usanmaz, 2023).

The prevailing focus has shifted from mere cost performance to flexibility, sustainability and

circular economy considerations during life-cycle and closed-loop inventory management

encompassing remanufacturing, product recovery and recycling operations, which require

ecological coordination across firms (Becerra, Mula and Sanchis, 2022).

With volatility in demand, supply and transportation factors, agility backed by analytical

insights for calibrated safety buffers has become pivotal. Inventory control environments have
 Literature Review and Company Analysis 3

transitioned from deterministic settings with guaranteed supplies, steady demands and one-

dimensional efficiency-seeking objectives towards customer-responsive sustainable ecosystems

equipped with digital decision support systems for uncertainty management across

interconnected supply chains.

Major Research Themes

Prevailing research themes related to inventory management encompass supply chain

coordination issues, uncertainty management, technology interventions, and sustainability

considerations from operational and strategic perspectives (Paton et al., 2020; Slack, Brandon-

Jones, and Johnston, 2016). Specific focus areas analyse contrasting risk profiles of inventory

decisions across multi-echelon supply chains, assess behavioural dimensions for incentive

alignment, explore applications of emerging technologies like blockchain and internet-of-things

(IoT) in engendering visibility for planning, and quantify ecological impacts of inventory

policies across product lifecycles (Jones and Robinson, 2019). A key aspect is coordinating

stocking quantities across supply chain tiers, spanning manufacturers, distributors, wholesalers,

retailers, and transportation players. This is done through designing channel contracts like

quantity flexibility, buybacks, and revenue-sharing mechanisms.

Research examines how contractual structure affects bullwhip effect mitigation and

alignment of decisions to optimal system-wide performance vs local goals. This encompasses

contrasting cost implications of stockouts at downstream retail sites where out-of-stocks directly

dent revenues versus upstream warehouses where shortages only incur backorder expenses

without immediate sales impact (Slack, Brandon-Jones, and Johnston, 2016). Behavioural

operations explore human decision fallacies through simulated inventory management game

settings, revealing systematic anchoring tendencies and reward structure manipulations

 Literature Review and Company Analysis 4

generating short-term cost savings but eventually sub-optimal inventory expenses (Paton et al.

2020). The research quantifies the environmental footprints of inventory policies considering

product lifecycles from raw material extraction, production, usage, product recovery, and reuse

or recycling at the end-of-life stage requiring closed-loop supply chain integration.

Key Performance Indicators (KPIs)

Core inventory management KPIs revolve around financial ratios, cycle times and

process metrics (Slack, Brandon-Jones, and Johnston, 2016; Paton et al., 2020). Financial

indicators encompass raw material versus finished goods inventory turnover ratios, revealing

replenishment cycle efficiency. High inventory turnover indicates better utilisation of working

capital through lean stock holdings balanced against risks of frequent stockouts necessitating

urgent reactionary fulfilment. The days-of-supply parameter reveals the average shelf-life of

inventory stocks, providing baseline benchmarks for spare capacity.

Fill rates represent service level performance specifying the percentage of demand

fulfilled directly from inventory availability. Higher fill rates require sufficient buffer stocks that

enhance responsiveness but strain inventory carrying costs. Item shelf-life management also

becomes pivotal to avoid expired, non-moving, obsolete stocks with perishable goods (Jones and

Robinson, 2019). Stockout rates highlight revenue risks from inadequate inventory buffers across

distributed supply chains, triggering emergency shipments, backorder expenses or even customer

migrations in competitive markets.

On responsible procurement aspects, transparency metrics are vital for tracing inventory

lineage regarding ethical sourcing, eco-sustainability, and human rights preservation across tiers

of outsourced production ecosystems (Jones and Robinson, 2019). Accounting accuracy scores

specify gaps between system records versus physical verification, providing inventory health
 Literature Review and Company Analysis 5

indicators for reliable planning. Total supply chain cycle time affects responsiveness, working

capital needs, and replenishment requirements, dictating safety stock targets. Minimum cash-to-

cash conversion cycle specifications balance efficiency and agility during dynamic optimisation

of these key inventory management KPIs and tradeoffs (Slack, Brandon-Jones, and Johnston,

2016; Paton et al., 2020).

Performance Improvement Techniques

Prevailing inventory management enhancement initiatives leverage ABC multi-criteria

classification methods for differentiated policy formulation, just-in-time production systems

cutting waste, and visibility-enabling technologies like radio frequency identification RFID tags

and IoT sensors for sharp inventory monitoring (Slack, Brandon-Jones, and Johnston, 2016).

Scientific EOQ models determine mathematical optimal reorder points balancing out stockout

risks and inventory carrying costs, augmented in real-time by sensor data patterns in modern

settings (Jones and Robinson, 2019).

Centralised storage pooling, execution of drop-shipping fulfilment models and cross-

docking via shared transportation consolidation improve cost efficiencies (Apte and

Viswanathan, 2000). Dynamic safety stock optimisation through machine learning calibrated

demand sensing allows containment of excessive buffering cutting waste (Syntetos et al., 2016).

Omnichannel retailing integrates inventory deployment across online and brick-and-mortar

channels, providing customers seamless experience across touch points (Melacini et al., 2018).

As per emerging circular economy principles, closed-loop supply chain integration enables

product recovery, recycling and reuse initiatives like IKEA or Caterpillar pursue to minimise

ecological impacts of overproduction (Guide and Van Wassenhove, 2009). Responsible sourcing
 Literature Review and Company Analysis 6

traceability metrics are also gaining prominence to address ethical and sustainability concerns on

the procurement side (Jones and Robinson, 2019).

Innovations and Future Outlook

Emerging inventory management innovations harness blockchain, internet-of-things

(IoT) sensors, drones and warehouse robotics for traceability, monitoring, and automation (Jones

and Robinson, 2019). Augmented reality glasses enhance order-picking efficiency by a

reasonable margin, while digital twin simulations enable virtual testing of inventory schemes

(Javaid et al., 2022). Machine learning sharpens demand anticipation for proactive optimisation

in volatile environments. The transition towards sustainable closed-loop networks mandates

quantifying ecological externalities of existing practices regarding carbon emissions, waste

generation and resource depletion with corrective mechanisms (Guide and Van Wassenhove,

2009). Industrial symbiosis and circular economy considerations will shape inventory

coordination decisions spanning collaborating firms focused on product recovery and recycling.
 Literature Review and Company Analysis 7

Part B: Unilever Company Analysis

Brief Company Background

Unilever is a transnational consumer goods company founded in 1929 from the merger of

British soap maker Lever Brothers and Dutch margarine producer Margarine Unie, co-

headquartered in London and Rotterdam (Unilever, 2023). The multinational owns over 400

brands focused on the nutrition, hygiene, and personal care market segments, including Knorr,

Lifebuoy, Dove, Lipton, Hellmann’s, Vaseline, Ben & Jerry’s ice cream, and Surf Excel, selling

products in over 190 countries (Unilever(a), 2023). Unilever pursues a multi-local strategy,

allowing regional flexibility in adapting global brands to local consumer preferences across

complex demographic contexts spanning developed and emerging economies through extensive

distribution networks of retailers and outlets tailored per market.

The company maintains an integrated supply chain encompassing over 300

manufacturing sites for production activities, several order capture centres for demand

consolidation and customer service centres for channel alignment and downstream coordination

(Unilever(b), 2023). This supply chain facilitates leveraging scale efficiencies in volume-driven

commodity-type offerings balanced with agile localisation capabilities for differentiated

products. Its strong focus on ethical sourcing practices, eco-friendly sustainable product

assortments, especially in cleaning solutions and laundry categories, which have high ecological

footprints, responsible marketing communication adherence, and fair compensation policies have

earned the company consistent high ratings across multiple environments, social and governance

(ESG) benchmarks over decades (Unilever(b), 2023). The company pursues extensive social

programs boosting the livelihoods of smallholder farmers in emerging markets, further

augmenting brand equity beyond consumer functional needs.

 Literature Review and Company Analysis 8

Inventory Management Overview

Unilever manages 25 billion euros of inventory annually spanning materials, components,

work-in-progress and finished goods across manufacturing plants, distribution centres and

retailer outlets in a globally integrated supply chain, overseen by centralised planning functions

at corporate headquarters but tailored regionally for local execution (Vial, 2019). As a fast-

moving consumer goods company selling essential products with frequent repeat purchasing

behaviour across multiple segments, from laundry to cleaning and food solutions, inventory

availability is important for competitive advantage.

The integrated end-to-end supply chain from over 300 suppliers through 300 factories

and more than 400 brands overseen by cross-functional planning managers balances scale

economies and localisation needs for differentiated products (Unilever(b), 2023). Connecting

directly to more than 25 million retail stores and indirectly accessing more than 5 million

neighbourhood outlets, managing high-paced workflows, high complexity of logistics across

over 190 countries, and hundreds of SKUs per brand while satisfying volatile demand from

billions of consumers remains an organisational challenge.

Channel alignment and category coordination complexity manifest internal tensions

between scale efficiencies from standardised production against in-market flexibility and

customer delight perspectives, attempting to balance commonality, variety, and customisation.

With production philosophy transitioning from the earlier make-to-stock approach to make-to-

order collaborative frameworks, the process shifts from forecast-driven manufacturing to

demand-driven supply chains, providing finer tuning opportunities (Vial, 2019). Configurable

product and recipe matrices cater to differentiated channel requirements, preventing

obsolescence from suboptimal positions. Local empowerment supports responsiveness

 Literature Review and Company Analysis 9

(Unilever(b), 2023). However, coordinating planning parameters across cross-functional teams in

globally integrated but regionally dispersed decision hierarchies remains challenging, requiring

behavioural alignment.

Inventory control imperative for Unilever encompasses delivering consistently high-

quality fresh produce matching evolving needs and exhibiting low stock-out rates via visibility

into point-of-sale trends enabled through advanced demand sensing modules navigating the

intrinsic demand volatility in the market segments. Inventory tradeoff analysis pans across cost

control through agile efficiencies, customer service by availability, sustainability considerations

and responsible sourcing practices leveraging emerging solutions like blockchain for supply

chain transparency. The focus has shifted from traditional budgets and forecast accuracy-based

planning processes towards external agility backed by internal business intelligence harnessing

data flows across the interconnected logistics ecosystem (Bai and Sarkis, 2014).

Performance Management and KPI Tradeoffs

Unilever’s inventory management KPIs span working capital cycles, stock loss

percentages, forecast accuracy metrics, fill rates and sustainability scores (Vial, 2019). Target

raw material and finished goods inventory turns indicate leanness seeking through enhanced

process capabilities, even for seasonal items. Shelf-life management limits write-offs at an

insignificant margin. A forecast accuracy target above 75% provides reliability for planning

(Hall, 2021). Fill rates consistently exceed 90% availability, leveraging analytics-led demand

calibration (Unilever(b), 2023). Perfect order fulfilment score highlights supply chain

coordination effects. Unilever balances proliferation risks and local preferences through optimal

category-channel product breadth complexity not exceeding 125% of benchmarks to contain

inventory impacts (Bai and Sarkis, 2014). The sustainable materials usage index reflects the
 Literature Review and Company Analysis 10

adherence to responsible sourcing standards. Tradeoffs persist between scale efficiencies from

standardisation and localisation needs requiring last-mile channel alignment.

Evaluation using Operations Management Themes

Unilever represents an exemplary fast-moving consumer goods company, effectively

demonstrating balanced inventory networking capabilities across its vast globally integrated

supply chain ecosystem. This is achieved through implementing a combination of advanced

operations management practices. Unilever leverages multi-criteria ABC-XYZ inventory

segmentation methods for differentiated categorisation instead of one-size-fits-all control

policies. They pursue postponement strategies via process modularisation, which entails

configurable manufacturing recipes to enable flexible make-to-order capabilities attuned to

volatile customer demand.

Integrated collaborative planning frameworks allow consensus forecasts guiding supply

parameters through coordination across functions, markets, and external partners. Emerging data

technologies provide enhanced visibility into demand management processes through advanced

analytics dashboards. Digitised workflows significantly cut order processing lead times to boost

responsiveness (Paton et al., 2020). Extensive responsible partner ecosystem development

through sustainability initiatives further augments Unilever’s inventory orchestration prowess

across the interconnected value chain.

Stratified inventory categorisation methods considering both financial aspects through

ABC analysis and functional differentiation of innovative versus functional established products

using techniques like XYZ segmentation allow customised control policies across items rather

than one-size-fits-all parameters. This prevents inefficient blanket restrictions stifling new

product introductions or excessive slack damaging cash flows (Paton et al., 2020). Configurable
 Literature Review and Company Analysis 11

modular production recipes facilitate responsive make-to-order capabilities through ingredient

flexibility, preventing outdated commitments. Collaborative planning integration across

functions, departments, and partners enables consensus forecasts to guide inventory decisions.

Control tower dashboards powered by IoT, blockchain, machine learning and advanced analytics

provide comprehensive visibility into volatile demand patterns for calibration (Saberi et al.,

2019). Digitised workflows sharply cut order processing lead times, enhancing responsiveness.

However, sustainability considerations regarding ecological implications of inventory

policies can be further embedded during new product blueprinting processes through possible

adoption of methodologies like Life Cycle Analysis to minimise waste. Circular economy

principles also need greater integration internally through reuse and remanufacturing initiatives

and externally via industrial symbiosis to optimise positive externalities across collaborating

entities (Piercy and Rich, 2015). Responsible innovation balancing economic, environmental and

social parameters is pivotal for long-term prosperity. Inventory decisions significantly impact

two key sustainable development goals, including responsible consumption and production

patterns and climate action. Unilever must continue pioneering this space.

Tools and Techniques to Analyse Issues

Various tools and techniques facilitate the analysis of Unilever’s complex inventory

challenges, like balancing standardisation for risk pooling and economies of scale against

localisation aspects and channel alignment (Slack, Brandon-Jones, and Johnston, 2016). Process

mapping of production planning workflows reveals decoupling points for optimal differentiation

positioning (Figure 1). Dual sourcing route modelling through linear programming assists

capacity planning during seasonal spikes, accommodating demand volatility. Multi-criteria

inventory classification techniques (Figure 2) determine differentiated cycle service level

 Literature Review and Company Analysis 12

policies and control parameters across 12 categories spanning functional versus innovative

assortments. Statistical forecasting methods enable safe stock optimisation by reliably sensing

demand and harnessing big data flows. Overall inventory optimisation requires collaborative

planning mechanisms across departments, markets and partner ecosystem players enabled

through integrated digital platforms.

Figure 1: Unilever’s Make-to-Stock Production Planning Workflow

 Literature Review and Company Analysis 13

Figure 2: ABC Analysis for Stratified Inventory Management Policies

Current Challenges and Recommendations Prevailing business complexity from

extensive product assortments and channel alignments strains forecasting capabilities,

compromising inventory planning reliability (Unilever(b), 2023). Bullwhip effects amplify

variability challenges. Routing flexibility limitations constrain responsiveness. Ecosystem

transparency needs improvement to engender sustainability despite traceability initiatives.

Recommended enhancements include advanced analytics adoption leveraging machine learning

for probabilistic predictive capabilities, increased modularity and postponement in production

systems to attenuate proliferation impacts, improved incentive mechanisms encouraging

information exchange across partners, augmenting cross-functional teams for integrated planning

and boosting circular economy engagement through industrial symbiosis. Responsible innovation

balancing economic, environmental, and social objectives is pivotal for long-term prosperity.

Conclusion
 Literature Review and Company Analysis 14

Unilever demonstrates best-in-class inventory management capabilities leveraging

sophisticated demand forecasting modules integrated across its digitized supply chain ecosystem

spanning over 300 manufacturing plants and distribution centres to delight consumers

consistently across 190 countries through responsible practices. However, further embedding

emerging circular economy ideas during new product designs using methodologies like Life

Cycle Analysis can enhance the focus on ecological sustainability.

Overall, Unilever pursues laudable inventory optimization tradeoffs across cost efficiency

leveraging scale while remaining responsive to dynamic consumer preferences through modular

recipes, coordinated planning integration, control tower visibility from the latest technologies

and ingrained channel alignment mechanisms for competitive advantage. With strong

governance practices towards community development through social programs boosting

smallholder farmers’ livelihoods, Unilever strives for holistic, balanced growth in the

competitive global FMCG industry. Its continued focus on responsible innovation can pave the

way for environmentally and socially progressive business models delivering consistent

consumer value.
 Literature Review and Company Analysis 15

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