The Supply Chain Matters blog provides the first of a two-part series highlighting supply chain response for certain cleaning and disinfecting product producers, including Reckitt Benckiser and Unilever, in efforts either undertaken or constrained to be able to support opportunistic product demand and make a difference for business results. In our subsequent Part Two commentary, we will add three further producers to our highlights.
The ongoing COVID-19 coronavirus pandemic has presented significant challenges as well as product demand opportunities for certain consumer goods manufacturers and their respective supply networks. Unprecedented spikes in virus related product demand have been attributed to both pantry loading as well as increased market demand opportunity. From an overall supply chain and business integrated planning perspective, the differences in overall performance are clearly being manifested on the ability of connected planning and supply networks ability to pivot to meet opportunistic demand.
In a previous blog published in mid-July, we highlighted some specific examples related to certain consumer goods companies. In this blog, we highlight additional examples of where the ability of the supply chain to pivot has made a discernable difference, and where it has not.
Reckitt Benckiser, makers of Lysol branded of disinfectant products reported a 50 percent increase in year-over-year revenues it its most recent reporting quarter.
The company’s CEO told Business Network CNBC: “We’re making 20 times the amount of sanitizer in July as we did last year, it just gives you the sense of the demand that there is.” However, the CEO further cautioned: “We don’t expect that (demand) to stick around for a long period of time, but we do expect it to be at higher levels.”
Consumer’s reading this blog could very likely attest that even though a U.S. regulatory agency approved Lysol products as being effective in killing coronavirus on surfaces, a likely significant advantage, finding any Lysol product available at most retail or online outlets is slim, and only if willing to pay a super-premium price.
The Financial Times reported in May that the production plant that produces disinfectant products is located in Hubei province China, the center of the original outbreak. According to the report, the Hubei factory, has increased its daily capacity from 40 tons to more than 400 during the pandemic. Further reported was that hundreds if not thousands of local suppliers were impacted by virus lockdowns and shortages of lower-tiered materials. Globally the company eventually had to make provisions to house upwards of 1,000 factory workers that could not travel to and from production facilities. According to executives, while supply chain agility was demonstrated, it came as a detriment to costs and margins.
Unilever PLC’s supply chain teams were clearly able to respond to exploding demand for sanitizer and disinfectant products. According to reporting from The Wall Street Journal, before the pandemic, there were but two global manufacturing facilities producing sanitizer, and the business was not considered a core product focus. Now there are over 60 production sites producing sanitizer globally, noted as a factor of 600 times capacity serving 65 new markets. Unilever quickly repurposed existing production lines, including those producing deodorants, to produce hand sanitizer. In Vietnam, a factory was reportedly kitted out to produce sanitizer in 25 days.
According to the WSJ report, since the start of the year, the manufacturer has increased sanitizer production from about 700,000 units of sanitizer per month to upwards of 100 million units, along with reassigning 8300 employees from slumping businesses to oversee sanitizer demand needs.
Despite this global supply chain pivoting, there are still cases where the manufacturer cannot fill existing demand in North America.
In its recent report of second-quarter financial performance, the consumer products company reported sales in its hygiene product business increased by 26 percent, while cleaning product sales increased by 37 percent. Each of these business units were not considered as sales growth candidates prior to the pandemic outbreak.
Setting Leadership Expectations
Both Reckitt and Unilever CEO’s were asked as to whether the current cleaning and sanitizer product growth would continue, and both agreed that demand would outlast the pandemic. From our Supply Chain Matters lens, this executive guidance was likely instrumental for respective supply chain management teams in the marshalling of resources and response capabilities under the assumption of required product demand fulfillment both from a short-term and longer-term perspectives.
In our Part Two commentary, we will highlight response capabilities of producers Procter & Gamble, GOJO Industries and Clorox, along with our summary thoughts and takeaways.
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