Degree

Master of Business Administration

Faculty / School

School of Business Studies (SBS)

Advisor

Dr. Muhammad Farooque, Assistant Professor, Department of Management

Project Coordinator (Internal)

Dr. Shahid R. Mir, Assistant Professor, Department of Management

Project Coordinator (External)

Abdullah Saeed Uddin Khan

Client

Unilever Pakistan Limited

Project Type

MBA Research Project

Keywords

https://ir.iba.edu.pk/do/search/?q=Segmentation&start=0&context=8598587&facet=">Segmentation, Lean, Agile, Responsive, Nurture, Resilience

Abstract / Summary

Unilever Pakistan is an organization with a wide variety and assortment of Foods, Homecare and Beauty and Personal Care products. They have more than 200 SKUs (Stock Keeping Units) spread across these three divisions. Given the strong presence of other local and multinational competitors with offerings in these businesses in Pakistan, it is no surprise that Unilever experiences high deviations in sales volumes, and gross margins across their SKUs within each business category. Products, though seemingly similar in nature, often show significant differences in sales and margins.

Unilever Pakistan, who is the client for this study, expressed its interest in categorization of their SKUs into one of four Supply Chain Segments namely, Lean, Agile, Responsive and Nurture. These Supply Chain Segments are derived from the works of Fischer (1997), and can be identified by a number of characteristics such as Sales, Margins, Supply Uncertainties, Demand Uncertainties, Product Life, Stock outs, and others (Hau, 2002). Broadly, the four Supply Chain Segments can be explained as follows:

  • Responsive: Products having high sales and yielding high gross margins
  • Agile: Products having low sales volumes but high gross margins.
  • Lean: Products having high sales volumes but yielding low gross margins.
  • Nurture: Products having low sales volumes and yielding low gross margins

Considering the client’s problem statement, this study was aimed to, firstly, identify the most relevant attributes for classifying SKUs of Unilever into the four Supply Chain Segments mentioned above. Secondly, classify Unilever’s SKUs into one of these four segments, based on data provided by the client, and lastly, recommend implications of some strategies which are suggested to move SKUs from one of these segments into another.

Primary and secondary data, gathered during this study, suggests that each of Unilever’s product categories have at least one stellar SKU which the company identifies as ‘Core of the Core’ SKU. These Core of the Core SKUs are ‘accretive’, that is, their sales volumes and gross margins are high above their category’s average and lift the category’s average sales and margins. These SKUs, though limited in variety, account for a large percentage of their category’s turnover. Such SKUs fall within the organization’s definition of the ‘Responsive’ Supply Chain Segments. Most SKUs however, have sales and margins which are close to their category’s average, and based on the client’s definition of Supply Chain Segments, fall into the ‘Lean’ Segment. There are also some SKUs which tend to be ‘dilutive’ that is, their sales and margins have over time, fallen below their categories’ averages, and these SKUs are classified into the ‘Nurture’ segment.

The reason for retaining the Responsive and Lean SKUs is self-evident, that is, they account for most of their categories’ turnover and margins. This study focused more towards the SKUs in the Agile, and Nurture Supply Chain segments. Our findings from this study suggest that the main reasons for unsatisfactory performance of these SKUs were:

1. Resilience, wherein the organization was struggling with supply uncertainties due to recent political and economic instability.

2. Presence of competitors, due to which the client had to offer SKUs in the same price points as their competitor. This would sometimes dilute the category’s average but their effect on the brand would boost some of their core SKUs which would supposedly neutralize the dilution caused by the Nurture SKUs.

3. Market development, wherein the company would retain some dilutive, yet innovative products as a strategy, geared towards their ‘future fit portfolio’. The company believes in developing the market by introducing products whose utility for their customers increase over time.

With the data analysis, literature review, and stakeholder engagement activities conducted with the client during this study, we propose that the most suited attributes for classifying the SKUs of Unilever Pakistan into the four Supply Chain Segments are Sales Volume, Gross Margins, Supply Uncertainty and Demand Uncertainty.

Considering the results of the segmentation, which are mentioned at the end of this report, summarized recommendations for each supply chain category are that Lean SKUs should be targeted to reduce cost inefficiencies and wastages, Responsive SKUs should be focused towards improving operating cycles, Agile SKUs should be aimed towards inventory management, and Nurture SKUs should be used as stepping stones for innovation and developing the market for future fit products.

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