Editor’s Note: Univar Solutions is the winner of ASCM’s 2021 Award of Excellence — Corporate Transformation. The organization leveraged the APICS body of knowledge and the ASCM Supply Chain Operations Reference (SCOR) model to transform and elevate the business and generate $76 million in savings. Univar’s story is detailed below.
Univar Solutions is a global chemical and ingredient distributor and a provider of value-added services. Its operations span 31 countries in North America, Western Europe, the Asia-Pacific region and Latin America to produce tailored solutions for customers in 125 different countries. These solutions are then delivered through one of the world’s most extensive industry distribution networks, which includes:
- 600 distribution facilities
- a private fleet of more than 3,500 trucks, trailers and tankers
- more than 1,300 railcars
- nearly 90 million gallons of bulk storage capacity.
This extensive network was formed in March 2019 when Univar acquired Nexeo Solutions. When the two groups merged, the new organization set out to redefine distribution and become “the most valued chemical and ingredient distributor on the planet,” in the words of CEO David Jukes at the time of the acquisition. This was both a vision and a challenge.
“Becoming the most valued chemical and ingredient distributor on Earth required transforming our practices from A to Z,” explains Alejandro Gusis, global vice president of indirect procurement and real estate.
Following the acquisition, company leaders quickly kicked off the Unite project, a company-wide transformation initiative to evaluate and optimize all aspects of the organization. The Unite project originally encompassed two core objectives:
- Change the culture. Create a data-driven company leveraging the world-class information technology capabilities of a consolidated enterprise resources planning (ERP) system and the best practices and people across the entire organization.
- Grow the business. Create shareholder value of $100 million by leveraging synergies across supply chain, procurement, human resources, real estate, corporate services and other departments.
A framework for supply chain improvement
To support these goals, the supply chain group needed to improve the overall efficiency of each step of its operations while reducing the total costs. The team chose to leverage the ASCM Supply Chain Operations Reference (SCOR) model to help them outline the work ahead.
“The ASCM SCOR model is an approach that informs our thought process,” says Brandon Luna, vice president of supply chain strategy and commercial integration. “Its benefits are two-fold in that it provides the ability to drill deep into key processes, critical design parameters and key metrics while also creating a high-level framework that illustrates the interconnectedness of processes across the supply chain.”
The goals included the following:
- Implement a single planning process that aligns the organization from executive sales and operations planning (S&OP) to individual product and customer forecasts across multiple horizons to material requirements planning requirements.
- Strategically source direct and indirect procurement categories with improved supply assurance, order execution and spend management, as well as reduced costs.
- Optimize the distribution network and eliminate redundancies.
- Improve the efficiency of the transportation group, including the company’s own fleet as well as its partner carriers.
- Implement a company-wide transformation office and change management organization to help with the implementation and adoption of all initiatives while measuring actual results; assess the company’s organizational chart and make changes to best support the new company; implement a shared services organization for customer service, finance and inventory planning; review all real estate agreements; and dispose of any physical assets, including real estate, that are identified as obsolete and redundant.
With a plan in place and inspired workers ready to take on these new challenges, the supply chain team kicked off its efforts in 2019. Then the pandemic hit. As an essential organization, Univar Solutions could not shut its doors for even a day, as drinking water, hand sanitizer and other vital items depend on the company’s products. Still, the pandemic created a challenging new operating environment, which led Univar Solutions leaders to add another goal to the Unite project: Continue providing excellent value to all stakeholders while focusing on the health and safety of employees.
Operating through a SCOR lens
Despite the challenges of the pandemic, the Univar Solutions team pushed forward to keep up with the aggressive project timeline. To reach the goal of creating a unified planning process, the team had to merge two legacy purchasing and planning systems. This required:
- mapping the entire process to enable full transparency and control of inventory planning and sourcing transactions
- establishing a training team to educate more than 100 employees about the new process
- implementing a shared service model that merged the planning and purchasing functions from five locations into two locations that covered the North American operations.
The supply chain team also designed and implemented an S&OP process that aligned the planning, finance and commercial operations.
For further integration, the indirect procurement team negotiated and consolidated all overlapping legacy goods and services contracts. Then, to optimize its distribution network, the supply chain team leveraged various SCOR level-1 and level-2 metrics to drive insights into the organization’s upside and downside adaptability, value at risk, cost management, and asset management efficiency.
In working toward fleet efficiency, the supply chain team merged three legacy vendor-management systems into one new solution. This merger involved meticulously reviewing and testing options, optimizing the management of outstanding carrier invoices, creating a new process to manage invoices, and then training staff and vendors on the system.
The company also needed to develop a vehicle replacement strategy to ensure maximum fleet value with limited capital allocation. The supply chain team set up a new predictive data-driven maintenance program to establish baseline thresholds by asset type, such as dollars per minute or dollars per mile. It also tapped partners to manage the maintenance of all 3,500 trucks, trailers and tankers as well as material handling equipment across more than 100 facilities. Lastly, the team prioritized fuel efficiency to improve its environmental sustainability.
Reaching all of Unite’s goals required having the right resources and talent in place. The organization implemented a transformation office to provide structure templates, coordination and project management capabilities across the entire project. The real estate team sold redundant assets to fund the transformation. Lastly, the human resources team assessed the skills of all employees, including leaders, to assign the right talent to areas of need.
“Executing this strategic transformation work through the lens of the SCOR model has pushed our teams to new levels of performance, challenging everyone to use data to evaluate and make fact-based supply chain decisions,” Luna says.
Distributing supply chain knowledge
The supply chain team’s success in each of these areas was only possible because most supply chain team members already were familiar with the APICS body of knowledge and other ASCM best practices. Univar Solutions employees regularly seek APICS certifications to grow in their supply chain disciplines, notes Mike Willman, vice president of network planning and procurement. In addition, ASCM’s programs are a cornerstone in Univar Solutions’ supply chain education in order to show employees industry best practices that can be applied to their work, explains Dave Presley, director of supply chain education.
The transformation gave Univar Solutions an opportunity to adjust its operations to match with the latest industry best practices. “We have taken legacy supply and demand planning processes — informed by APICS in the early 2000s — and supplemented them with the latest thinking and best practices to truly elevate our organization’s abilities in order to redefine what being a chemicals distributor means,” says Ian Fontaine, supply chain strategy and transformation manager. “Now, we have had suppliers tell us that our supply chain planning practices are leaps and bounds ahead of our competitors in the marketplace.”
With this knowledge base, Univar Solutions’ supply chain team was able to plan and execute its transformation in just 14 months — all while dealing with the challenges of COVID-19.
Gusis credits the SCOR model as “a true North Star” for helping the new combined organization develop objectives, measure results and ultimately operate as a single entity. “Without its core guiding principles, we would not be able to effectively harness the power of our integrated supply chain,” he says.
Through the transformation efforts, Univar Solutions was able to achieve the following results in specific SCOR areas:
- Plan: All planning and purchasing activities now are managed by a consolidated ERP system, which has given Univar Solutions additional insights to better serve its customers and improve supplier relationships. The tool already has proven its worth amid a variety of extraordinary circumstances including the global pandemic, international shipping disruptions, winter storm Uri in February 2021 and significant packaging shortages. In addition, the organization established a comprehensive and coordinated S&OP cadence that has improved collaboration among the commercial, finance and supply chain teams and delivered improvements in forecast accuracy, execution efficiency and customer satisfaction key performance indicators.
- Source: Through strategic sourcing, re-negotiation, and the consolidation of goods and services contracts, the company has achieved more than $16 million in realized synergies savings.
- Make: By consolidating 14 locations, the organization saved $7.7 million in operating expenses in 2020 alone. In addition, the new, consolidated ERP system has created a single source for demand, production and transportation planning; inventory management; and order data. This has helped reduce the total cost to serve and working capital requirements, increased service reliability, maximized capital and transportation asset utilization, and created a strong foundation for future supply chain visibility efforts.
- Deliver: The new combined freight invoicing system improved the organization’s visibility, forecast accuracy and proactive engagement with carrier partners with high levels of invoicing errors. Since implementation, the company has reclaimed approximately $1 million in duplicate invoicing costs and now has zero holds on carriers’ credit. In addition, Univar Solutions’ new comprehensive seven-year maintenance and capital replacement program has helped the company benchmark maintenance repair costs for all asset types and asset equipment performance data to create a comprehensive replacement list. The plan is projected to save the company 30 cents per mile per asset throughout the next five years.
- Enable: The transformation office and talent strategies implemented by the human resources team supported all of these outcomes. In addition, the sale of 20 real estate properties generated more than $73 million in revenue, which was used to fund the transformation.
The increased emphasis on safety also enabled Univar Solutions to accomplish all of this while achieving its safest year on record. Its total case incident rate dropped from 0.80 to 0.57, and it reduced its spills on record by 32% from 2019 to 2020, which also boosted its sustainability.
Across the entire enterprise, Univar Solutions is on track to meet Unite’s two overarching goals. The company successfully merged and streamlined its operational efficiencies and improved all critical operational indicators. In addition, it generated $76 million in net synergies by 2020. An additional $45 million expected in 2022, putting the group well over its goal of $100 million.
“But we are not done yet,” Gusis says. “Our recent introduction of an ASCM corporate membership and engagement with Principles on Demand as part of our supply chain education program are recognition of our need to build greater supply chain knowledge across Univar Solutions. Only then will we be able to fulfill our commitment to becoming the most valuable chemical and ingredient distributor on the planet.”
Image Credit: Univar Solutions scientists perform a chemical analysis to determine the best application for the formulation. (Image courtesy of Univar Solutions)
To learn more about how Univar utilized the SCOR framework to transform its supply chain, read the Univar Case Study.