How an 11-day truck strike in Brazil hurt Unilever's top line

Posted by On 10:35 AM

How an 11-day truck strike in Brazil hurt Unilever's top line

Brief How an 11-day truck strike in Brazil hurt Unilever's top line

Dive Brief:

  • An 11-day strike in Brazil slowed Unilever's supply chains for at least two weeks after the event, and the country's businesses are still recovering inventory, according to CEO Paul Polman.
  • "When the truck[s] strike, they don't strike for us alone. They strike for everybody, so all of our suppliers, etc." Polman said in an earnings call. CFO Graeme Pitkethly said the company was "wholly unable to ship products to retailers or indeed get any raw materials into our factories" during the strike.
  • The event cost the company 60 basis points (0.6%) off the top line, which included an 8% drop in sales in Brazil during the first half of 2018.

Dive Insight:

The truck strike in Brazil lasted 11 days in late May, affecting inventories worldwide.

In the earnings call, Unilever detailed how a seemingly isolated incident can impact operations across supply chains. It's not just transportation that was disrupted, but also production, as buyers and suppliers alike saw their goods halted in transit or stocked up within their facilities.

"This was then followed by a period of recovery where distribution and manufacturing was slow to ramp up, particularly in fabric solutions and hair, where we operate with just-in-time manufacturing and lean stock levels," Pitkethly said.

The comments illustrate how the 11-day event turned into a month-long economic disruption that started in Brazil, but spread globally.

The inventory stockpiling and sudden need to transport products after the strike led to even further delays at ports, where demand exceeded freight capacity. As of mid-June, at least 60 ships were still facing loading delays, with more than 400,000 tons of goods awaiting transport, Reuters reported.

A 60-basis point drop is not that much for a global company like Unilever, however.

"We can cover for that in the year, and we can cover for that in the quarter," Polman said. "What you cannot cover for is quickly finding the top line growth. So what Brazil is now doing is replenishing stock, replenishing inventory."

By their nature, global comp anies must be resilient to large scale disruptions, whether in Brazil, the U.S. or Europe. Polman said he had learned to love dealing with these, as part of his job.

"The Brazil strike or not, frankly, now we have this trade dispute with Canada. Tomorrow, we have Kim Jong Un who's going to do something," Polman said. "I mean, this world is full of surprises and that makes it interesting to live in, and that's why we love this world."

Recommended Reading:

  • Supply Chain Dive Trucker strikes in Brazil deliver gut punch to supply chainsoffsite link

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Filed Under: Freight Logistics Operations Procurement Risk/Resilience Top image credit: UnileverSource: Google News South Brazil | Netizen 24 Brazil

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