Consumer-goods companies (CPG) want supply chain to run smoothly from end to end, and a new generation of digital tools help tackle the challenges with digital technologies. One of the challenges is channel conflict, defined as a situation where distributors have to compete against one another. Unilever, a multinational consumer goods company, has started to print unique QR code on product and digitalize the channel management system to avoid channel conflict in China. In 2016, Unilever launched unique QR code on each Dove product and further incorporate channel management and incentive system into a single platform, which is “Mini Program” on WeChat.
Unilever digitalizes distribution channel and track the supply chain by integrate all information into one platform through a unique QR code on products. At each stop of the supply chain, the bar code on the carton will be scanned, starting from the factories to central distribution centers, and to regional distribution centers. The process is managed within Unilever supply chain system. And the supply chain can easily check the inventory and the shipping volume on the digital platform. However, after the products are shipped to the tier 1 distributors, Unilever will lose track of the products. As a result, distributor A might sell products to a store, which should be covered by distributor B, and Unilever would not be able to identify the problem. However, after the unique QR code is printed on each product, the channel supervisor can scan the code and judge if the Dove shampoo is from an authorized distributor.
The implementation of unique QR code helps Unilever not only identify channel conflict but also prevent it in the beginning. For the short-term, the Unilever team digitalizes the distributor management and incentive system on WeChat, which is a most popular social media in China, to encourage the regional distributors to order product from authorized tier 1 distributors. First, Unilever associates the unique bar code on the cartons with the unique QR code on the products, because only the bar code on cartons is recorded within Unilever’s internal system, and the regional distributors will sell the product to each store by items instead of by cartons. Thus, when a channel supervisor scans the QR code on a product, he would know which carton this product is from, and which distributor this carton is sold to. Secondly, the Unilever partners with a software company to develop an app on WeChat, which is called distribution management mini program. After the products are shipped to a regional distributor, which is one level above the stores, the distributors can create accounts on the app, and scan the unique QR codes on the products. Once the system verifies that the products are from the authorized channel, the distributors will get points, which they can redeem on an online store. The reward to distributors is a huge motivator to the regional distributors. The distributors used to be rewarded with cash refund when they met the sales target; thus, the distributors then would look for cheaper price from other tier 1 distributors. With the QR code incentive system, distributors get rewarded only by ordering products from the authorized distributors, although additional workforce is needed to scan products. The unique QR code is currently implemented on Dove brand. For the medium term, Unilever has intention to digitalize the supply chain of other brands, and add more features to the digital program.
I would recommend that Unilever can further add features to this digital initiative. For example, Unilever can use the unique QR code on the product as an anti-fake label. Once the end consumers scan the code, they will be able to know if the product they are going to buy is genuine. For the medium terms, Unilever can also launch a loyalty program targeting at end consumers. They can conduct a marketing campaign to encourage the consumers to scan the codes after purchase, and then they will get points to redeem telephone bill gift card. The loyalty program requires two-layer of unique QR codes – one for distributor and one for end consumers. The end consumers can get access to the QR code which is hidden inside of the package. At the same time, consumers are required to provide their names and cell phone numbers, which can be used for precision marketing and consumer behavior analysis.
To digitalize the whole supply chain is costly. Unilever will have to upgrade the system by adding auto scanning equipment etc. in the supply chain network. Will this investment be worthy? On the distributors’ and consumers’ sides, will they buy in such innovation?
McKinsey & Company. (2017). Digitization and advanced planning in CPG. [online] Available at: https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/digitization-and-advanced-planning-in-cpg [Accessed 16 Nov. 2017].