Henkel, the German consumer goods powerhouse, is undergoing a significant supply chain transformation aimed at reducing complexity and achieving substantial cost savings.
Supply Chain Simplification
Henkel, the German consumer goods company, has embarked on a strategic initiative to streamline its supply chain operations. The company’s recent earnings call revealed a targeted 25% reduction in supply chain complexity, with a 15% achievement already realized in the fourth quarter. This initiative is part of a broader effort to enhance efficiency and reduce costs across the board.
Phase One: Cost Reductions and Consolidation
The initial phase of Henkel’s strategy focused on reducing the number of stock-keeping units (SKUs) and trimming the workforce. The company successfully cut SKUs by a significant double-digit percentage and merged its laundry and home care with beauty care segments, resulting in over 2,000 job cuts primarily in sales and administration.
Phase Two: Optimization and Projects
Henkel’s second phase is now in full swing, concentrating on optimizing the supply chain network for its consumer brands division. CEO Carsten Knobel announced the launch of over 800 projects, driven by the need to adapt to portfolio shifts and expedite capacity consolidation. These projects have led to the consolidation of logistics in North America and optimization of production footprints across Europe, North America, Latin America, and the EMEA region.
Pilot Programs and Flex Shift Models
The company has implemented pilot programs in major production sites in the U.S. and Germany, which have resulted in reduced logistic costs, increased productivity, and improved line utilization. Additionally, Henkel has introduced flexible shift models at various sites to further boost efficiency.
Financial Impact
The supply chain overhaul has already yielded financial benefits for Henkel. Initially projecting savings of approximately $425 million by 2026, the company now anticipates savings could reach as high as $558 million, according to Knobel. This revision underscores the effectiveness of the supply chain restructuring and the potential for even greater cost efficiencies moving forward.
