PROCTOR AND GAMBLE: A CASE STUDY

PROCTOR AND GAMBLE: A CASE STUDY

Saumya Goel 208Nishant mandwawala212Nikhil nair 366Ronak vora374Vedant gupta 310Manalp mehta 314

AT A GLANCE

• $67.9 billion sales*• 135,000 employees• More than 170 manufacturing

facilities in more than 40 countries

• More than 20 R&D centers in 10 countries

• Unique organization structure

DISTRIBUTION

PRICING AND PROMOTION • Increased use of promotions in the 1980s.• Forward buying and increased promotions

leading to problems like1. Increased manufacturer and retailer

inventories.2. Consumer demand variation3. Higher manufacturing costs

PROCESS REDESIGN

•

LEADERSHIP ROLE IN

WORKING WITH GROCERY STORE

INDUSTRY WIDE EFFICIENCY IMPROVEMENTS

PRICING

POLICY

CHANGES

PROBLEMS AND THE SOLUTION

VARIABILITYLOW PROFIT

MARGINS FOR RETAILERS

ISSUESINEFICCIENCY IN SUPPLY CHAIN

UNCERTAINTY IN DEMAND

HIGH MANUFACTURING COSTS

SOLUTION: CRP

INPUTS FOR CRP

Actual warehouse on-hand quantity

Actual warehouse on-order quantity

Projected sales demand from the stores

BENEFITS OF CRP IMPLEMENTATION

TO THE RETAILER• Reduced inventory• Improved cash flow• Productive use of buyer time• Improved service• Volume and share growth

TO THE VENDOR• Improved perfect order rate• Total delivery cost reduction• Reduced invoice change• More productive use of sales

time

EDI

Transmit data from retailer to P&G

Platform for CRP

BENEFITS

Reduced transaction

cost

Huge data transfer

Error free transfer

THREATS

Seeks manual intervention

Huge errors without

human buffer

Increased cost

EDI

ORDERING, SHIPPING AND BILLING SYSTEM

Rewrote the entire system

Supported pricing, ordering, credit

policy

Integrated many systems

Eliminate manual steps

Shared database for product pricing and specifications

Batch production system upgraded

ORDERING, SHIPPING AND BILLING SYSTEM

•Standardization of the process

•Automation •Reduction of

complexity •Reduction in

error•Reduction in

the cost of the processes

BENEFITS

•Resistance to change

•Time and cost of implementation

THREATS

LEADING THE GROCERY CHANNEL TRANSFORMATION.

• Implementations of ECR.

• Efficient Consumer Response (ECR).

ECR

• Optimize productivity of retail space and inventory

EFFICIENT STORE ASSORTMENTS

• Optimize time and cost in the ordering process

EFFICIENT REPLENISHMENT

• Maximize total system efficiency of promotions

EFFICIENT PROMOTIONS

• Maximize effectiveness of new product development

EFFICIENT PRODUCT INTRODUCTIONS

Q2 Key decisions taken by P&G in distribution channel.

ECR (Efficient Consumer Response)

CRP (Continuous Replenishment Program)

Customer and Category Management

• One of the most important aspect of the joint industry ECR vision was the retailers’ shift from buyers to category managers.

Outsourcing to IBM

• Benefits– Standardization in the industry– Reduced barriers to CRP adoption– Reduced P&G’s cost of operation– Increased the base for P&G’s operations

• Threats– There were no economic benefits for P&G by

outsourcing

Q How important are the new IT in P&G's efforts?

Answer

• Efficient process reengineering• Reduces the complexity of processes thereby reducing the errors• IT is used in Continuous replenishment-The retailer provide P&G

with daily data on warehouse orders received from the stores • In Electronic data interface• Rewrote the entire ordering, shipping, and billing (OSB) system

Redesigning the complete Ordering Process

• improve pricing policies & practices.

• A common database was developed

• It was developed to provide data to the customers own system electronically.

VALUE PRICING

FACTORS LEADING TO VALUE PRICING• Declining brand loyalty• Frequent promotions• Disincentive to brand loyal customers• Lacked a standardizing pricing structure

BENEFITS • Benefits to crp customers• Reduction in number of pricing changes• Elimination of variable promotional allowances• Stronger profits

To what extent has P&G changed its strategy to take advantage of ECR ?• In 1992, the company instituted a comprehensive program, called

Efficient Consumer Response (ECR) to remove unwanted costs from the supply chain.

• ECR concentrated on four key areas: efficient replenishment, efficient promotion, efficient introduction and efficient assortment.

• It enabled grocery chains to compete effectively with low cost alternative retail formats.

• ECR became a banner for a wide variety of innovations in the grocery channel.

• P&G was a clear leader in implementation of CRP and other ECR Programs and wanted to increase the pace of its adoption in the industry overall.