Procter and Gamble

Improving Customer Value Through Process Redesign

Group 5 PGP 2012 Dheeraj Kumar (1211180) Gautam Punj 1211186) Parambrahma Panda (1211282) Vishrut Shukla (1211314) Ravi Purohit (1211049)

Customer Relationship Management

O Question 1: What were the key decisions

taken by P&G in relation to distribution channel? Could a mid-sized manufacturer have used this approach?

Key Decisions
CRP Implementatio n
Transmit data daily from retailer to P&G on warehouse product shipments to each store with the help of EDI (Electronic data exchange) Quantity shipped based on shipment information rather than retailer orders Quantities were computed with the objective to provide sufficient safety stock, minimize total logistic cost & eliminating excess inventory at retailers. JIT basis shipment of products on the basis of retailers actual sales data . Improve consistency and overall service levels by integrating many separate systems that did not work well together across functions and product sectors. Automated existing processes & provide flexibility to meet needs of different sectors & functions Common database for product pricing and product specifications with the vision of Simplify, Standardize , then Mechanize Change from high-low pricing to Value Pricing. Encouraging CRP adoption by providing benefits to retailers. Reduced the number of pricing changes at P&G from 55 per day to 1 per day in around 2 years of time Timely, accurate , paperless information flow between Supplier, Distributor, retailer and consumer Change from brand to category management helped in standardizing product lines.

OSB Changes

Pricing Restructure

ECR System

The Case of Mid-Sized Companies

Comparison between P&G v/s a Mid sized Company
Parameters Bargaining Power over customers Economies of scale Financial Strength P&G High (Strong customer pull due to big brand name, sales through multiple channels) High (Presence in multiple product segments , volume is high ) High (Fund for Technology investment is easily available, $30 billion sales in 1993) High (Sale of CRP system to IBM for increasing attractiveness of CRP for Industry) Mid Size Companies Medium Medium Medium Low-Medium

Capability to drive Industry

Risk taking capabilities

High ($459 in 1987 and $1746 in 1993 spent for cost of restructuring)

Low

Conclusion: The capabilities of mid-sized companies as compares to P&G dont seem adequate to implement this approach.

O Question 2: How important are the new IT

technologies in P&Gs efforts?

Importance of New IT for P&G

CRP and EDI Systems of P&G
Areas of Improvement Increased retail sales through CRP retailers : Due to increased availability of P&G products. Expansion of product line (exp Diapers), efficient management of increased number of SKUs. Problems with order quality: Due to removal of human buffer, data entry errors were not caught at early stages leading to collection issues. Cost reduction : Due to elimination of excess capacity because of better control on demand variations
Areas of Improvement Reduction in time delays and paperwork Reduction in transaction costs.

KPI 4%

10%
KPI

Channel Partners

Inventory reductions and service level improvements, reduction in stock outs.

Areas of Improvement Increased availability of P&G products due to reduced stock outs. Customers Reduced fluctuations in prices ; reduced dissonance

KPI

Importance of New IT for P&G (contd.)

Order, Shipping and Billing Systems
Areas of Improvement Financial Transactions : Improvement in billing accuracy, perfect orders, deductions resolved in favor of P&G Improved on time delivery, reduction in returns and refusals KPI Billing Accuracy: 10% Perfect Orders: 20% Deductions: 50% Perfect orders : 20%

Areas of Improvement
Improvement in order quality, shipset quality and reduction in order entry errors, reduction in order cycle time Reduction in price and promotion changes per day Channel Partners Constant procurement costs for retailers, elimination of forward buying by retailers

KPI
Order Quality: 35% Change 55 : 1 p.d

Areas of Improvement Increase in brand loyalty as promotions reduced, reduced customer dissonance

KPI

Customers

O Question 3: To what extent has P&G

changed its strategy to take advantage of ECR?

Changes in P&Gs Strategy

Strategic Area
Channel Logistics

Strategy prior to ECR implementation

Non harmonious relationship with retailers and wholesalers Trade based on negotiations over short term initiatives

Change in Strategy for maximizing ECR benefits

More collaborative and mutually productive relationships Focus changed from negotiations to collaborative efforts to meet consumer needs P&G determined order quantities and timing based on warehouse shipment data sent through EDI Efficient operations through CRP implementation led to accurate demand forecasting -> Lower inventory, fewer stock outs Value pricing program in lieu of frequent special programs Elimination of geographic pricing differences Focus on brand-loyal consumers rather than price-sensitive consumers Efficient utilisation of plant capacity Elimination of entire plants due to productivity gains Reductions in employment levels Organization structure shifted to Category management Category manager responsible for overall pricing & product policies Focus shifted to fulfilling consumer needs through category management -> New product innovations Elimination of weaker brands Standardisation of product packaging/labelling -> Restructuring of SKUs Long term strategic focus -> Sale of CRP system to IBM to increase the adoption of CRP by other companies

Channel Relationship

Retailer determined order quantities & timing, Inefficient operations (LTL shipments, stock outs) Forward buying behaviour by retailers (buying for profit) led to artificial demand creation

Pricing Strategy

Multitude of promotional programs by P&G Large variable promotional discounts & allowances led to forward buying by retailers Excess capacity build up for meeting uncertain demand variations Inefficient use of capacity Organization structure based on brand management approach Brand managers had complete product responsibility

Operations / Manufacturing planning Management / Organisation Structure

Product Strategy Focus on individual brands High product variations or large no. of SKUs Conflict between same branded products for resources

Industrywide Standardisation

Decisions based on short term horizon -> Focus on profit making

O Question 4: What do you think the next steps

are for P&G?

Next Steps for P&Gs CRM Strategy

Area Do more with real-time CRM data Inbound Actions Obtaining store-level PoS data from retailers to get real-time data on demand, SKU availability, consumer behavior, consumption patterns ideas for NPD Continuous plan-make-ship processes; logistics innovation (eg: cross-docking) Backward integration of CRP with suppliers to automate inbound sourcing Segment customers: Key Account, Strategic Partner for collaborative marketing Different levels of CRM engagements SCM CRM (Key accounts) E-Business Automation (Strategic) Customer-driven supply network, Vendor Managed Inventory for Key Accounts Collaborative planning, forecasting and replenishment for strategic partners Replication Expansion of Value Pricing, CRP and category management to all product lines Adaptive, dynamic approach of monitoring and evaluating the health of P&Gs supply chain where alerts and actions can be triggered automatically

Enhancing CRM Systems & Processes

Ensuring reliability, uptime, recovery & high-availability of CRM-related data and systems deployed globally to guarantee business continuity at all times Simplified CRM application and data architecture to allow integration of new global operations, customers and network alliances in the future

Metrics

Carefully define & track metrics for value additions through CRM engagements

Thank You.
Questions?