OPERATIONS MANAGEMENT II

TERM PAPER ON SUPPLY CHAIN AND DISTRIBUTION OF THE

FMCG PRODUCT- VICKS VAPORUB

Instructor:
Prof. Vinay Kumar Kalakbandi

Submitted by: Group 2

Name Roll Number Contribution

Varun reddy 2018PGP016 25%
Rupesh Jain 2018PGP027 25%
Mohd Asad Khan 2018PGP034 25%
K Nischal 2018PGP030 0%
Saurabh Chitnis 2018PGP051 25%
Sayantan Biswas 2018PGP053 0%
Aayush Sudhakar 2018PGP002 0%
Rohan Aitawade 2018PGP008 0%

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About P&G
Procter & Gamble, USA (P&G) owns 65 per cent of P&G India's equity. The multinational has
built many world class brands, like Pampers, Head & Shoulders, Ariel, Ivory, Tide, Vicks,
Whisper, Crest and Pantene. Nearly all are market leaders in Europe and the United States.
This leadership, along with a presence in 140 countries, helps give P&G annual sales of over
$35 billion. P&G's products have a strong presence in India too. Its Vicks brand has virtually
become a generic cough and cold treatment.

About Vicks Vaporub

Vicks VapoRub ointment is a mentholated topical ointment, part of the Vicks brand of over-
the-counter medications owned by the American pharmaceutical company Procter &
Gamble. VapoRub is intended for use on the chest, back and throat for cough suppression or
on muscles and joints for minor aches and pains. It has also been used to treat mosquito bites
VapoRub was originally manufactured by the family-owned company Richardson-Vicks, Inc.,
based in Greensboro, North Carolina. Richardson-Vicks was sold to Procter & Gamble in 1985
and is now known as Vicks. VapoRub is also manufactured and packaged in India.

Current Supply Chain Model

Procter & Gamble has End-to-end Supply Chain – From Factory to Shelf.

Supply Chain process moves from Suppliers -> Factory -> Distributors -> Wholesalers ->
Retailers.

P&G integrates its supply chain software with its suppliers, distributors and retailers with a
notion of joint business planning with key stakeholders. To fully integrate different parts of
the chain, understanding that digital automation of workflows that allows high visibility of
any movement in each step is a key to enable end-to-end model. Digital automation of
workflows empowered by use of algorithm-driven tools to reduce exceptions, enables end-
to-end planning, connecting headquarters, manufacturing plants, distributor, and retailers.

As per the data and information collected from local retailers, Vicks has high sales from July
to February(Monsoon & Winter season, as Vicks, follows cyclical demand pattern), while the
sales go down drastically from March to June. According to them, a salesperson of the
company comes and takes the order mobile application. He gives an estimated price of the
total order. It takes 1-2 days to receive the order. Market experiences a shortage of supply in

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October & November. In 2017, the average shelf life of the Vicks VapoRub was around three
days, so retailers had to bear the Understocking cost as demand grew 6 six times during that
year.

One highlight in logistics capability, called “Distributor Connect” connects P&G with
distributors. Digitally enabled operational program, it allows all the transportation, from raw
materials from suppliers to finished goods to retailers, be accessible in one source of data, on
their laptop or mobile, for the supply managers to track the status of the delivery. With
enhanced real time visibility of where things move, Distributor Connect significantly reduces
inventory across the ecosystem and the ‘deadhead,’ trucks not optimally utilized, by about
15%.

In every district or taluka place, distributor keeps inventory with the wholesaler to meet the
immediate demand of retailers. Average inventory turnaround time was five days, as the
distributor takes the order every week. A wholesaler generally is preferred at taluka level to
look after the demands of taluka place. While, some distributors chose multiple wholesalers
at the district level, who cater to different parts of district and taluka regularly.

Similarly, not only does P&G support with mobile-phone applications that enable retailers to
check the status and order more products, it fully incorporates “GDSN,” Global Data
Synchronization Network with the operation with retailers. GDSN enables 100% automated
commerce without human intervention. This capability significantly improves the human
error between retailers and companies and save cost for all the parties.

Distributors need to place the order to manufacturer one before reaching the safety stock as
the manufacturer takes one week to deliver the products.

These ‘end-to-end’ approach, enabled by digital capabilities, allow the company to accelerate
the time to deliver its products to the market. However, the implications of rising
digitalization trend do not just start from manufacturing. It goes back into product innovation.
If we look at different industries, for example apparel industries, digital landscape has pushed
each brand to take advantage of latest technology such as AI to realize real-time
personalization.

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 Recommendations

 Unlocking insights through Advanced Analytics– If we can quickly identify the insights from
the big data, could we capture primary demand for the manufacture without sequential
researches to ‘qualify’ the products? AI will enable the company to better understand and
interpret individual customers’ preferences. This will allow us to shorten the lead-time to
explore different options of formulations. This approach will also significantly reduce
finished goods inventory with more precise demand forecast while offering the better value
proposition to the end consumers.
 Direct to Consumer – One way to shorten the lead time from manufacturing to consumers
is to cut some phases of the supply chain. Rather than moving the products from factories
to retailers, P&G should accelerate the development of direct to consumer supply chain
from the manufacturing plants.

Exhibits
Exhibit 1

Fig. Supply Chain Management at P&G

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Exhibit 2

Fig. Role of information technology in supply-chain integration

Exhibit 3

Fig. Bull-Whip Effect

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Exhibit 4

Exhibit 5

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Exhibit 6

References

[1] Alicke, K., D. Rexhausen, and A. Seyfert, “Supply Chain 4.0 in consumer goods,” McKinsey
& Company, April 2017, [https://www.mckinsey.com/industries/consumer-packaged-
goods/our-insights/supply-chain-4-0-in-consumer-goods], accessed November 2017

[2] Aronow, S., Nilles, K. and Romano, J., “The Gartner Supply Chain Top 25 for 2017”,
Gartner Inc., May 25, 2017, [https://www.gartner.com/newsroom/id/3728919], accessed
November 2017.

[3] Chui, Michael, “Inside P&G’s digital revolution,” McKinsey Quarterly, November 2011,
[https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/inside-p-
and-ampgs-digital-revolution], accessed November 2017

[4] Fritzen, Soren., F. Lefort, O. Lovera-Perez, and F,. Spangar, “Digital innovation in
consumer-goods manufacturing,” McKinsey & Company Consumer Packaged Goods Article,

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November 2016, [https://www.mckinsey.com/industries/consumer-packaged-goods/our-
insights/digital-innovation-in-consumer-goods-manufacturing], accessed November 2017

[5] Trebilcock, Bob, “What Does It Take To Remain A Supply Chain Leader?”,
SupplyChain247, January 2015,
[http://www.supplychain247.com/article/what_does_it_take_to_remain_a_supply_chain_l
eader], accessed November 2017

[6] Vadino, Jessica, “Digital Transformation in Retail: How to Take Advantage of Innovation”,
E-Apparel, June 23, 2017, [https://apparelmag.com/digital-transformation-retail-how-take-
advantage-innovation], accessed November 2017

[7] Boudet, Julien., B Gregg, J Heller, and C, Tufft, “The heartbeat of modern marketing: Data
activation and personalization,” McKinsey & Company Marketing & Sales, March 2017,
[https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the-
heartbeat-of-modern-marketing], accessed November 2017

[8] O’Mahar, Kevin, “CPG: the Post-Replenishment Supply Chain Challenge,” Logistics &
Transportation, Nov 30, 2016,
[https://www.forbes.com/sites/kevinomarah/2016/11/30/cpg-the-post-replenishment-
supply-chain-challenge/], accessed November 2017.

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