PROCTOR AND GAMBLE: A CASE STUDY

PROCTOR AND GAMBLE: A CASE STUDY

Saumya Goel 208 Nishant mandwawala212 Nikhil nair 366 Ronak vora374

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 like 1. Increased manufacturer and retailer inventories. 2. Consumer demand variation 3. Higher manufacturing costs

PROCESS REDESIGN

PRICING POLICY CHANGES

INDUSTRY WIDE EFFICIENCY IMPROVEMENTS

LEADERSHIP ROLE IN WORKING WITH GROCERY STORE

PROBLEMS AND THE SOLUTION

LOW PROFIT MARGINS FOR RETAILERS

VARIABILITY

HIGH MANUFACTURING COSTS

ISSUES

INEFICCIENCY IN SUPPLY CHAIN

UNCERTAINTY IN DEMAND

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

THREATS
Seeks manual intervention Huge errors without human buffer Increased cost

Error free transfer

EDI

ORDERING, SHIPPING AND BILLING SYSTEM

Supported pricing, ordering, credit policy

Rewrote the entire system

Integrated many systems

Eliminate manual steps

Shared database for product pricing and specifications

Batch production system upgraded

ORDERING, SHIPPING AND BILLING SYSTEM

BENEFITS

Standardization of the process Automation Reduction of complexity Reduction in error Reduction in the cost of the processes

THREATS

Resistance to change Time and cost of implementation

LEADING THE GROCERY CHANNEL TRANSFORMATION.

Implementations of ECR. Efficient Consumer Response (ECR).

ECR

EFFICIENT STORE ASSORTMENTS EFFICIENT REPLENISHMENT EFFICIENT PROMOTIONS EFFICIENT PRODUCT INTRODUCTIONS

Optimize productivity of retail space and inventory

Optimize time and cost in the ordering process

Maximize total system efficiency of promotions

Maximize effectiveness of new product development

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&Gs cost of operation Increased the base for P&Gs 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

 improve pricing policies & practices. A common database was developed

Redesigning the complete Ordering Process

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.