Operations

Supply chain model analyzed: Procter & Gamble

Procter & Gamble previously used Supply Chain mastery to pare out strong, long-term
Competitive Advantage. The Company's strategic focus toward Supply Chain-based service
modernization transformed both the consumer products and retail industries. The method
required direct distribution to major accounts. This channel arrangement enabled Procter and
Gamble to develop an exceptionally high degree of customer confidence and on-going rounds
of Supply Chain modernization in these accounts. At the same time, Procter and Gamble quietly
moved to end its direct relationships with numerous smaller accounts, setting up a set of master
distributors to service them. In turn, the main distributors had grown enough volume to sustain
direct value-added relationships with Procter & Gamble.
For its part, Procter and Gamble developed operations capabilities in two key areas: First, it
created a sweeping new set of industry change programs, e.g., Efficient Consumer Response
(ECR), Customer Requirements Planning (CRP), and streamlined logistics. The programs
required a solid new understanding of network economies and the impact of Supply Chain
innovation. Second, to enable to raise service levels to meet the needs of the new system, the
Company established sophisticated Information Technology (IT) bonds to coordinate its product
flow. These going on changes remained organizational resistance, from marketing managers
especially who were concerned about the other distributed vendors' products by the new
business. Concern also expressed over what would done with the major accounts that did not
"fit" the business model.
There was a major need for creative and advanced solutions to overcome these issues and
reach the customer without any delay and loss of market share. Therefore, they decided to use
agent-based modelling complex, adaptive systems after doing a lot of research.
Procter & Gamble's Key task for Supply Chain Management involve:
1. Creation of processes that support the flow of raw materials and finished goods to and from
Procter & gamble facilities;
2. Facilitation of the transportation of raw materials to its manufacturing locations;

3. Development of strategies that will keep Procter & gamble leading the marketplace in
logistics services;
4. Management of logistics information; customer orders and the prompt delivery of finished
product to the trade customers.
Procter & Gamble transform its Supply Chain system with the used of an agent-based modelling
in which its fundamentals helped the company until they no longer even calls it a Supply Chain.
"The Cincinnati-based maker of Tide, Crest, Pringles, Pampers, Clairol and 300 other products
now call its connections to 5 billion consumers in 140 countries a "Supply Network".

Key elements identified are as follows:

Segment customers based on service needs: Companies traditionally have grouped
customers by industry, product, or trade channel and then provided the same level of service to
everyone within a segment. Effective supply-chain management, by contrast, groups customers
by distinct service needs--regardless of industry--and then tailors services to those particular
segments.
Customise the Supply Chain Management network: In designing Supply Chain
Management network, companies need to focus intensely on the service requirements and
profitability of the customer segments identified. The conventional approach of creating a
"monolithic" Supply Chain Management network runs counter to successful supply-chain
management.
Listen to signals of market demand and plan accordingly. Sales and operations planning
must span the entire chain to detect early warning signals of changing demand in ordering
patterns, customer promotions, and so forth. This demand-intensive approach leads to more
consistent forecasts and optimal resource allocation.
. Differentiate product closer to the customer. Companies today no longer can afford to
stockpile inventory to compensate for possible forecasting errors. Instead, they need to
postpone product differentiation in the manufacturing process closer to actual consumer
demand.

Strategically manage the sources of supply. By working closely with their key suppliers to
reduce the overall costs of owning materials and services, supply-chain management leaders
enhance margins both for themselves and their suppliers. Beating multiple suppliers over the
head for the lowest price is out, Andersen advises. "Gain sharing" is in.
Develop a supply-chain-wide technology strategy. As one of the cornerstones of successful
supply-chain management, information technology must support multiple levels of decision
making. It also should afford a clear view of the flow of products, services, and information.
Adopt channel-spanning performance measures. Excellent supply-chain measurement
systems do more than just monitor internal functions. They adopt measures that apply to every
link in the supply chain. Importantly, these measurement systems embrace both service and
financial metrics, such as each account's true profitability.