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Proctor and Gamble
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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.