Strategy of Procter and Gambler's Business Unit
P&G measure their customer satisfaction based on two critical ‘moment of truth’;
The first moment of truth is when the consumer stands at the store shelf and makes the purchase decision on a particular brand. This became the centre for P&G ' which works back through the supply network starting from the store shelf. The second moment of truth was when the consumers use the product and decide whether it was satisfactory or not. Therefore, the complex consumer goods supply chain system of P&G, linked by sophisticated technologies and logistics systems, was centred round the consumer.
P&G top manager realize that the company’s supply network needed to be re-engineered so that it could be more responsive to consumer demand. This was especially important for promotional items, because of the cost of merchandising and promotional activities, and the long-term negative impact of stock-outs on consumers. After customers have been unable to buy the desired product and have switched to alternatives, it becomes hard to persuade them to return to buying the initial product when they go shopping again. P&G decided that sophisticated demand chain management, establishing direct connections between sales and supply chain business processes, could be the key to maintaining its leading position in the consumer packaged goods industry. Thus, P&G has implemented “consumer-driven supply network” (CDSN) program into their company where consumer is the boss.
P&G’s aim to create adaptive, responsive supply networks that will link together sales and supply processes, inside and outside the organization, to improve product availability. Through CDSN, P&G starts its supply chain from store shelves and moves back to its suppliers.
P&G’s vision of a consumer-driven supply network has two essential elements.
• Building collaborative supply chains at several levels (local market and global markets)
• Ensuring that manufacturing sites serving both local and global supply networks are
The first moment of truth is when the consumer stands at the store shelf and makes the purchase decision on a particular brand. This became the centre for P&G ' which works back through the supply network starting from the store shelf. The second moment of truth was when the consumers use the product and decide whether it was satisfactory or not. Therefore, the complex consumer goods supply chain system of P&G, linked by sophisticated technologies and logistics systems, was centred round the consumer.
P&G top manager realize that the company’s supply network needed to be re-engineered so that it could be more responsive to consumer demand. This was especially important for promotional items, because of the cost of merchandising and promotional activities, and the long-term negative impact of stock-outs on consumers. After customers have been unable to buy the desired product and have switched to alternatives, it becomes hard to persuade them to return to buying the initial product when they go shopping again. P&G decided that sophisticated demand chain management, establishing direct connections between sales and supply chain business processes, could be the key to maintaining its leading position in the consumer packaged goods industry. Thus, P&G has implemented “consumer-driven supply network” (CDSN) program into their company where consumer is the boss.
P&G’s aim to create adaptive, responsive supply networks that will link together sales and supply processes, inside and outside the organization, to improve product availability. Through CDSN, P&G starts its supply chain from store shelves and moves back to its suppliers.
P&G’s vision of a consumer-driven supply network has two essential elements.
• Building collaborative supply chains at several levels (local market and global markets)
• Ensuring that manufacturing sites serving both local and global supply networks are
Links: between supply chain planning and supply chain execution processes are critical. In the transportation area, P&G expects a lot of change, including improved collaboration with logistics outsourcers and more use of techniques such as cross-docking. This system, under which inbound trucks are unloaded and the goods are sorted and loaded straight onto outbound vehicles, without ever being put into store, can be used to cut inventory and handling costs, as well as delivery times. Daily planning will give way to continuous plan make- ship processes, which will demand improved loading techniques to make efficient use of vehicles as lot sizes become smaller. In the short term, P&G expects to see supply networks based on relationships, rather than entirely owned by manufacturers. This kind of collaborative organization offers the flexibility to vary capacity according to short-term or last-minute needs. End-to-end optimization is essential, as there is no point in optimizing one component (e.g. production responsiveness) at the expense of another (e.g. delivery and transport costs). In P&G’s vision of the consumer-driven supply network, daily demand updates provide timely warning of changes in product consumption. To make the CDSN work, this information must then be rapidly integrated into replenishment plans, internally and for partners and suppliers. P&G is also piloting new distribution requirement planning techniques that will make it easier to understand product requirement implications across the distribution network. With the implementation of the systems which is based on real-time data ,it allows P&G to deliver a much better result, meaning fewer out of stocks, on time delivery, more desirable products, and a very satisfied consumer. For P&G products, the average level of out-of stocks is between 10%–15%range.