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Case Title:

P&G’s Logistics Revolution: Co-creating Value

Publication Month and Year :  July 2009

Authors: Sai Prasanna, R. Muthu Kumar

Industry: FMCG

Region:Global

Case Code: MM0030

Teaching Note: Available

Structured Assignment: Available


OR





Abstract:
Proliferation of products, brands, companies and even distribution channels and media, have necessitated consumer goods industry giants to shift their attention from brand marketing and positioning towards a cross-functional focus. While manufacturers vied for significant shelf space, retailers competed for winning customer attention and loyalty. However, their inability in rightly assessing consumer demand created market imbalance in the form of either excessive stocks or stock outs. The need to produce and deliver goods based on real demand made both manufacturers and retailers rethink/review their business relationships and co-create value for each other. This involved integration of their operations across the supply chain and delivery of the right goods to the right place at the right time with the right operational costs.

P&G was one among the first consumer goods companies that realised the significance of shelf space and the need to lure customers at the point of sale. It initiated customer-driven supply chain management, wherein starting from customer decision at the store shelf, it worked backwards to production. This required P&G to assess product demand based on customers’ purchase decisions and buying behaviour and this in turn necessitated collaboration with retailers. In this context, P&G’s tie-up with Wal-Mart exemplified the success of manufacturer-retailer relationships. They collaborated with each other to track customer buying behaviour with the help of a sophisticated technology and accordingly assess the demand for their products.

The case study highlights various aspects like the need for conducive manufacturer-retailer relationships in co-creating value, viewing supply chain as a profit centre rather than as a cost centre, supply chain as a source of competitive advantage in ensuring top-line growth as well as bottom-line performance, customer-driven supply chain - shift from forecast-based to demand-based and better inventory management by attaining balance between stock-outs and excess inventory.

However, sustainability and extendibility of P&G’s collaboration across Wal-Mart's other stores as well as other retailers - in both developed and developing countries - remains to be answered.

Pedagogical Objective:

  • To discuss the trends and changing competitive dynamics of the global consumer packaged goods industry – developed vs developing markets
  • To understand the role and importance of supply chain management in a consumer packaged goods company like P&G
  • To debate on the possibilities of supply chain management becoming a competitive advantage and contributing to top-line growth as well as bottom-line performance
  • To debate on the sustainability and extendibility of ‘P&G-Wal-Mart’ experiment.

Keywords : Supply chain; Logistics; Supply chain management; Supply chain integration; Manufacturer-retailer Collaboration; Consumer Packaged Goods; Balancing stock-outs and excess stocks; Category management, Marketing Management; Marketing Mix; Market Segmentation; Product Life Cycle; New Product Development; Consumer Behavior; Marketing Case Studies; MBA; Marketing Course for MBA Marketing Course Case Map; Course Case Map; Case Map

Contents:

  • Consumer Packaged Goods Industry – The Changing Dynamics
  • P&G's Supply Chain Management
  • P&G's Logistics Revolution

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