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

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

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Even retailers adopted obsolete formats of developed markets in the developing nations and retail formats like shopping malls, hypermarkets and specialty stores quickly sprang up. But despite their growing prowess, traditional retailers likemom-and-pop stores, streetmarkets and small independent supermarkets still held their ground in emerging markets like India and posed a tough competition for the global retailers. Amid such market scenario, companies like P&G strengthened their presence with greater focus on understanding consumers across geographies, building strong brands, and leveraging on scale and scope.However, it faced competitive pressures from local and global rivals as brand management and other marketing tactics were easily imitated. Hence, it sought a sustainable competitive edge in focused approach to consumer needs, their buying behaviour and go-tomarket capabilities. P&G's Supply Chain Management

P&G, with 171-year history, strengthened its global presence to become the world's biggest consumer goods company. It has an extensive brand portfolio in various categories like family and child care, beauty and personal care, health care, fabric and home care, snacks and coffee and pet care. Relentless innovation with end consumer in mind was at the heart of P&G's product development strategy and embraced open innovation through ‘Connect + DevelopSM' approach. It collaborated with scientists, engineers and other experts from whom it invited innovative ideas on every aspect that impacts consumers' lives – from product and packaging to shopping and product usage experience. Even customers took an active part in P&G's innovation process and were involved in every step of a product or idea's initiation to launch.

Operating in more than 80 countries with over 300 brands, P&G tailored its marketing and communications to specific customer segments and used innovative web-based marketing techniques like conducting online consumer research and other concept studies. Such practices significantly reduced the time to collect and analyse consumer opinions and enabled P&G to quickly translate customer needs into products. It employed the services of 15,000 advertising agencies and other marketing-related organisations with an annual expenditure at nearly $8 billion.

As the industry began to shift from plant-based sourcing to global corporate-based sourcing, consumer goods companies, which traditionally leveraged on in-person negotiations with suppliers, found the process slow and nontransparent. Further, P&G's logistics was highly fragmented because procurement decisions for outbound logistics were made in local and regional customer service units spread globally. Inbound logistics(,) on the other hand(,) were managed by its suppliers. Therefore, it had to rethink its operational strategies while sourcing thousands of chemicals, polymers, packaging, etc. for its diverse products.

Thus, P&G's operational overhaul included consolidation of back-office functions like human resources, finance, facilities management and IT into a single unit – Global Business Services (GBS), elimination of non-value added costs by outsourcing non-core operations and processes, setting up of Global Purchases division for sourcing P&G supplies, etc. The purchase division consolidated the sourcing locations at six regional centers – Cincinnati in the US, Geneva in Switzerland, Frankfurt in Germany, Guangzhou in China, Singapore and Caracas in Venezuela.

The purchase division worked in union with GBS and made R&D as the backbone of supply chain management. It bridged the gap between suppliers and R&D team by developing new product formulae and new packaging for the products. P&G's formulation for liquid laundry detergents like Tide, Gain, Cheer, Era and Dreft exemplified the same. These were packed in half the size of the original ones, however, with sufficient detergent to do the same load while saving on fuel consumption, warehouse space, quantity packed and the packaging material. A.G. Lafley, P&G's CEO and chairman, says, “P&G Purchases is much more than a cost-management leader. The organization is a strategic business partner that drives innovation, creates key alliances and enables business agility and financial flexibility.

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