1. Supply Chain Management Submitted by Savio Cerejo 2010C25 AyushBhagat 2010C29 Krishna Bajaj 2010C37 Sohan Tulpule 2010C39 KritikaPriyadarshini 2010C40 Kunal Singh 2010C412. About P&GIndustry Consumer goodsFounded 1837Revenue $78.9billionOperating income $16.13 billionNet income $12.74 billionEmployees127,0003. Supply chain initiatives of P& Control Tower Program Consumer DrivenSupply Network (CDSN)Other Initiatives Collaborative PlanningForecasting and Replenishment (CPFR) GMajor InitiativesThe concept emerged when the logistics executives at Procter 4. CPFRPre scenario - Bullwhip Effect & Gamble (P&G) examined the orderpatterns for one of their best-selling products Pampers. Its sales at retailstores were fluctuating, but the variability was certainly not excessive.However, as they examined the distributors orders, the executives weresurprised by the degree of variability. When they looked at P& At firstglance, the variability did not make sense. While the consumers, in thiscase, the babies, consumed diapers at a steady rate, the demand ordervariability in the supply chain were amplified as they moved up the supplychain. P Gs orders of materials to their suppliers, such as 3M, theydiscovered that the swings were even greater.&G called this phenomenonthe "bullwhip" effect.Rationing and shortage gaming. Players in supply chain after receivingorder accumulates demands (Order Batching) before issuing an order.Price fluctuations manufacturers and distributors periodically have specialpromotions like price discounts, quantity discounts, coupons, rebates, andso on. Separate demand forecast done by players in supply chain. 5.CPFR pre scenario - Bullwhip Effect- CausesProcter 6. CPFR - Overview & P Gamble’s CPFR focus is to build on thecurrent success of the Continuous Replenishment Program (CRP). CRPhas delivered greater than 99% service levels, and has reduced customer
distribution center inventories by as much as 50% in customersrepresenting over 40% of our U.S. and European businesses.&G hasdeployed CPFR to enable creation and integration of consumer demanddata. This will trigger product flow from our manufacturing plants to ourcustomers’ DCs, from the customers’ DCs to their retail store shelves, andultimately from the store shelves into consumer homes.Generating orders Resolving / collaborating on exception itemsIdentifying exceptions for order forecast Creating order forecastResolving collaborating on exception items Identifying exceptions forsales forecast Creating sales forecast Creating joint business planDeveloping collaboration agreement 7. CPFR - ModelCPFR is a nine-stepprocess model consisting of8. CPFR - ModelSupply Chain Management Processes Replenishment ProcessesIntegrated Planning and Forecasting Processes CollaborativeProcesses 9. CPFR - InitiativeCPFR Processes AddressedCPFR recognizes that the main causes of these two issues are identical:1. Ineffective trust-based collaboration. 2. Ineffective planning usingvisibility of POS consumer demand. 3. Ineffective forecasting. 4. Ineffectiveproduct replenishment in response to demand fluctuations. PrimarilyCPFR output concentrates on improving inventory and reducing out-of-stocks. Since both the objectives are inversely proportional; trade-offs mustbe made. 10. CPFR - InitiativeSelection of CPFR Partners P 11. Challenges in Implementing CPFR&Trust Based Relationship CPFR involves sharing sensitive information.Totake full advantage of the benefits of CPFR, P G and Wal-Mart assess thepotential relationship according to anticipated, realistic benefits, pertinent tocommon business goals, organizational and cultural issues.&G andWalmart created a relationship founded on trust. Sharing sensitive dataand close collaboration demands reliability.
Senior Management buy in Senior management of P Detailed Definitionof Systems’ Capabilities For the success of CPFR it is key to collaborate atthe same data level. In particular, best practice would be to collaborate atthe lowest data level; sharing promotional plans, forecasts andreplenishment orders per trading unit and per point of sales. 12.Challenges in Implementing CPFR&G made sure that the necessaryresources (Human Resources, Technical Infrastructure, Time and ProjectBudget) are prioritized and dedicated to the project.Improved responsiveness to consumer demand The reduction of out-of-stocks and shorter cycle times leads to a more responsive and reliablesupply chain for P 13. CPFR - Benefits&G, thereby improving on-shelfavailability and increasing consumer satisfaction. Through CPFR P&Greater forecast accuracy with single shared forecast Sharing a singleforecast along the supply chain enables P G reduced replenishment timeby 20%.&G to benefit from potential synergies and brings together tradingpartners’ efforts. Depending on their position in the supply chain andsupply chain activities, trading partners may have different views of themarket and information. Combining this knowledge is the foundation forgreater forecast accuracy. Through CPFR forecast accuracy improved by20%.Increase in sales Collaboration on planning and forecasting potentiallyreduces out-of-stocks, lost sales and increases on-shelf availability whichleads to increase in sale of P 14. CPFR - Benefits& Cost reduction P G.&Improved relationship between the trading partners The relationshipbetween P G has aligned the production schedule with the agreedforecast, so costs has been reduced by decreasing set-up times, effortduplications and variations.&G, wall mart has improved when collaborationtakes place. Trading partners will gain a better understanding of theirrespective businesses by regularly exchanging information andestablishing direct communication channels.
Inventory reduction Increased forecast accuracy facilitates a decrease inthe safety stock, reducing inventory levels and increasing on-shelfavailability. Thus the inventory cost for P 15. CPFR - Benefits&G hasreduced.P 16. CDSN – Pre Scenario& P In order to handle the first moment oftruth, it is important to have stocks available on shelf. G believes in 2moments of truth. ◦ First, when customer buys the product from shelf. ◦Second, when they actually use it and like it.&G realized that 48% of t Theywere losing a large quantum of sales and hence needed to take correctiveaction. imes their products were unavailable on the shelf when thecustomers wanted it.P 17. CDSN - Initiative& P G redefined its supply chain strategy underthe leadership of Keith Harrison – Head of Global Product SupplyDivision.&G decided to have a connection between actual sales and thesupply chain process. Paradigm shift in viewing supply chain managementfrom forecast driven to actual demand driven. Supply Network instead of asupply chain because of information flow in all directions.P 18. CDSN - Initiative& CDSN required P This operating strategy wascalled Consumer Driven Supply Network. G started its supply chain fromstore shelves and moved back to its suppliers.& Harrison was quotedsaying:“ We need to work off of real demand, so that we produce what isactually selling, not what is forecast to sell.” G to create a responsivesupply chain that would produce and supply products as per demand at thecustomer level.19. How did P& P G implement CDSN& This enabled retailers to connectto P Implemented an online system-”Web Order Management”. Gcollaborated with its partners across the supply network to win consumersat the point of purchase.& Various other initiatives like using multifunctionalresources, joint scorecards and sophisticated technology were undertaken
in collaboration with retailers. G and access its scheduling, inventory andreplenishment levels.IDF is a software used by P IDF is one of the most important componentof CDSN. 20. CDSN – Intelligent DailyForecasting (IDF)& •Output: ◦ Dailyestimates for next 42 days ◦ Refreshed Daily Input: ◦ Daily OrderInformation ◦ Daily Shipment Information ◦ Weekly shipment forecast G toforecast the demand based on actual sales. Following are the Inputs andoutputs that this software provides.IDF tracks daily demand across different stores, and that itself becomesthe replenishment plan of P 21. CDSN – Intelligent DailyForecasting(IDF)& As a result of implementing IDF, P Actual demand is picked upfrom the scanner data at the point of sale and it is made available at theplant where it becomes part of the daily production schedule. G for thosestores.&G is running few plant at 6-8 hours response time.Creating consumer value and meeting rising supplier costs. Thechallenge was to reach the global large-scale retailers as well as the smalland local street shops. Meeting the diverse challenges of developed anddeveloping markets as such markets like India depended on unorganizedretail. Reaching out to millions of customers across the globe was a majorchallenge. The $83 billion company had a total of 90000 suppliers with150 manufacturing plants globally. 22. CDSN - Challenges23. Impact of CDSN - Results1. Forecasting Accuracy: Improved forecastaccuracy by 30%.2. Shelf-Level Out of Stocks: The percentage of productsthat are out of stock on retailers shelves at any given time. P&G has cutthis to 5%, from 10% within 8 months of implementation.3. Total SupplyChain Response Time: The time from when a cash register records thesale of a product to the purchase of raw materials to produce itsreplacement. From six months, it came down to two months.24. Impact of CDSN - Results4. Total Supply Chain Inventory: The hardcount of all products flowing through the supply chain at any given
moment, whether on store shelves, in back of the store, at warehouses, intrucks or wherever. P&G got a daily count, rather than weekly or monthlyand hence reduced safety inventory by 10%.5. Pricing-Design From theShelf Back: CDSN helped in determining an acceptable price point for anitem and then working it back through manufacturing and distribution to seeif that product can be delivered at a price acceptable to consumers and aprofit acceptable to P&G.6. Topline and bottomline: Increased overall salesby 15% in one year. Net profits witnessed a 19% gain from $4.35 billion to$5.19 billion.Financial Times once wrote,“An effective supply chain helpsmanufacturers by reducing a retailers “out-of-stocks”, which in turnprevents lost sales. Those sales also benefit the retailer, while efficientdelivery of products to meet demand can also reduce the costs of holdinginventory to the retailer.” Jake Barr - In Charge Supply Chain Innovationwas quoted saying“Twelve months into the new pull system, the companyis close to its original goal of cutting out-of-stock conditions in half. Now93% of outlets working under the new system are experiencing no morethan 5% out- of-stock rates.That represents a yearly savings of $50 millionto $100 million.”Source: www.baseline.org – 01-07-2004CDSN helpedcreate a balance between excess inventory and stock- outs 25. Impact ofCDSN - ResultsThe lead logistics provider centrally controls and optimizes the productflows, delivering maximum truck fill for every kilometre travelled in thefastest possible time, in an ecologically friendly manner. Helped ineliminating inefficiencies such as loading and unloading delays, rushtransport up-charges, dead legs (empty trucks) and production line stops.Logistics optimized by making changes to the rate, route, mode andmethod of transportation. 26. Control Tower Program27. P& 67,000 metric tons reduction in CO2 emissions. 68% improvementin our finished product inbound operation in Turkey. 58% reliabilityimprovement on inbound operations in Egypt. Amount of empty truck
journeys reduced by over 15% to date. Turkey and Egypt were the firstcountries in CEEMEA region to adopt the Control Tower logisticsoptimization effort.Results Kicked off in 2010 in Central and EasternEurope, Middle East and Africa (CEEMEA). G Control Tower Program