Basically, supply chain management (SCM) incorporates a meshwork of suppliers, manufacturers, assembly plants, and distribution channels. The chain also involves logistical infrastructure that conducts the procurement of materials and conversion of such materials into transitional and finished products (Bozarth & Handfield, 2005).
This report analyzes supply chain strategy used by the Procter & Gamble Company (P&G) against a comprehensive literature review of best practices recommended in the supply chain contexts. P&G is an American company (headquartered in Cincinnati, Ohio) and sells its products globally through a credible, reliable, and well-orchestrated supply chain mechanism.
The fundamental role of P&G’s supply chain entails the distribution of these materials to the respective customers. In the manufacturing considerations, there are major decisions for choosing the plant situation area, product line choice, as well as capacity planning and production arrangement.
The distribution considerations involve decisions about warehouse setting, client allocation, demand speculation, and inventory management (Radhakrishnan, 2001). The logistics are also important considerations within the SCM processes.
From the P&G’s context, viable SCM emphasizes on quality products, distribution processes, planning for uncertainties, and real-time monitoring and management of customers’ demands (Mahapatra, 2010). It is vital to note the various models or theoretical concepts that offer the basis for these outlined considerations in the SCM decision processes in regard to P&G.
Evolution of Supply Chain Management and P&G story
Businesses have a commitment to improve processes for a better market performance. One of the key areas of business competence deals with the realization of quick and reliable supply of goods and services to the customers. Supply chain management is one of the business processes utilized by many companies around the world who aim to create better flow of their goods and services to the consumer.
Supply chain management has received much attention with the advent of e-commerce. However, supply chain management is not a new idea at all. A brief look into history suggests that supply chain management system was at work as early as 401 BC and was employed by Clercus Sparta (Pedrosa, Näslund, & Jasmand, 2012). Evidence also points to the use of the system in the Second World War between Germany and Russia.
The military still has several good examples of the application of supply chain management. For example, the supply of constant inventory and soldiers in the Gulf war, was a practice of this system. More so, the concept of the ‘Air Bridge’, where planes get supplies from localized stations equally utilizes the concept of supply chain management (Tae, Young & Rajath, 2012).
The supply chain consists of the flow of materials and information from the suppliers all the way to the final consumers. On the other hand, the supply chain management is sum of the plans involved in ensuring the accomplishment of activities within a supply chain. It is a systems approach to the management of all processes involved in movement of goods and services from raw material suppliers to the final customers.
The related aspect of business is the demand chain management which focuses more on the best ways to serve the consumers. However, it has become a common practice to integrate the two concepts for better efficiency (Bass, 2012; Ellinger, & Chapman, 2011).
A supply chain management has two main parts: the upstream aspect and the downstream component. The other aspect refers to the internal supply chain which is geared toward the core business of provision of goods and services. This aspect is at times forgotten but it is the most critical in ensuring a smooth transition between the downstream and upstream components of the supply chain.
The initial application of supply chain was driven by a push factor. For many companies including P&G, their aim was to push as much product to their consumers as possible through the retailers and the distributors. There was very minimal consideration of whether the customer really needed the dispatched items.
The assumption was that as long as a company continued production, there production cost was lowered. This however has been proven a fallacy because if a company produces goods which customers do not need, then the company is in essence increasing her production cost (Frazelle, 2001).
The application of supply chain management with the greatest value has been demonstrated to rely on the ‘pull’ factors. “This is the situation where, the customers’ demand determines the quantity and quality of goods that manufactures push to the consumers through their distribution channels” (Frazelle, 2001, p.31).
The customer’s purchases and merchandise become the greatest source information for customizing supply value. This idea is at the center of the supply chain management activities and improvements implemented by P&G. The company already has very positive response from the application, and the improvements they have invested in with regard to SCM (IMTN, 2010).
Main challenges to operationalization of a SCM and P&G’s response
Operationalizing a system wide SCM system is a very tedious undertaking. It requires investment not just in the infrastructure but also in training of all personnel. The case of P&G moving from a cosmos system to upgrade to a SCM system is a very relevant example of the possible challenges that go with operationalizing the SCM system.
Apart from the investment costs, there are more specific challenges to running an effective SCM system. First, the supply chain management system is never implemented in isolation. Several other processes impact on the system. In the case of P&G, the new product development strategies affect the supply chain management and require special consideration.
On the other hand, the company may also be working on other goals such as increasing market share, or improving on the cash at hand. All these are likely to impact on the implementation of the SCM system. To be effective, the company must strategically unify these visions for the realization of maximum value from the SMC system (Li, 2007).
The strength of the P&G’s SCM lies in the fact that the company has aligned her mission and goals to the SMC system. This way, the risks of failure of the system are minimized. The second challenge of a SCM system lies in the difficulty to design and operate a system wide supply chain. Of course, this process is a challenge even to organizations with only a single line.
The common practice shows that the more the systems, the more difficult it is to realize implementation of a SCM system. P&G has done exceedingly well in creating a system wide SMCs. Even after a single year of operations, the company and her customers have reported significant improvement in lead time for goods and services.
Last, there are always risks and uncertainties inherent in a supply chain. Specifically, the customers’ demand may vary due to several reasons. At the same time, the customer specifications in terms of quality and size may change within a very short time. Additionally, the logistics regarding breakdowns or traffic jams may easily jeopardize the operations of a supply chain (Svensson, Tronvoll, & Slåtten, 2008).
The other uncertainty in supply chain management lies in the use of outsourced services and third party suppliers. The parent company may have very minimal control of the operations of their third party partners. However, a look at the operations of P&G shows a synergistic relationship with their third party supplier.
That relationship has made their operations smooth and reliable. P&G has used a channel partnership programme with Wal-Mart who is their main supplier and competitor. In addition, the company has cemented a long time relationship with their haulers that has resulted in a reliable supply to customers within the set time (Slack, Chambers, & Johnston, 2010).
P&G’s supply chain best practice strategy and its meaning Improvements in P&G
The process remains vital to the continuous and successful movement of merchandise in the P&G stores. It synchronizes the issues of identifying the stock, filling the orders, and speedily preparing the orders for transportation to various consumers (Mahapatra, 2010). Therefore, it is critical to note that P&G has been handling SCM requirements effectively. This is not particularly to fit the firm’s departmental requirements, but also to cater for the demands of the general clientele.
There have been critical observations that the process of material handling ensures supply of the right quantity of the appropriate material or good at the right time. Moreover, it ensures that the right quantity of goods is delivered at the needed location (Bozarth & Handfield, 2005). This process also follows the appropriate sequence of, right position, condition, as well as cost. It entails the handling, storage, as well as material control.
In the downstream context, customization is done for customers throughout the world. The customization team combines stocks and then repackages them for convenience. Any customization is expensive, manually involving, and needs more quality control checks. In the manufacturing considerations, there are major decisions for choosing the plant location. In addition, there is need to determine product line choice, capacity planning, and production arrangement.
The distribution considerations involve decisions about warehouse setting, client allocation, demand speculation, and inventory management (Radhakrishnan, 2001). The logistics are also important considerations within the SCM process. There must be choice on the logistics methodology, ports selection, and motor product scheduling.
On the Global Front, important decisions include; product as well as processes options, planning within uncertainties, real-time monitoring, and management (Mahapatra, 2010). Additionally, the integrated scheduling also forms pertinent component of this decision stage. Consequently, there are theoretical frameworks that govern all these areas of important SCM decisions.
Since the process of material handling involves the interaction of man and his machines, the occupational safety and health considerations have become pertinent considerations within the process. Safety measures must be grossly observed during the processes to enhance material as well as human safety (Frazelle, 2001).
This leads to minimizing severe breakages that might arise during work. It also reduces workers’ or handlers’ exposure to occupational health risks. As a result, a lot of health audits are always conducted as part of the material flow process. There are numerous merits of the application of material handling in the distribution and manufacturing processes within organizations.
Foremost, material handling enhances the efficiency. Basically, this occurs through enabling of the logistics to rapidly respond efficiently to consumer needs. Different methods are also considered if there is an improvement that involves upgrades to the P&G’s IT system (Ford, Gadde, Hakansson, & Snehota, 2003).
Improving the functionality of the SCM at P&G
Proctor and Gamble (P&G) has strategically invested in improving the quality of their supply chain management system. They are involved in implementing Collaborative Planning, Forecasting, and Replenishment (CPFR) as well as Consumer Driven Supply Chain Network (CSCN), and the control tower programme. All these processes are aimed at enabling P&G operate a high quality and efficient supply chain.
They also help create an environment where P&G can easily innovate for the good of an efficient supply chain to her customers. P&G has strategically extended their relationship with HP, who has been mandated to help P&G realize the operationalization of the ‘Always On’ model (Sarkis, 2012). This application aims to help P&G realize more meaningful customer service.
It integrates all the P&G’s infrastructure including, SCM, research and development, inventory management, SAP, ERP, and business intelligence. The final platform aims to help P&G achieve higher value and efficiency with all the supply chain players. The system will enable extensive customer, supplier, retailers, and distributors interaction through customer touch ports and portals.
It will mean real time integration of all customer orders, through mobile applications and allow for easier and efficient e-invoicing. On the other and, the integration of the ORTEC system into the SCM has enabled the company compress delivery time to the customers. It has enabled the company achieve a better lorry fill. It has also made it possible to plan so that a single lorry may be able to serve several customers along a given route.
At the same time, the very delivery lorry may carry returns on its way back to the company. This way, the company is helping their hauler’ owners achieve their carbon footprint objectives. More over, the system’s integration has contributed to better reporting structures and enabled ease of modification to the load sent to the customers (Tocquigny & Butcher, 2012).
Whether a situation ever arise where a different size truck is sent and the company cannot meet the desired order
Obviously, P&G faces various challenges and situations that require prompt action. Changed order requirements are handled carefully and the concerned customers are contacted for more time to service them effectively. Evidently, all the trucks that the company uses are standard. The company has been working closely with its haulers for years so its systems are error free.
In order to reach its customers promptly and distribute its products efficiently, the company has considered the use of rail transport to distribute its bulky products efficiently. This is a considerable provision in diverse contexts (Fromm, 2005).
Quality improvement on the P&G’s SCM system
Continuous improvement is a strategy that helps organizations scrutinize their current operations with the aim to making their future processes better. There are several sources of information that may lead to improvement of business processes. To improve however, a business must be aware of their current position and then realize what it intends to achieve.
The company must then strategize how to bridge the gap between their present position and their future aspirations. That is why bench marking is such a crucial process to P&G. The year on year analysis of demand, supply and other important parameters helps the company to establish their current position. In addition, the company may rely on the feedback of the customers, workers, and even suppliers to realize areas that require improvement (Shapiro, 2007).
Any suggestions for improvement must be brought to the multidisciplinary team that then determines the necessary improvement. This is the only way to ensure that the benefit of realizing an improvement in one area does not take from the gains already made by another department (Harrison, & van Hoek, 2011).
Dealing with Seasonality, customer’s demand changes at P&G
In spite of having an integrated system, the P&G still faces the challenges brought about by seasonality in some of the goods and services they produce and supply. Some of the products that experience seasonal fluctuations in demand include: Braun, Duracell, and Pingles. Unlike the past when seasonal variations in demand would throw the company off balance due to lack of anticipation, the current system leverages on the customer information to ensure that the company produces and ships adequate stocks to their distribution centers.
On the other hand, the year on year analysis helps the company anticipate the likely rise in demand and therefore get enough raw material supplies from their suppliers in good time. This means that the company will keep adequate inventory at all times. It can thus minimize on dead stock and the inherent costs of maintaining such a stock. This helps realize an order-supplier integration that benefits from the free, real time information flow from both the customers and suppliers (Tocquigny, & Butcher, 2012).
At times the demand from customers may change but the system enables for quick customer order processing to reduce undue delay to customers. The company can easily determine the best load and lorry fill efficiencies for products delivered to the customers. At the moment, even when customers fill I mixed orders; the team at P&G can easily organize the order in a manner that makes more sense for the customer.
Because of the open communication channels, the little glitches that may occur on the system can be maneuvered by taking orders manually and filling them into the SAP system. Any emergency situations arising can be handled through EAP so that the employees may even be able to work from home (Mahapatra, 2010; Babbar, Prasad, & Tata, 2000).
Manufacturing companies face several challenges of meeting customer demands in short time periods. The nature of the goods and services they offer are very competitive. A customer missing on a product due to an out-of-stock situation will more often than not just pick a competitor’s product. Such losses arising from missing on a sale add up to a lot of money by the end of a trading period.
Most times such a scenario arises from lack of adequate anticipation and speedy response to customers’ demands. It is for this reason that companies have been engaged in implementation of systems that can minimize on such losses while at the same time, reducing the lead time. The application of SCM is a tool for use by companies that seek to leverage on the benefits of having an efficient supply chain (Bozarth, & Handfield, 2005).
Evidently, it can be noted that SCM is eminent within the manufacturing companies including P&G. In the P&G’s context, SCM has generally been eminent for productivity and competitiveness within manufacturing industry. Furthermore, it remains a fundamental application area within the electronic commerce industries.
This dependency of electronic industry has consequently led to an increased attention to material handling and other related processes within such organizations (Li, 2007). There are basically two phases within the SCM. The first may be referred as the back-end. This is composed of the physical structure blocks including the supply amenities, production infrastructure, warehouses, distributors and the retailers. P&G has set a year-long strategy to be the number 1 supplier to all its clients globally (Murray, Beiske & White, 2007).
This has been possible through 100% employee engagement and empowerment. It is vital to note that the major improvements established and enacted by P&G incorporate upgrading of its products and developing new ones to meet the emerging consumer needs.
Generally, it helps in managing information, materials, and distribution trends. Ideally, it is observable that SCM differs considerably from the supply management. While the supply management has a narrow application and is only concerned with suppliers, the SCM approach is holistic (Mahapatra, 2010).
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