Submitted by
Savio Cerejo 2010C25
Ayush Bhagat 2010C29
Krishna Bajaj 2010C37
Sohan Tulpule 2010C39
Kritika Priyadarshini 2010C40
Kunal Singh 2010C41
About P&G
Industry Consumer goods
Founded 1837
Employees 127,000
Supply chain initiatives of P&G
Major Initiatives
Collaborative Planning Forecasting and Replenishment
(CPFR)
Consumer Driven Supply Network (CDSN)
Other Initiatives
Control Tower Program
CPFR Pre scenario - Bullwhip Effect
The concept emerged when the logistics executives at
Procter & Gamble (P&G) examined the order patterns for
one of their best-selling products Pampers. Its sales at retail
stores were fluctuating, but the variability was certainly not
excessive. However, as they examined the distributors'
orders, the executives were surprised by the degree of
variability. When they looked at P&G's orders of materials to
their suppliers, such as 3M, they discovered that the swings
were even greater.
At first glance, the variability did not make sense. While the
consumers, in this case, the babies, consumed diapers at a
steady rate, the demand order variability in the supply chain
were amplified as they moved up the supply chain. P&G
called this phenomenon the "bullwhip" effect.
CPFR pre scenario - Bullwhip Effect
- Causes
Separate demand forecast done by players in supply
chain.
Price fluctuations manufacturers and distributors
periodically have special promotions like price discounts,
quantity discounts, coupons, rebates, and so on.
Players in supply chain after receiving order accumulates
demands (Order Batching) before issuing an order.
Rationing and shortage gaming.
CPFR - Overview
Procter & Gamble’s CPFR focus is to build on the
current success of the Continuous Replenishment
Program (CRP). CRP has delivered greater than 99%
service levels, and has reduced customer distribution
center inventories by as much as 50% in customers
representing over 40% of our U.S. and European
businesses.
P&G has deployed CPFR to enable creation and
integration of consumer demand data. This will trigger
product flow from our manufacturing plants to our
customers’ DCs, from the customers’ DCs to their
retail store shelves, and ultimately from the store
shelves into consumer homes.
CPFR - Model
CPFR is a nine-step process model consisting of
Collaborative Processes
Integrated Planning and Forecasting Processes
Replenishment Processes
Supply Chain Management Processes
CPFR - Initiative
Primarily CPFR output concentrates on improving
inventory and reducing out-of-stocks. Since both the
objectives are inversely proportional; trade-offs must be
made.
CPFR recognizes that the main causes of these
two issues are identical:
1. Ineffective trust-based collaboration.
2. Ineffective planning using visibility of POS consumer demand.
3. Ineffective forecasting.
4. Ineffective product replenishment in response to demand
fluctuations.
Challenges in Implementing CPFR
Selection of CPFR Partners
P&G and Wal-Mart assess the potential relationship according
to anticipated, realistic benefits, pertinent to common business
goals, organizational and cultural issues.
Trust Based Relationship
CPFR involves sharing sensitive information.To take full
advantage of the benefits of CPFR, P&G and Walmart created a
relationship founded on trust. Sharing sensitive data and close
collaboration demands reliability.
Challenges in Implementing CPFR
Detailed Definition of Systems’ Capabilities
For the success of CPFR it is key to collaborate at the same
data level. In particular, best practice would be to collaborate at the
lowest data level; sharing promotional plans, forecasts and
replenishment orders per trading unit and per point of sales.
Input:
◦ Daily Order Information
◦ Daily Shipment Information
◦ Weekly shipment forecast
•Output:
◦ Daily estimates for next 42 days
◦ Refreshed Daily
CDSN – Intelligent Daily
Forecasting (IDF)
IDF tracks daily demand across different stores, and that
itself becomes the replenishment plan of P&G for those
stores.
Actual demand is picked up from the scanner data at the
point of sale and it is made available at the plant where
it becomes part of the daily production schedule.
As a result of implementing IDF, P&G is running few
plant at 6-8 hours response time.
CDSN - Challenges
The $83 billion company had a total of 90000
suppliers with 150 manufacturing plants
globally.
Reaching out to millions of customers across the
globe was a major challenge.
Meeting the diverse challenges of developed and
developing markets as such markets like India
depended on unorganized retail.
The challenge was to reach the global large-scale
retailers as well as the small and local street
shops.
Creating consumer value and meeting rising
supplier costs.
Impact of CDSN - Results
1. Forecasting Accuracy: Improved forecast accuracy by
30%.
2. Shelf-Level Out of Stocks: The percentage of
products that are out of stock on retailers' shelves at
any given time. P&G has cut this to 5%, from 10% within
8 months of implementation.
3. Total Supply Chain Response Time: The time
from when a cash register records the sale of a
product to the purchase of raw materials to produce
its replacement. From six months, it came down to two
months.
Impact of CDSN - Results
4. Total Supply Chain Inventory: The hard count of all
products flowing through the supply chain at any given
moment, whether on store shelves, in back of the store, at
warehouses, in trucks or wherever. P&G got a daily count,
rather than weekly or monthly and hence reduced safety
inventory by 10%.
5. Pricing-Design From the Shelf Back: CDSN helped in
determining an acceptable price point for an item and then
working it back through manufacturing and distribution to
see if that product can be delivered at a price acceptable
to consumers and a profit acceptable to P&G.
6. Topline and bottomline: Increased overall sales by 15%
in one year. Net profits witnessed a 19% gain from $4.35
billion to $5.19 billion.
Impact of CDSN - Results
Jake Barr - In Charge Supply Chain Innovation was quoted
saying
“Twelve months into the new pull system, the company is close to its
original goal of cutting out-of-stock conditions in half. Now 93% of outlets
working under the new system are experiencing no more than 5% out-
of-stock rates.That represents a yearly savings of $50 million to $100
million.”
Source: www.baseline.org – 01-07-2004
CDSN helped create a balance between excess inventory and stock-
outs