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Question 2 : How important are the new information technologies in Procter & Gamble efforts?

The new information technologies brought many benefits to P & G efforts in improving channel efficiency and service. The introduction of electronic data interchange (EDI) and continuous replenishment process (CRP) is likely to improve the supply logistics and reduce channel inventory. EDI is process of using computers to interchange business documentation. Using the EDI it will be less costly compare to when business using handling paper base order. When dealing with computers process the document in EDI, it will reduce the number of human mistake. Other benefits from EDI are helping business have faster transaction process; it will occur when the processing time between the shipment order and shipper sends it off can take only ten days from two weeks. Meantime, EDI also contribute business have better warehouse space and efficient inventory stock out. An important role for EDI in this case, is to provide an efficient platform for CRP operations. EDI enable CRP to have error free interchange of large data automatically between the retailers and P & G.

EDI is a critical part of P & G strategy to increase the efficiency of the business ordering and delivering process. The CRP implementation will get benefits by having more inter connection and greater inter organizational links from the new IT. The ordering and billing system will be updated to better satisfy the customer needs. In addition to that, P & G retailer will get benefits in the form of inventory reduction, service level improvement and labor savings. The retailer will also be able to cut buyer position to optimize the ordering and delivering processes. Meanwhile, the large mass merchandiser will also obtain benefits by reducing retail stockouts, reduce product acquisition cost and optimize total inventories.

Besides, P & G is likely to use the new IT to get data to manipulate warehouse orders. P & G will be allowed to use the daily warehouse shipment data to decide on the warehouse replenishment volume. Both P & G and the retailer will then be able to cut the operating cost and boost the revenue. It is believed that the lower cost can be translated into higher sales, higher product availability and better customer service. From SKUs perspective, P & G may also reap benefits from the new IT through lower prices, reduced stockouts and expanded retail stores. The new IT is likely to be a good catalyst for the SKUs to change their channel ordering and logistics by using a new technique called CRP. It is believed that CRP will be a logistic innovation as they are able to give mutual benefits to retailers and manufacturers.

The new IT such as ordering system billing (OSB) will allow P & G to have improvement in billing accuracy and reduction in invoice deductions. The new IT will also aid the company in redesigning their ordering process by combining the system and business elements in a more tightly integrated environment. The new IT will help P & G customers team to concentrate on providing better service and marketing new products instead of spending time resolving billing problems. Other than that, the new IT will enable P & G to redesign of the ordering process by changes in its structure, policies and systems and get benefit from cost reduction and quality improvement.

The new IT will allow P & G to do radical restructuring of pricing at the same time the company will also be able to have better prototyping of the new net pricing term. This is important when they can eliminate variable discounts and promotions in order to remove incentives for forward buying.

The use of the new IT also allows P & G to have improve access to internal information to sharpen their market focus, beside that IT will help P & G to reduce product development cycle and to increase sales through faster inquiry response. P & G will also get other benefits such as higher productivity, better resource utilization, better content intergration and costs reduction, and better standard for future development application. Further, the use of data in IT also can be information that will help P & G to make decision making such as from low sales on fast moving item, stock out on a SKUs and it will make P & G as a powerful business competitor to others.

Question 3: To what extent has P & G changed its strategy to take advantage of Efficient Consumer Respond (ECR)

CRP was an important element of the efficient consumer response (ECR). ECR is a realization of a simple, fast and consumer driven system which all link work together in order to satisfy consumer need with the lowers possible costs. Given that, P & G has make significant changes in their strategies to fully utilise ECR programme. Firstly, P & G made a substantial change from brand management to category management structure to improve coordination and efficiency. Various brand were intergrated into several type of product categories under supervision of category manager. This approach were give them more flexiblelity in restructuring the product line. In this case, category manager will have geater responsibility in overall product pricing and policies. Through this strategic changes , P & G will be able to standardize operation and product line, they will be able to eliminate uncessary SKUs. This will provide consumer with greater choice that meet their need and expectation.

P & G also meet changes to their manufacturing strategies by shiffting to a more stable environment so that they can negotiate more attractive price with more suppliers. The efficiency gain from this stable environment allows them to have value pricing, rationalized product line and dramatic improvement in process reliability. The strategies changes also allows them to have sufficient access product capacity to eliminate unnecessary product plants.

ECR also have play most important role in the P & G strategies when the retailers shift from buyers to category managers. In this case, P & G will replace their buyers with cagetory managers who can focus more on both profit and meeting consumer need which require new skill and capabilities. This changes represented a new mind set for both individual in the role and overall organization. P & G category managers are better positioned to estimated the true costs and profit generated for each product. P & G customer teams will be able to use solid economic analysis to better satisfy their customers expectation. P & G has made decision to sell of their CRP system to IBMs Intergrated Systems Solutions Corporation (ISSC) subsidiary. In this case, P & G will outsource their support and operations of their CRP system to ISSC. The aggrement with IBM will reduce the P& Gs cost of operating the CRP system since the IBM service contract cost was less than the cost of operating the system using P & Gs internal staff and systems. This strategy will offer benefits for both companies and this will provide the credibility of a third party platform offering and attractive CRP in this industries. This implementation of the CRP and ECR in the strategies will allow P & G and its customers to improve internal processes and reduce costs by providing the best product to the customer at the lowest cost through the channel.

The diagram below shows how is ECR strategies are translated to their respective operational objective.

ECR STRATEGIES
Efficient Store Assortments Efficient Replenishment Efficient Promotions

ECR OBJECTIVES Optimize productivity of retail space and inventory Optimize time and cost in the ordering process

Maximize total system efficiency of promotions


Efficient Product Introductions

Maximize effectiveness of new product development

Figure 1 : The ECR vision A continuous channel process

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