P&G case: Improving Customer Value through Process Redesign

Procter and Gamb Gamble le Improving Improving Customer Value Value Through Through Process Redesign Redesign Group 5 – 5 – PGP  PGP 2012

Customer Relationship Management

Dheeraj Kumar (1211180) Gautam Punj 1211186) Parambrahma Panda (1211282) (1211282) Vishrut Shukla (1211314) (1211314) Ravi Purohit (1211049) (1211049)

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Question 1: What were the key decisions

taken by P&G in relation to distribution channel? Could a mid-sized manufacturer have used this approach?

Key Decisions CRP Implementatio n

• Transmit data daily from retailer to P&G on warehouse product s hipments to each store with the help of  EDI (Electronic data exchange) • Quantity shipped based on shipment information rather than retailer orders • Quantities were computed with the objective to provide sufficient safety stock, minimize total logistic cost & eliminating excess inventory at retailers. • JIT basis shipment of products on the basis of retailer’s actual sales data .

• Improve consistency and overall service levels by integrating many separate

OSB Changes

Pricing Restructure

systems that did not work well together across functions and product sectors. • Automated existing processes & provide flexibility to meet needs of different sectors & functions • Common database for product pricing and product specifications with the vision of “Simplify, Standardize , then Mechanize” • Change from high-low pricing to Value Pricing. • Encouraging CRP adoption by providing benefits to retailers. • Reduced the number of pricing changes at P&G from 55 per day to 1 per day in

around 2 years of time • Timely, accurate , paperless information flow between Supplier, Distributor,

ECR System

retailer and consumer • Change from brand to category management helped in standardizing product lines.

The Case of Mid-Sized Companies • Comparison between P&G v/s a Mid sized Company Parameters Bargaining Power over customers Economies of scale Financial Strength

P&G High (Strong customer pull due to big brand

Mid Size Companies Medium

name, sales through multiple channels) High (Presence in multiple product segments ,

Medium

volume is high ) High (Fund for Technology investment is easily

Medium

available, $30 billion sales in 1993)

Capability to drive Industry

High (Sale of CRP system to IBM for increasing

Risk taking capabilities

High ($459 in 1987 and $1746 in 1993 spent for

Low-Medium

attractiveness of CRP for Industry) Low

cost of restructuring)

Conclusion: The capabilities of mid- sized companies as compares to P&G don’t

seem adequate to implement this approach.

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Question 2: How important are the new IT technologies in P&G’s efforts?

Importance of New IT for P&G • CRP and EDI Systems of P&G Areas of Improvement

Increased retail sales through CRP retailers : Due to increased availability of P&G products.

KPI

4%

Expansion of product line (exp Diapers), efficient management of increased number of SKUs. Problems with order quality: Due to removal of human buffer, data entry errors were not caught at early stages leading to collection issues. Cost reduction : Due to elimination of excess capacity because of better control on demand variations Areas of Improvement

10% KPI

Reduction in time delays and paperwork Reduction in transaction costs. Channel Partners

Inventory reductions and service level improvements, reduction in stock outs.

Areas of Improvement

Increased availability of P&G products due to reduced stock outs. Customers

Reduced fluctuations in prices ; reduced dissonance

KPI

Importance of New IT for P&G (contd.) • Order, Shipping and Billing Systems Areas of Improvement

KPI

Financial Transactions : Improvement in billing accuracy, perfect orders, deductions resolved in favor of P&G

Billing Accuracy: 10% Perfect Orders: 20% Deductions: 50%

Improved on time delivery, reduction in returns and refusals

Perfect orders : 20%

Areas of Improvement

Channel Partners

Improvement in order quality, shipset quality and reduction in order entry errors, reduction in order cycle time

Order Quality: 35%

Reduction in price and promotion changes per day

Change 55 : 1 p.d

Constant procurement costs for retailers, elimination of forward buying by retailers

Areas of Improvement

Customers

KPI

Increase in brand loyalty as promotions reduced, reduced customer dissonance

KPI

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Question 3: To what extent has P&G

changed its strategy to take advantage of ECR?

Changes in P&G’s Strategy  Strategic Area

Channel Relationship

Strategy prior to ECR implementation •

Non harmonious relationship with retailers and

wholesalers • Trade based on negotiations over short t erm initiatives •

Retailer determined order quantities & timing,

Channel Logistics

•

Inefficient operations (LTL shipments, stock outs) Forward buying behaviour by retailers (buying for profit) led to artificial demand creation

Pricing Strategy

• •

Multitude of promotional programs by P&G Large variable promotional discounts & allowances led t o forward buying by retailers

Operations / Manufacturing planning

•

Management / Organisation Structure

•

Change in Strategy for maximizing ECR benefits • •

More collaborative and mutually productive relationships Focus changed from negotiations to collaborative efforts to meet consumer needs

•

P&G determined order quantities and timing based on

warehouse shipment data sent through EDI • Efficient operations through CRP implementation led to accurate demand forecasting -> Lower inventory, fewer stock outs • • •

Value pricing program in lieu of frequent special programs

Excess capacity build up for meeting uncertain demand variations Inefficient use of capacity

• • •

Efficient utilisation of plant capacity

• •

•

Organization structure based on „brand management approach‟ Brand managers had com plete product responsibility

Organization structure shifted to „Category management’ Category manager responsible for overall pricing & product policies

• • •

Focus on individual brands High product variations or large no. of SKUs Conflict between same branded products for resources

•

Decisions based on short term horizon -> Focus on profit making

•

Elimination of geographic pricing differences Focus on brand-loyal consumers rather than price-sensitive consumers

Elimination of entire plants due to productivity gains Reductions in employment levels

Focus shifted to fulfilling consumer needs through category management -> New product innovations • Elimination of weaker brands • Standardisation of product packaging/labelling -> Restructuring of SKUs •

Product Strategy

Industrywide Standardisation

•

Long term strategic focus -> Sale of CRP system to IBM to

increase the adoption of CRP by other companies

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Question 4: What do you think the next steps

are for P&G?

Next Steps for P&G’s CRM Strategy  Area Do more with real-time CRM data Inbound

Actions

Obtaining store-level PoS data from retailers to get real-time data on demand, SKU availability, consumer behavior, consumption patterns  ideas for NPD Continuous plan-make-ship processes; logistics innovation (eg: cross-docking)

Backward integration of CRP with suppliers to automate inbound sourcing Segment customers: Key Account, Strategic Partner for collaborative marketing

Different levels of CRM engagements

SCM  CRM (Key accounts)  E-Business Automation (Strategic) Customer-driven supply network , Vendor Managed Inventory for Key Accounts

Collaborative planning, forecasting and replenishment for strategic partners Replication

Expansion of Value Pricing, CRP and category management to all product lines  Adaptive, dynamic approach of monitoring and evaluating the health of P&G’s supply chain where alerts and actions can be triggered automatically

Enhancing CRM Systems & Processes

Ensuring reliability, uptime, recovery & high-availability of CRM-related data and systems deployed globally to guarantee business continuity at all times Simplified CRM application and data architecture to allow integration of new global operations, customers and network alliances in the future

Metrics

Carefully define & track metrics for value additions through CRM engagements

Thank You. Questions?