P&G India

P&G is one of the largest and amongst the fastest growing consumer goods companies in India.

P&G is one of the largest and amongst the fastest growing consumer goods companies in India. Established in 1964, P&G India now serves over 650 million consumers across India. Its presence pans across the Beauty & Grooming segment, the Household Care segment as well as the Health & Well Being segment, with trusted brands that are household names across India. These include Vicks, Ariel, Tide, Whisper, Olay, Gillette, Ambipur, Pampers, Pantene, Oral-B, Head & Shoulders, Wella and Duracell. Superior product propositions and technological innovations have enabled P&G to achieve market leadership in a majority of categories it is present in. P&G India is committed to sustainable growth in India, and is currently invested in the country via its five plants and over nine contract manufacturing sites, as well as through the 26,000 jobs it creates directly and indirectly. Our sustainability efforts focus on Environmental Protection as well as Social Responsibility to help develop the communities we operate in.

P&G operates under three entities in India - two listed entities “Procter & Gamble Hygiene and Health Care Limited” and „Gillette India Limited‟, as well as one 100% subsidiary of the parent company in the U.S. called „Procter & Gamble Home Products‟.

Procter & Gamble has streamlined its supply chain to put more of its products on store shelves when customers are ready to buy.
Jake Barr is in charge of "supply chain innovation" at The Procter & Gamble Co. He is supposed to figure out how to get the consumer products giant's detergents, soaps and personal care products into the hands of 5 billion customers in 170 countries more efficiently. This is a $50 billion company that already boasts 13 brands generating more than $1 billion of revenue each year. His goal? To create the equivalent of a 14th billion-dollar brand—by stocking shelves in stores around the globe more accurately by responding better to what people want. And getting 5,000 retailers and 30,000 suppliers to participate in a system that would immediately signal products favored by customers. "If you can't drive sales and deliver product at the point of purchase, you lose," Barr says. In the past decade, P&G 's business has changed radically, even if its systems for timing the delivery of products to stores have not. Just like cars, clothes, music and even prime-time television, the sales of mass-produced products for the home have become hit-driven. Or, better put, promotion-driven. Some 60% of P&G 's sales now come from what Barr calls "events." These are promotions that the supermarket, convenience store or other retailer executes with price cuts or other incentives; or they take the form of discount coupons and price promotions mailed out or distributed in a store by P&G itself. Some events are initiated on the Internet, such as a "Max the Stack" promotion for the company's Pringles brand of potato chips. Teenagers got decoder cards at theme parks and SFX concerts. Then, they went online to see whether they had won a cash prize of between $3 and $50. Similar promotions for gift-with-purchase were rolled out on the Pampers.com and BabyUniverse.com sites. These "pull" marketing events are designed to drive consumers to retail stores and maintain customer loyalty. In the past, P&G used a "push" system of moving products out the store door. Independent of what retailers were doing, P&G would forecast sales for Tide detergent, Crest toothpaste or other products. Then, it would tweak sales through the year with coupons and other incentives designed to entice enough customers to buy, moving products off store shelves. But with the majority of sales now coming from promotional events, Barr and his Global Product Supply team studied the pull systems of efficient distributors of consumer and industrial products such as personal-computer maker Dell. The idea: Cut out piles of inventory and produce only those products that consumers are actually buying.

If they could do this, Barr's team could create that 14th billion-dollar brand. How? By reducing the frequency with which P&G products were not on shelves when customers wanted them. To a retailer, being out of stock on a product that consumers want is no small matter. A retailer whose shelf is bare of a product in demand loses the sale 41% of the time, according to Consumer Insight magazine, an industry trade publication. The typical response is to find the product at another store. But even P&G loses. Approximately 28% of the time, Barr says, the customer simply picks another competing product. "It's a very tricky balancing act," Barr says. Barr's goal about 18 months ago was to get to a "nearly 100% demand-driven" system of supplying products to supermarkets and other stores around the globe. In his preferred analogy, he wanted P&G's planners and forecasters to be "looking through the windshield and not the rearview mirror" at what was happening in the marketplace. But P&G is not like Dell. It doesn't field calls from consumers. It can't wait until after consumers decide what they want before it puts products onto store shelves. It can't wait to find out what customizations the consumer wants when the call comes in. "I have to put all seven smells [of a soap] out on the shelf" at all times and in the right quantities, Barr says. In effect, P&G has to manage out-of-stock conditions on 50,000 different products worldwide, every day. When Barr's team started to tackle the problem of shifting from a push system to a pull system, nine times out of 10 consumers were finding the P&G product they wanted in the store. Barr aimed to cut the rate of out-of-stock items from 10% to 5%. That is not so easy, he says: "For a company our size, [that's like] trying to turn a large cruise ship vessel on a dime." His goal was to take the chaos out of the delivery system by bringing retailers and suppliers into the planning and delivery process. The "signals" of consumer demand would come from the stores; "responses" would come from P&G manufacturing managers, supply chain managers and suppliers, who would key production of new products to sales reports coming from the stores. For example, P&G now gets dates and locations for all events with its retail partners, such as a cluster of Wal-Mart stores in south Florida, and prepares for predictable increases in demand. If these stores are going to do a "buy-two, get-one- free" promotion on their Pampers diapers, P&G can better coordinate its production and distribution in that region. As Barr puts it, "In the past, we'd only know that these stores wanted an extra 100 or 200 cases of the product and we'd send it in one large delivery. Sometimes, it'd be several weeks early. Once in a while, it would be late.

"One of our fatal flaws," Barr adds, "was that our [supply chain] network was not really well integrated." The company has 5,000 key retailers and more than 30,000 key suppliers. "I had data [coming] from many sources, but it was not synchronized," Barr says. Some sales data might come in daily, some weekly. Some might come by item or product category. Consistent information, received daily or more frequently, would mean getting retailers and suppliers to adhere to common conventions in feeding and drawing information out of P&G 's SAP supply chain management system. This caused immeasurable problems. When P&G is spending $80 million to advertise new flavors of fluoride anti-cavity toothpaste such as Cinnamon Rush and Extreme Herbal Mint, it needs to know which ones are selling and which aren't. Without detailed reports, boxes of Extreme Herbal Mint can be collecting dust in the storage rooms while there isn't enough Cinnamon Rush on the shelves to meet demand. Barr's aim: to replace the movement of boxes of goods with a better flow of information. That meant a big change at P&G's factories. In the old build-to-forecast days, the plants would simply run big lots, move them to warehouses and let marketing work down the stacks of unsold product. "Changeovers of manufacturing lines were anathema," says Barr, a former factory manager, because the belief was that long product runs cut down per-unit costs. But what actually happens is per-unit costs rise if you're making products consumers don't buy, says Barr. Now P&G plans plenty of changeovers on its production lines every day. The principle: Manage by exception, for products that are moving fast off shelves. That keeps costs down. "We've tried to improve every aspect of how we deliver product to our customers at the lowest cost," says Tom Walker, vice president of logistics for Costco Wholesale Corp., which sells $41.7 billion worth of consumer goods a year through its 397 retail warehouses. "The software, along with common sense, has improved [P&G's] ability to get accurate shipments to our stores in a timely manner. "The fact that our sales of P&G products are up 15% in the past year tells you how effective this system is." In its 2003 Power Rankings of the nation's largest manufacturers, Cannondale Associates, a marketing and consulting firm in Evanston, Ill., said retailers ranked P&G as the top manufacturing partner, ahead of Kraft Foods. Twelve months into the new pull system, the company is close to its original goal of cutting outof-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.

More precise management of the quantities and brands available on store shelves has had a direct impact on virtually every financial metric at P&G. Sales increased from $40.2 billion in fiscal 2002 to $43.4 billion in fiscal 2003, up 7.8%. Net profits, which P&G expected to improve 10%, jumped from $4.35 billion to $5.19 billion, a 19% gain. In fiscal 2001, P&G generated $1.5 billion of cash from operations. In fiscal 2003, P&G generated $4.9 billion, largely because of the supply chain improvements-and increased sales resulting from the coordination with events. Working capital, the amount of money the company has on hand to run its day-to-day business, jumped from a mere $700 million in fiscal 2001 to more than $1.7 billion in fiscal 2003. "To me, working capital is the best barometer of how efficient an organization is," says Bill Steele, an analyst at Banc of America Securities in San Francisco. "P&G is making life very difficult for competitors like Unilever, Kimberly-Clark and Colgate-Palmolive. It has consistently outperformed all of these guys, mainly as a result of its systems and its management." Colgate-Palmolive is also in the process of implementing an SAP-based trade promotions management system to keep pace. The program has already been implemented in Mexico with plans to bring it to the U.S. by early next year. Barr can't be sure whether the sales gains can be attributed to repeat purchases from increasingly satisfied customers. But in his drive to build that next billion-dollar brand by "out-operating" other household goods rivals, there's no question what his next goal is: to cut that out-of-stock rate in half again, to 2.5%. Barr also doesn't have to worry as much about failing. He can fail more, and still succeed. Because he's responding to demand—not a forecast P&G Key Performance Indicators 1. 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%. 2. 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. P&G wants to chop this in half, from 100 days. 3. 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 wants a daily count, rather than weekly or monthly.

4. Shelf-Level Quality: The percentage of packages damaged or otherwise unappealing when a customer sees them on a store shelf. The goal: zero. 5. Pricing-Design From the Shelf Back: 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. Procter & Gamble Base Case Company: The Procter & Gamble Co. Headquarters: 1 Procter & Gamble Plaza, Cincinnati, OH 45202 Phone: (513) 983-1100 Business: The country's leading manufacturer of household products. Its 35 manufacturing plants crank out an extensive mix of products in five major categories: fabric and home care; beauty care; baby and family care; health care; and snacks and beverages. Associate Director for Supply Network Innovation: Jake Barr Financials: $5.2 billion profit in 2003 on sales of $43.4 billion. Challenge: Install SAP's supply-chain management software to better react to demand created by eventdriven promotions.

planning
It is still too early for P&G to be able to point to business results and ROI figures in connection with this work, but several programs have already been approved and launched. These projects are already contributing tangible business benefits in several planning areas. • Demand planning: P&G has launched a new demand planning system, which is now used to forecast 80% of the company’s sales volume. It is already showing that it can produce forecasts with significantly improved accuracy. • Rough-cut capacity planning: P&G has introduced a pilot to support rough-cut capacity planning processes in its detergents business. This has already succeeded in cutting out-of-stocks by three-quarters and reducing inventory levels. • Distribution requirements planning: Among others, there has been a successful pilot project in P&G’s North American cosmetics manufacturing facility, supporting a daunting 10,000 permutations of product and distribution channel. P&G has also developed private e-marketplace facilities for both suppliers and customers, allowing its key business partners to see its inventory levels and production plans and perform real-time transactions via Web-enabled front-end systems. This approach has produced inventory savings across the whole supply chain, and allowed the introduction of other improvements, such as automatic invoice processing. Improved responsiveness to events has enabled P&G to increase promotional product volumes, but still be left with less residual inventory when each promotion is over. At its manufacturing sites, P&G is experimenting with early pilots to support produce-todemand capabilities. These involve superimposing real-time demand signals onto the production plan, and integrating real-time shop-floor and warehouse data. It is also piloting a “dynamic distribution requirements planning” system, in which the planning cycle is automatically triggered by major events, such as changes in demand or inventory, and could be run many times a day. Though the pilots are still in early stages, incorporating these highly responsive processes into the supply chain will eventually cut costs and lead to real improvements in consumer satisfaction. These projects are all contributing to P&G’s overall goal of building its consumer-driven supply network, while producing immediate improvements in the company’s capacity to do business.

Procter & Gamble Finding the Right Business Model
Like many consumer products companies, Procter & Gamble, Co. embraced micromarketing. The world's preeminent consumer products company began using information technology in the late 1980s to support a traditional make-sell business strategy. P&G developed capabilities to electronically exchange orders with its largest customers, and began to redevelop its order, billing, and shipping systems. But a major consolidation of grocery stores brought about by competition from large national chains such as Wal-Mart resulted in 40,000 retail outlets disappearing by the mid 1990s. P&G sales slowed. P&G's answer was to (1) proliferate new products to give customers more choices, (2) develop marketing programs to push the product through the retail marketing channel to the customer, and (3) develop information systems that could track manufacturing, warehousing, shipping, and the hundreds of different price promotions used to push product down the channel to retailers. P&G used a series of information systems to collect and analyze retail sales data, using the information for finely tuned promotional campaigns. For example, by analyzing scannerbased sales data in relationship to regional weather pat-terns, P&G measured the effects of the cough and flu season on sales of its Vicks Formula 44 and Nyquil cold products. It then developed consumer response programs, such as special sales or coupon giveaways in cold regions. P&G developed 35 different varieties of Bounce fabric softener in North America, his and her baby diapers, 31 different varieties of hair shampoo, and 50 versions of Crest toothpaste. To move all this new product down the retail channel, P&G developed 27 different types of promotions from bonus packs (two products put together in a single pack) to cents-off campaigns, to goldfish giveaways (unfortunately, most of the goldfish froze to death before customers could retrieve them). P&G made

55 price changes per day, affecting 110 products, and offered 440 price promotions per year. It was the micromarketing product model gone completely wild. In this period of the early 1990s, information systems were developed to make the existing business processes and the business model more efficient. Marketing developed elaborate quota systems for salespeople, and carefully tracked sales force performance. To make new products successful, any sales force has to be given sales targets, and P&G salespeople were told to move product no matter what. The sales force was credited with a sale when the product was shipped out of the P&G warehouse, not when a consumer actually bought the product. And the recently modernized order, shipping, and billing system dutifully tracked how much product was shipped from the P&G warehouses. In fact, the sales force developed so many promotions and pricing formulas (17 different price lists for the same products) that it became difficult even with elaborate computer systems to keep the orders straight. Retailers would order cases at a promised $100 per case, but P&G would ship them at $125 a case; a special order-correction facility of 150 specialists was set up in Cincinnati to correct 27,000 orders per month, at a cost of $35 to $75 per order. Retailers of course responded to aggressive price promotions. Economists call this a moral hazard: People are given incentives to do the wrong thing. Retailers built larger warehouses, and when P&G prices became very attractive, they would order trainloads of merchandise in what is called "forward buying." These huge orders presented P&G manufacturing with severe problems. Manufacturing began to build new plants, only to find that the new plants would sit idle as prices returned to normal. Meanwhile, retailers' warehouses were filled with aging coffee, shampoo, and diapers. Some items would be trapped for years in the warehouse system of retailers.

The combined result of the P&G business model, systems, and marketing strategy was to raise costs to everyone in the retail channel and to the consumer. Earnings of P&G fell and sales growth stopped. Consumers were confused. The average consumer, often a woman, takes only 21 minutes to do her supermarket shopping. In that time, she buys an average of 18 items from 30,000 to 40,000 choices, down 25 percent from five years ago. She doesn't bother to check prices, looking for the same product, in the same row, at the same price week after week. Obviously a new business model with new business processes was needed, and in 1993 P&G began a major business strategy and process shift. The new business strategy had several components according to Durk Jager, president and chief operating officer. P&G began by eliminating one-third of its products, some of which were sold to others. It reduced its labor force by 13,000 and eliminated dozens of factories. P&G then greatly reduced price promotions and met with retail channel executives to explain the new policies. A new policy was adopted for new products: If they failed to rise to the top two-thirds of product sales in a division they would be eliminated in one year. P&G moved from brand and product management toward customer management by assigning one P&G representative to a store to coordinate sales to individual supermarkets. Prior to this, up to seven P&G product managers would call on stores. To ensure the customer would always find the product they wanted on the shelf, P&G built systems that would trigger shipments only when customers actually bought product. Taking a cue from Wal-Mart, one of P&G's largest customers and well known for its continuous replenishment systems, P&G now uses point-of-sale data provided by retailers to generate orders. P&G trucks now deliver only what is needed based on customer sales.

This has saved retailers over $250 million in inventory costs alone. Now, when dealing with highly automated retailers such as Wal-Mart, 40 percent of all orders are computer generated and based directly on actual sales recorded daily and weekly. The sales force was equipped with laptop computers, and they send daily reports to headquarters recording changes in customer buying habits— and the reasons for changes in those buying habits. At headquarters, sales and marketing specialists analyze the data and quickly adjust production schedules to both actual purchases and anticipated demand. Last, P&G began a program of sharing data with its retail customers to improve the profits of its "channel partners." In some instances this has meant some P&G products have been withdrawn from retail shelves because they did not sell well. Overall, P&G believes that sharing information with channel partners, optimizing their profits, is the way to build loyalty and stay in touch with what is actually selling in the marketplace. ■