SUPPLY CHAIN MANAGEMENT OF

(COLGATE PALMOLIVE)

INTRODUCTION OF THE COMPANY

The Company was incorporated on 23rd September 1937, as a private limited
company. The Company Manufacture and market dental care products (dental cream
and tooth powder), hair care products (hair oils, shampoos, brilliantine) and other
personal care products such as shaving creams, and lotions, face creams, baby
powder, talcum powder, etc. The products are marketed under the trademarks
"Colgate". "Palmolive, Halo" and "Charmis". - A distribution set up was also developed
on an all-India basis with warehouse facilities in Mumbai, Chennai and Calcutta.
Colgate-Palmolive Company, U.S.A. supplemented this reinvestment by providing,
technical assistance, new product information and its worldwide developments in quality
dental care and other personal care products. The Company has its own research and
development facilities.

Colgate-Palmolive is one of the leading global consumer products companies in the

world with employing 40,000 people in more than 200 countries and territories. They
provide quality consumer products in the areas of Oral Care, Personal Care, Home
Care and Pet Nutrition under widely recognized, famous brands such as Colgate,
Palmolive, Ajax, Protex, Irish Spring, Soft-soap, Simply White and Hills Science Diet.
They are the global leader of oral care, liquid soaps and underarm protection. In other
categories, their brands encompass a range of products that play a familiar role in daily
hygiene all over the world. Colgate-Palmolive entered China in 1992. They were proud
to have been a part of the development of China for nearly two decades. Today, they
have commercial offices and manufacturing sites in Guangzhou, Beijing, Shanghai,
Chengdu, Yangzhou and Hong Kong with more than 5,000 employees. Their Huangpu
Plant based in Guangzhou and Sanxiao Plant in Yangzhou has become the largest
toothpaste plant and toothbrush plant in Colgate globally. In addition, they have part of

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the Global Technology Center, Global Procurement and Greater Asia Colgate
Innovation Center.

SUPPLY CHAIN MANAGEMENT

The company sells oral care, personal care, home care, and pet nutrition products
throughout the world with the help from the SAP Supply Chain Management application;
the company has significantly enhanced its global supply chain planning processes.
Colgate has used this and other SAP software to improve the quality, timeliness, and
accessibility of its data and automate its supply chain processes. As a result the
company is more demand driven and globally integrated.

WHY SAP WAS SELECTED

1. Strategic partnership with SAP that aligns with Colgates global IT strategy.

2. Ability to leverage existing SAP software and ongoing R & D investment by SAP.

3. Enterprise - wide data for business decision.

4. Extensive planning and execution functions.

5. Support for financial planning and analysis.

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 6. Support for collaboration with suppliers and customers.

KEY CHALLENGES

1. Standardized processes for global supply chain management.

2. Align consumer, professional, and retail programs.

3. Increase focus on near term demand signals and respond quickly to

unexpected demand.

4. Tie replenishment and orders to downstream demand rather than high level
forecast.

FINANCIAL AND STRATEGIC BENEFITS

1. Streamlined vendor managed inventory.

2. Improved the granularity and timeliness of customer data.

3. Reduced manual orders.

4. Helped planners spend more time analyzing business impacts and less time
cleansing data.

5. Increased products in stock for promotions via effective forecasting and planning.

6. Gained access to a global network of experienced resources.

OPERATIONAL BENEFITS

1. Increased customer order fill rate.

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 2. Increased forecast accuracy.

3. Reduced inventory.

4. Raised inventory accuracy to more than 99%.

5. Streamlined put away and picking processes.

6. Increased on time, complete, vendor managed inventory (VMI) orders

7. Cut VMI planning cycle from 5 days to 1 day.

CREATING A GLOBAL SUPPLY CHAIN THROUGH

STANDARDIZED PROCESSES AND SOLUTIONS

Colgates SAP R/3 implementation began in 1994, providing a platform for

responding to global customer requirements through better understanding of
costs and prices, for analyzing sourcing options, and for determining competitive
strategies. With this SAP R/3 execution framework in place, Colgate embarked
on an ambitious plan to streamline its global supply chain planning processes.
Implementation of this plan would not only enable significant operational
improvements in service and inventory reduction, but also position the company
to move from regional sourcing to a globalized model. This supply chain strategy
allowing for a breakthrough in production efficiencies and economies of scale
required full visibility of supply and demand information worldwide and a highly
responsive supply chain planning process. These essential characteristics of
Colgates supply chain are being enabled by the optimization, scheduling, and
collaboration capabilities of SAP APO in Supply Chain Management The
capabilities of SAP APO are critical to enabling Colgate to take the next logical
steps in enhancing global supply chain performance, says John Giroux,
Colgates director of global IT strategic planning. SAP APO delivers solutions on

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 three key fronts they gain visibility to global logistics data, optimize our
operations through use of advanced mathematical planning functions, and
provide a platform for collaboration with customers and partners. By making use
of SAP APO, our worldwide operations are truly progressing toward excellence in
supply chain planning. The anticipated savings continue to be facilitated by
supply chain programs and the enterprise-wide SAP software. The broad global
reach of its products, coupled with these continuing margin improvements,
enables reinvestment in growth-building activities and confers on Colgate a
sustainable competitive advantage.

SUPPLY CHAIN CHALLENGE

In 1993, Colgate recognized that it faced lack of standardization in systems and

data throughout the world and incurred costly duplication of effort on many fronts.
The company had inventory levels that were unnecessarily high, order-related
cycle times that were excessively long, and IT and other costs that were much
higher than they would be with global standardization of systems and data.
In 1994, Colgate began its SAP R/3 implementation, which enabled the company
to improve operations through consistent, global support for financial analysis,
logistics planning, and other business processes. Moreover, a complementary
standardization mandate came from senior management that covered all general
naming conventions, formulas and raw materials, manufacturing data and
processes, and financial information. These standardization initiatives supported
by SAP systems contributed to tremendous improvements in efficiency. For
example, in the operations arena, these efforts supported substantial
consolidation of manufacturing facilities. Colgate has now implemented SAP R/3
in 49 countries covering 80% of its business, and by early 2002 will be managing
95% of its global operations with SAP R/3.

While SAP R/3-enabled efforts produced significant results, the competitive

pressures in Colgates global markets have driven the company to seek further
Improvements using my SAP SCM:

On-time and complete customer order fulfillment had been improved from very
poor levels to rates of around 90%. However, these rates were hampered from
further improvement by inadequate visibility into capacity constraints and
demand, and the continuing lack of product availability meant potentially losing

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 out on revenue opportunities. Moreover, these fulfillment rates were still
significantly below the increasingly stringent requirements of large customers.

The replenishment order cycle time had been reduced from nine days to five
days in North America. However, Colgates order cycle times elsewhere in the
world remained much longer, and competitors were gaining significant ground on
this service metric that customers were finding increasingly important. Moreover,
the long order cycle times represented unacceptably high internal costs to
Colgate The capabilities of SAP APO are critical to enabling Colgate to take the
next logical steps in enhancing global supply chain performance, says John
Giroux, Colgates director of global IT strategic planning.

Reductions in inventory had been achieved, including an increase in turns per

month for finished goods inventory in North America. However, internal inventory
costs remained unacceptably high, and the high inventory levels were indicative
of the limited visibility that continued throughout Colgates supply chain
operations.

Despite various reductions in capital and expenses that had been achieved,
price competition continued to drive a focus on cost reduction. Plant operations,
packaging, and transportation costs were all targets for further reductions.

Finally, the very source of Colgates competitive advantage created supply chain
challenges. Rapid global introduction of new products, the needs for
customization, and services to global customers created continued complexities
for the companys supply chain.

IMPLEMENTATION

While brands in Colgate have been managed globally, the company realized it
must also manage demand and supply on a worldwide basis. The Colgate Global
Supply Chain initiative began in November 1999 with the objective of building on
the companys investment in its core SAP R/3-enabled business processes in
order to further improve supply chain performance. These performance
improvements would be achieved by focusing on the fundamentals globally
standardizing internal supply chain and business-to-business processes,
implementing shared services, sourcing strategically, and implementing cost
reduction programs. Colgate identified three major supply chain strategies to
achieve the companys goals:

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 Roll out a vendor-managed inventory (VMI) program with key accounts to drive
significant channel inventory and cycle time improvements.

Implement Cross-Border Sourcing (CBS), a global planning initiative to enable

Colgate to move from a regional to a global sourcing model, thereby driving
forecast improvements and safety stock reductions, enabling consolidation of
assets, and taking advantage of economies of scale on a worldwide basis.

Implement collaborative planning, thus enabling development of a closed-loop

process to manage promotional demand and synchronize activities throughout
the supply chain.

1. Vendor-Managed Inventory:

VMI is a pull process by which Colgate replenishes customer distribution centers

(DCs) based on daily transmitted inventory and demand information. The current
focus on VMI is in North America, where 40% of shipped cases from five plants
are managed using VMI. The implementation includes 40 customer DCs at 12
customers, covering all categories of Colgate products (about 1,000 SKUs). As
supply and demand are more precisely matched, this VMI implementation
enables lower finished goods inventories, higher rates of on-time and complete
orders, and reduced replenishment cycle times.

The VMI business process is supported by supply network planning (SNP) in

SAP APO. Daily inventory levels and demand from customer DCs are
transmitted to SNP, which calculates replenishment orders. SNP incorporates
plant capacity information to determine production requirements and any supply
constraints. The replenishment orders are transmitted back to the customers via
electronic data interchange (EDI) for acknowledgement and for handling the
customers information processing requirements.
The benefits of VMI will be multiplied as implementation extends toward all
transacted business in North America and to other geographic regions.

2. Collaborative Planning:

The demand planning (DP) capabilities and collaborative engine in SAP APO
provide the Colgate sales subsidiary with a mechanism for communicating
demand information to the supplier and further synchronizing planning across the
supply chain network. For example, collaborative planning, forecasting, and
replenishment (CPFR) is being deployed by Colgate by making use of SAP APO

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 tools with customers, enabling collaboration on promotional activity, inventory
levels, and demand forecasts. The associated CPFR processes can drive
forecast accuracy improvements and thereby enable a range of cycle time and
customer service improvements.

In particular, statistically computed-base demand is calculated by DP and can

drive repeatable replenishment processes, and changes resulting from
promotions can be incorporated using collaborative processes. The support that
the collaborative process provides for separate management of base and
promotional demand is very valuable. Promotional demand management is
substantially independent of the base demand, and it is critical information for
driving manufacturing, product finishing, and distribution in Colgates consumer
products business. To support the collaborative process covering promotional
demand, the collaboration engine allows the exchange of up-to-date planning
information, enables user-access security restrictions, supports exception-based
management, and facilitates tracking of performance measures including
forecast accuracy.

OUTCOME

The SAP APO-supported supply chain implementations have achieved

significant, measurable benefits for the initial America based implementations.
The competitive position of Colgates business has been enhanced by
improving service to the retail trade and internal customers, enhancing
responsiveness, and improving margins. Colgate has achieved performance
gains with SAP APO beyond what had already been achieved with SAP R/3, and
the company is well-positioned for multiplying the benefits across the global
enterprise.

The benefits achieved across the three initiatives include:

1. Vendor-Managed Inventory: The SNP-enabled VMI process has enabled

improvements to 98% in on-time and complete orders and an improvement to
a one-day replenishment order cycle. In the eyes of Colgates customers and
partners, these improvements are very significant. The previous SAP R/3-
enabled achievements of 70% on-time and complete orders for VMI and the
five-day replenishment order cycle would not have been acceptable in the
unfolding competitive environment.

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 2. Cross-Border Sourcing: The initial single-country implementation of Cross-
Border Sourcing enabled the replenishment order cycle time (which includes
time for order preparation, processing, and shipping) to be reduced from 62
days to 33 days. Supply and demand were more accurately matched, so
there was a significant increase in shipments per month, a reduction in
inventory by about 22%, and an increase in case-fill rates from 94% to 97%.
CBS yielded a significant improvement in on-time and complete orders for
intercompany replenishment, and customer order fulfillment increased to
95%.

3. Collaborative Planning: Responsiveness to promotions and other changes

in supply and demand have been enhanced due to the closer link between
producers and consumers. Improvements in cycle times, fulfillment
performance, and inventory levels were supported through enhancements
enabled by DP and the collaborative engine. In particular, forecast error with
a major retailer was reduced from 61.9% before CPFR to 21.9% after CPFR
was implemented.

All three initiatives were supported by SAP APOs real-time integration model, where
any changes in stock, sales orders, and so on are transferred in real time between
customer or internal ERP systems and SAP APO. This ensures that modifications to the
plan can be made rapidly which is particularly important to facilitate planning for
promotions.

The VMI, CBS, and collaborative planning implementations will be extended globally. As
these implementations are extended to all brands and plants, Colgate expects to
multiply the impact of the current implementations substantially. Moreover, savings are
being achieved outside direct supply chain operations, including in key areas such as
IT.

NEXT STEPS
Colgate intends to continue to pursue supply chain improvements that will enhance its
competitive position. In addition to extending the use of vendor-managed inventory,
cross-border sourcing, and collaborative planning globally, Colgate is pursuing:

1. Repetitive manufacturing: Colgate is working with SAP to implement repetitive

manufacturing processes using the PP/DS capabilities in SAP APO. These
processes will perform repeated production runs using a single bill of material,
with back flushing of material requirements. Production will become more

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 responsive to promotion-driven demand changes, as making and finishing
operations will be distinguished as separable manufacturing processes,
facilitating quick production scheduling changes. Colgate is specifically
supporting development of a PP/DS-related Wave algorithm. This algorithm will
provide optimization of repetitive manufacturing during potential sudden peaks
and valleys in requirements and finite capacity constraints.

2. Outsourced manufacturing: Due to the variations in supply requirements

resulting from the promotions-driven environment, third-party manufacturing
contractors are increasingly relevant to Colgates business. Colgate expects to
make use of SAP APO enabled collaborative planning links with these
contractors.

3. Transportation planning: Colgate is planning to implement Transportation

Planning/Vehicle Scheduling (TP/VS) in SAP APO to optimize its transportation
network and derive ongoing cost savings.

4. Supply chain event management: Colgate is planning to use SAP supply chain
event management capabilities to track carrier tendering and customer
shipments and to provide early warning of undue delays or problems.

5. Additional collaborative scenarios: Colgate will pursue various additional

forms of collaboration with customers and partners. Of significance will be
Colgates participation in consumer goods industry e-marketplaces, which
provide exchanges for collaborative demand, procurement, and logistics
planning.

Supplier Code of Conduct

Colgate people worldwide take enormous pride in our reputation for integrity and
the business success that our reputation has enabled. This reputation has taken
years to build and maintaining it is vital to our success. This Colgate Supplier
Code of Conduct has been developed to convey to all current and future
vendors, suppliers, contractors, consultants, agents and other providers of goods
and services (our suppliers) Colgates expectation for all of our suppliers to
adhere to the highest ethical standards when conducting business.

Colgate suppliers are required to take reasonable steps to ensure that this
Colgate-Palmolive Company Supplier Code of Conduct is communicated

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 throughout their organizations and to make this Code available to their
employees and throughout their own supply chain.

Colgate values its business relationships with suppliers and requires its suppliers
to share our commitment to, at a minimum, compliance with the following
standards:
1. Antitrust/Competition Law:
It is Colgates policy that all suppliers comply fully with competition laws (known
as antitrust laws in the U.S.) applicable to them. Competition laws ensure that
companies compete to get business by offering lower prices, innovative products
and better service and not by interfering with the market forces of supply and
demand. Colgate requires that all suppliers conduct their business in full
compliance with all applicable laws intended to promote free and fair competition.

2. Confidential/Proprietary Information:
Suppliers must respect Colgates intellectual property, trade secrets and other
confidential, proprietary or sensitive information and may not use or disclose any
such information except in accordance with their contract with Colgate and for
the benefit of Colgate. Any information or data regarding Colgate operations
shall be treated by suppliers as confidential at all times unless that information
enters the public domain through no fault of the supplier. The suppliers
obligations with respect to Colgates confidential or proprietary information
include:

Not to disclose this information to other people within the suppliers organization
except on a strict need to know or need to use basis.

Not to disclose this information to persons outside of the suppliers organization.

Not to use this information for the suppliers own benefit or the benefit of any
other person.

3. Ethical Dealings:
Honest dealing with customers and suppliers is essential to sound business
relationships. Colgate seeks to give all potential suppliers fair consideration.
Decisions are based on objective criteria such as price, quality, and service
capability as well as a vendors reliability and integrity. Giving or receiving any
kick backs, bribes or similar payments of any sort is prohibited. Our suppliers are
required to demonstrate these same high ethical standards and to conduct all
business transactions with integrity and fairness.

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