5 supply chain risks of P&G (Procter and Gamble) and specific risk mitigation strategies

Global supply chains today are subject to more risk factors than localized supply chains of the past.
These risks include supply disruption, supply delays, demand fluctuations, price fluctuations and
exchange rate fluctuations etc. Underestimating risks in global supply chains and not having suitable
mitigation strategies in place can result in painful outcomes.
Procter & Gamble (P&G) is one of the largest consumer goods companies in the world, with more
than $43 billion in annual sales. P&G sells more than 300 brands worldwide, including major brands
such as Tide, Mr. Clean, Ivory Soap, Crest, Pringles, Pampers, Clairol and Prell. P&G has five global
business units in more than 80 countries with 100,000 suppliers.
It is critical for global supply chains to be aware of the relevant risk factors and build in suitable
mitigation strategies. Table 1 contains a categorization of supply chain risks and their drivers that
must be considered during network design of P&G.
Table 1: Supply chain risk factors to be considered by P&G
Category Risk drivers of P&G
1. Disruptions risk i. Natural disaster, war, terrorism
ii. Labor disputes
2. Delays risk i. High capacity utilization at supply source
ii. Inflexibility of supply source
iii. Poor quality or yield at supply source
3. Systems risk i. Information infrastructure breakdown
ii. System integration or extent of systems being networked
4. Forecast risk i. Inaccurate forecasts due to long lead times, seasonality, product
variety
ii. short life cycles, small customer base
iii. Information distortion
5. Procurement i. Exchange rate risk
risk ii. Price of inputs
iii. Fraction purchased from a single source
iv. Industry wise capacity utilization

Risk drivers of P&G:

 Disruption: Disruption can be taken place in such a situation where the civil war in a country
has taken place such as Ethiopia, Myanmar etc. Labor disputes may be seen as a serious
cause to disrupt in supply chain management in the countries where we can see political
turmoil.
 Delays: Due to COVID-19, it would be a vital factor to run the supply chain of P&G.
 System risk: System integration of P&G must be aligned with information infrastructure so
that any wrong information does not pass through the line.
  Forecast risk: Forecast should be such that it aligns with the demand and order of the
customers.
 Procurement risk: It is to be noted that the fluctuations in exchange rate, inputs and so on
must be minimized with the changing of time.
Every mitigation strategy comes at a price, however, and may increase other risks. Acquiring
multiple suppliers mitigates the risk of disruption but increases costs because each supplier may have
difficulty achieving economies of scale. Thus, it is important to develop tailored mitigation strategies
during network design that achieve a good balance between the amount of risk mitigated and the
increase in cost. Some tailored mitigation strategies of P&G are outlined in Table 2.
Table 2: Tailored Risk Mitigation Strategies of P&G

Risk Mitigation Strategy Tailored Strategies of P&G

1. Increase capacity (in i. Focus on low-cost, decentralized capacity for predictable
response with the demand.
disruption risk) ii. Build centralized capacity for unpredictable demand.
Increase
iii. Decentralization as cost of capacity drops.
2. Get redundant i. More redundant supply for high-volume products, less
suppliers (in response redundancy for low volume products.
with the delay risk) ii. Centralize redundancy for low-volume products in a few
flexible suppliers.
3. Increase i. Favor cost over responsiveness for commodity products.
Responsiveness (in response Favor
with the system risk) ii. Responsiveness over cost for short–life cycle products.

4. Pool or aggregate i. Increase aggregation as unpredictability grows.

Demand (in response with the ii. Minimize the bullwhip effect
forecast risk)

5. Increase inventory (in i.Decentralize inventory of predictable, lower-value

response with the products.
procurement risk) ii. Centralize inventory of less predictable, higher-value
products.
It is important to keep in mind that any risk mitigation strategy is not always in the money. It is
critical that risk mitigation strategies be evaluated rigorously as real options in terms of their
expected long-term value before they are implemented. Through the following discussions, we have
discussed the five supply chain risks of P&G (Procter and Gamble) and specific risk mitigation
strategies for handing those risks.