Procter & Gamble (P&G) Blends Models, Judgement and GIS to Restructure the Supply

Chain
INTRODUCTION
Procter & Gamble produces. markets and distributes more than 300 brands of consumer
goods worldwide in more than 140 countries. P&G has operating units (plants, divisions,
facilities) in 58 location, around the globe. In 1995 worldwide sales were $33.5 billion with
earnings of $2.64 billion.

The company has grown continuously over the past 159 years. To maintain and accelerate
the growth experienced continuously since the early 1800s. P&G performed a major
restructuring called strengthening global effectiveness (SGE) to streamline work processes.
drive out non-value-added costs, eliminate duplication. and rationalize manufacturing and
distribution. Because of this program. there were major impacts on P&G. which wrote off
more than $1 billion in assets and transition costs. The program affected more than 6000
people and saved $200 million annually before taxes. It involved hundreds of suppliers.
more than 50 product lines. 60 plants. 10 distribution centers. and hundreds of customer
zones.
A Major component of the initiative was to kink care-fully at the North American product
supply chain. specifically, to investigate plant consolidation. Before there had been
hundreds of suppliers. more than 50 product categories more than 60 plants. 15 distribution
centers (DC's). and more than 1000 customers. As P&G became global in terms of brands.
common formulas. and packages, there were economies of scale and fewer operations.
Thus. plants needed to be closed to cut manufacturing expense and working capital. to
improve speed to market. and to help avoid capital investment. P&G also wanted to deliver
better consumer value by eliminating non-value-added costs: thus. they wanted to develop
more efficient linkages with trade customers, reduce customer inventory and eliminate the
least productive sizes. The decision to restructure the supply chain seemed like the right
approach.
P&G wanted to restructure the supply chain because
• Deregulation of the trucking industry had lowered transportation costs.
• A trend toward product compaction allowed more product to be shipped per truckload.
• Recent focusing on total quality had led to higher levels of reliability and increased
through-put at every plant.
• Product life cycles had decreased to about 18-24 months instead of 3-5 years over a few
decades.
• Several corporate acquisitions had given P&G excess capacity.

So, executives focused on product, sourcing: choosing the best site and operation level for
manufacturing each product. The production scope at a given site is limited to
products relying on similar technologies. Producing too many products at a site can he too
complex. But large. single-product plants can he risky (if demands shift). Since plant
locations affect raw materials supply costs and the distribution of finished products. The
distribution system had to be considered. The scope of the project was defined by these
factors.