Using the supply chain to increase sales This unit describes how Procter & Gamble is using its supply chain not only to improve profits but also to increase sales growth. Corian Discuss these questions. 1 In what ways do you think a company producing consumer products can use its supply chain to rease sales growth? 2. What are the benefits to retailers if their suppliers have efficient supply chains? 3 How can deliveries to the distribution centre ofa retailer be made more efficient? Preaping Understanding the main points Read the article on the opposite page and choose the statement that expresses the ideas in the article most accurately. 1. Suppliers need to reduce their supply-chain costs because of increased transport costs. 2 By reducing supply-chain costs, Procter & Gamble (P&G) is achieving higher profits. 3 PRG is using its supply chain to increase sales growth. Understanding details Read the article again and answer these questions. What is Keith Harrison's job, and when did he start it? How big is P&G's supply chain? ‘What pressure are retailers and suppliers under? ‘What is one thing that P&G is trying to do with its supply chain? What else is P&G trying to do with its supply chain? How does supply-chain management usually operate in a company? How can a supplier’ effective supply chain help retailers? What does P&G want from its customers if it improves its supply-chain performance and reduces their out of stocks and inventory levels? 9 How important a customer is Wal-Mart for P&G? 10 What kind of co-operation do Wal-Mart and P&G have? 11 Is PRG the only company to have access to Wal-Mart's Retail Link data? 12 What is special about P&G's Missouri factory?UNIT2.*» USING THE SUPPLY CHAIN TO INCREASE SALES Adding value with the supe chain by Jonathan Birchall ‘A. Asthe managerin charge ofthe world’s largest supply chain, Keith Harrison believes the time as come to give the business of logistics more credit. 45 The Head of Global Product Supply a Procter & Gamble believes the search for a competitive edge will focus more ‘on supply-chain efficiency as retailers and suppliers battle huge increases in raw material and eneray costs “Today you have road congestion, you have freight costs, driver shortages, capacity issues. Working capitalist premium. Competition among 1s Teailers and vendors is higher. All of this is putting pressure on having a more efficient supply chain. This is more critical than it has been before.” B Since his appointment in 2001, 29 Mr Harrison has been atthe forefront of efforts to drive costs from P&G's ‘supply chain, helping the company meet is long-term sales and earnings growth targets, in spite of surging 2s input costs. But he says P&G has also been looking increasingly over the past three years at ways to tum improve- so customer's inventories, I want more _ deliveries on a store-by-store basis for ‘ments in the supply chain into top-line than just the “supplier of the year” _a single test product. Rather than sales growth. "We're tying tomakethe award,” he says. ‘How do we get 7s shipping the required volume to a dis- x» supply chain into a growth engine for _that value that we've created at least tribution centre, where itis then divided the company.” he says. ‘A lot of the partially reinvested in growing our _up for each store, the shipments are time, supply-chain management is ss business? Do we get sharper pricing, instead prepared atthe factory for the reactive, or passive, cost control. But _ better features, more display, better _right store. When the goods arrive at ‘we think there's also an opportunity for _ shelving?” ‘0 the Wal-Mart distribution centre, they ss usalso to use the supply chain tocreate E _Asanexample ofthe potential bene- are moved directly from P&G's truck top-line growth as well as bottom-line fits, Mr Harrison gives the example tothe appropriate Wal-Mart truck, with performance.” ‘© of a plot project with Wal-Mart in the no time in storage. It is assembled for C An effective supply chain helps US, whose worldwide stores account _a store, and itis just lowing through ‘manufacturers by reducing areailer’s for 15 percent of P&G's overall sales. the system,’ says Mr Harrison. 4 ‘out-ofstocks’, which in tum prevents The two established a cooperative G _ Kevin O'Marah a logistics consult- lost sales. Those sales also benefit the _ relationship inthe late 1980s, starting __antat AMR Research, believes P&G is. retailer, while efficient delivery of 5 with Wal-Mart's decision to allow the first consumer goods company 10 products to meet demand can also P&G and other suppliers access to the _use the Retail Link data in this way, reduce the costs of holding inventory _customer sales data collected by its 4s tothe retailer. Retail Link computer system, D _P&Gistelling retailers thatitshould F Over the past 12 months, a P&G be rewarded for the benefits its supply 7 factory in Missouri has been using live chain delivers. ‘If T do something sales data from stores not to forecast with my supply chain to reduce my demand but to schedule replenishmenti UNIT2 > USING THE SUPPLY CHAIN TO INCREASE SALES 10 Poe BY Word search Find words or phrases in the article which fit these meanings. 41 something that gives a company an advantage over others (paragraph A) 2 fight against (paragraph A) 3. extremely valuable and rare, which a lot of people want (paragraph A) 4. inthe leading position (paragraph B) 5 rapidly increasing (paragraph 8) 6 the way goods are arranged ina store so they are easily seen by customers (paragraph 0) 7 atest done on a small scale to see how something works (paragraph E) 8 information about sales, which is current orn realtime (paragraph F) 9 replacement of what has been used or sold (paragraph F) 410 put together in a certain way (paragraph F) Sentence completion Use the words and phrases in the box to complete the sentences. cost control freight costs growth targets inventory replenishment deliveries road congestion salesdata_vendors working capital | 1 To keep costs down, its important for retailers to keep their.......levels as low as possible. 2. Ifretailers carry too much stock, they will use a lot oftheir. 3. Amore cost-effective way to operate is to schedule. on a just-in-time basis. 4 Ifsuppliers have live access to a customer's. , they can prepare deliveries specially for each store. 5 Suppliers are also known as. 6 Delivering goods by truck now takes longer in many countries due to increased 7 With rising oil prices, are also going up. 8 Atraditional aim of supply-chain managers is. keeping costs down. 9 PAGis using its supply chain to meet sales Word famities Complete the chart. E shipment investment distribution replenishment improvement competition delivery ‘manufacturerUNIT2 + USING THE SUPPLY CHAIN TO INCREASE SALES understanding expressions ‘Choose the best explanation for each phrase from the article. 1‘. copacity issues.’ (line 13) a) problems about the company’s expertise b) problems about production volumes 2‘... input costs.’ (line 25) 4) costs of materials purchased by a company ) costs of manpower employed by a company 3. ‘top-line sales growth.’ (ines 28-29) a) increased sales turnover b) better sales of the most profitable products 4 ‘~.agrowth engine for the company. (line 30-31) a) something that will make the company bigger b) something that will help the company increase sales 5‘. bottomline performance.’ (ines 36-37) a) better sales of poor performing products. b) better profitability 6 ‘sharper pricing. (line 55) 4) more competitive prices b) more risky prices so bescribing a process ut the verbs in brackets into the correct form of the passive. Rather than shipping the required volume to a distribution centre, wher then. (ivide) up for each store, the shipments........instead.......? (prepare) at the factory for individual stores. So, when the goods arrive at the Wal-Mart distribution centre, they ? (move) directly from P&G's truck to the appropriate Wal-Mart truck, with no time in storage. It. (@ssemble) for a store, and itis just flowing through the system. Oe 11 Imagine you are the supply-chain manager at a consumer goods manufacturer like P&G. Hold a meeting with your customer, a large supermarket chain. Argue for things such as sharper pricing and better display of your products in return for reducing the customer's costs of holding inventory levels because of the efficiency of your supply chain. 2 Give a presentation to the board of your company to explain how using your customers’ live sales data can help reduce their inventory levels and at the same time increase sales of your company's products. 1" a ee