P&G

- Supply chain

Supplier – Timber Industry - Paper Manufacturer – Tenneco Packaging - P&G manufacturer

Supplier - Chemical manufacturer - P&G manufacturer

Supplier - Chemical manufacturer – Plastic Producer - P&G or other manufacturer

P&G manufacturer – distribution centers – supper market – Carrefour – customers

- Objective of the supply chain

Sustainability, efficiency

Beyond 2020, the company has its sights set on outright sustainability and is working toward goals of
100% renewable energy and renewable or recycled packaging as well as eliminating all waste
(manufacturing and consumer) from disposal in landfills.

Example: P&G receives $10 from a customer for a Laundry Detergent (revenue)

Supply chain incurs costs (information, storage, transportation, components, assembly, etc.)

Difference between $10 and the sum of all of these costs is the supply chain profit

- Decision Phases

Supply Chain Strategy or Design

Locations: Manufacturer in the 6th of October City, Office in New Cairo.

Products: Gillette, Head & Shoulders, Herbal Essences, Pantene, Ariel, Bonux, Braun, Downy, Fairy, Tide,
Always, Pampers, Oral-B.

Modes of transportation: trucks, ships

Information systems: SAP applications. P&G started using the enterprise resource planning system (ERP)
which was implemented by SAP.

Supply Chain Planning

Target market Egyptian market and export

Building or rental stores that accommodate the planned production

Subcontracting, more than one

Inventory policies, Inventories are valued at the lower of cost or market value. Product-related
inventories are maintained on the first-in, first-out method. The cost of spare part inventories is
maintained using the average-cost method.
All this is done according to

Demand uncertainty, Exchange rates, Competition over the time horizon

Supply Chain Operation

Time horizon is daily. Work on the organization and management of production processes and storage
and achieve customer requests during the working day.

Goal is to implement the operating policies as effectively as possible

- Process View of a Supply Chain

Cycle View of a Supply Chain

Customer order cycle (customer-retailer)/Replenishment cycle (retailer-distributor)/Manufacturing cycle

(distributor-manufacturer)/Procurement cycle (manufacturer-supplier)

Involves all processes directly involved in receiving and filling the customer’s order

Customer arrival/Customer order entry/Customer order fulfillment/Customer order receiving

All processes involved in replenishing retailer inventories (retailer is now the customer)

Retail order trigger/Retail order entry/Retail order fulfillment/Retail order receiving

All processes involved in replenishing distributor (or retailer) inventory

Order arrival from the distributor, retailer, or customer/Production scheduling/Manufacturing and

shipping/Receiving at the distributor, retailer, or customer

All processes necessary to ensure that materials are available for manufacturing to occur according to
schedule

Manufacturer orders components from suppliers to replenish component inventories

However, component orders can be determined precisely from production schedules (different from
retailer/distributor orders that are based on uncertain customer demand)

Important that suppliers be linked to the manufacturer’s production schedule

Push/Pull

Their marketing strategies involve both push and pull strategies. In the push system, they try to sell their
products as soon as possible by carrying out independent studies to forecast the demand of a certain
product. Then, they would tweak the sales if demand is low and the products to be sold is high, by
various promotional activities and coupons. In the pull system, P&G comes up with tactics to attract
customers to the retailers and also maintain customer loyalty. For example, one of their tactics which
they used in the sale of Pampers was to offer a gift with purchase. Success rate at P&G’s supply chain
increased even more when they concentrated on the information about the products and used it to
their advantage.

- Retail Storage with Customer Pickup or Carrier Delivery

Factories - Warehouse Storage by Distributor - Retailer – Customers, Product Flow Information Flow

Service Factor
Response time shorter time, same day (immediate) pickup possible for items stored locally at pickup site

Order visibility. Simpler- easier Trivial for in store orders. Difficult, but essential, for online and phone
orders

Returnability. Simpler- easier, Easier than other options given that pickup location can handle returns

Cost Factor

Transportation. Lower cost, Lower than all other options Because the cost of transportation is divided on
more than one side

Information. Lower cost, Some investment in infrastructure required for online and phone orders
 - Role of each driver in supply chain and role in competitive strategy

Facilities Role in the supply chain

The “where” of the supply chain/manufacturing or storage (warehouses)

Role in the competitive strategy

Economies of scale (efficiency priority)/larger number of smaller facilities (responsiveness priority)

Inventory: Role in the Supply Chain

Inventory exists because of a mismatch between supply and demand

Source of cost and influence on responsiveness

Impact on Material flow time: time elapsed between when material enters the supply chain to when it
exits the supply chain

Throughput-rate at which sales to end consumers occur

Role in Competitive Strategy

If responsiveness is a strategic competitive priority, a firm can locate larger amounts of inventory closer
to customers

If cost is more important, inventory can be reduced to make the firm more efficient

Trade-off

Information: Role in the Supply Chain

The connection between the various stages in the supply chain – allows coordination between stages

Crucial to daily operation of each stage in a supply chain – e.g., production scheduling, inventory levels

Role in the Competitive Strategy

Allows supply chain to become more efficient and more responsive at the same time (reduces the need
for a trade-off)

Information technology

What information is most valuable?

- Components of Inventory Decisions

Cycle inventory

Average amount of inventory used to satisfy demand between shipments

Depends on lot size

Carrying cost versus ordering cost.

Safety inventory
inventory held in case demand exceeds expectations

costs of carrying too much inventory versus cost of losing sales

Seasonal inventory

inventory built up to counter predictable variability in demand

cost of carrying additional inventory versus cost of flexible production

Overall trade-off: Responsiveness versus efficiency

more inventory: greater responsiveness but greater cost

less inventory: lower cost but lower responsiveness

Economic Order Quantity (EOQ)

The concept of an economic-order quantity addresses the question of how much to order at one time.

Definition: The Economic order quantity (EOQ) is the optimum ordering quantity for an item of stock
that minimizes the total cost.

To calculate the EOQ a mathematical model of reality must be constructed.

Some assumptions are made to simplify reality .

When an assumption is modified or deleted a new model must be constructed.

Calculate each of

Number of order

Quantity order equals the total quantity divided by Number of order

Average stock equals the Quantity order divided by two

Cost of ordering equals the cost of one order Multiplied by the Number of order

Carrying cost equals the unit cost Multiplied by the quantity of order

Total cost equals sum Cost of ordering and carrying cost

We adopt the least value in total cost

- Obstacles to Achieving Strategic Fit

Globalization, Increased competition for local companies

Difficulty executing new strategies, Accompanied by high risks, it takes a long time to apply them
effectively

Increasing variety of products, It provides the size of the organizational structure and network and
connects us to Decreasing product life cycles