Procter & Gamble, the world leader in consumer goods, sells nearly 300 brands in more than 160 countries. It has sales of $80 billion and 130 manufacturing sites around the world. Probably every second, P&G brands touch the lives of people around the world. These products are divided into five business sectors:
- paper products
In the 1980s, P&G had come to identify two main issues:
Issues with ordering and billing: These five sectors had individual ordering and billing policies, thus lacked standardization. This led to inefficient shipments, and hence higher transportation costs. Also, sometimes, there were nine prices for a single item!!
Stock-outs: When the buyer reached the shelf only to see that the product had stocked out, it was a critical moment. Naturally, the consumer would buy a rival product. Surveys suggested that the exact product, in the variant that the buyer wanted, was not available more than half the time. If the retailer had forecasted wrongly and ordered the wrong volumes, P&G was not aware of the problem. In the end, both P&G and the retailer were losing. That was P&G's Eureka moment.
P&G reconfigured the current logistics system between them and the retailers. This was key if they had to be the world brand leader. They implemented the following systems to tackle the issues they were facing:
Customer Replenishment Process (CRP): To improve supply logistics and reduce in-channel inventory
Electronic Data Interchange (EDI): To remodel the ordering and billing system
This system to transmit information day-to-day was collectively called the Consumer-Driven (or demand driven) Supply Network (CDSN).
What is CRP?
P&G's CRP was a precursor to ERP. It is a tool managing product flow to the retailer to maintain optimum inventory levels, and also generating timely, accurate data. It enabled P&G to reduce the inventory and to plan shipments more efficiently. This was first implemented between P&G and Wal-Mart. P&G restocked Wal-Mart’s inventory depending on the data received from Wal-Mart’s distribution center (DC) as the products moved through the channel. This allowed P&G to ensure that their products were on Wal-Mart's shelves at all times. P&G was successful in reducing the order cycle time by 3-4 days. This JIT supply of products ensured that customers would never find the product stocked out on the shelf. Also since data was being shared P&G and the retailer, they