P & G Supply Chain Strategy

Introduction

In recent years, businesses and ideologies have expanded beyond the scope of national borders. People, governments, and cultures have been shaped, changed, and interconnected in a new globalized market. Globalization comes with its own complex set of benefits and challenges that forces stakeholders to adapt or be left behind. The effects of globalization are broad and vast across many spheres, but the profound effects on supply chain structure and management in particular have altered the foundation of how firms operate and compete. To distinguish these substantial effects, one must first create an understanding of what a global supply chain is. Although there are many varying schools of thought and theories that attempt to piece

It had to create a global network that could minimize lead times, understand and deal with fluctuating customer demands, integrate information technologies, and account for an increase in risks, volatility, and logistics costs. They responded to these problems by redefining their role as a manufacturer and re-engineering their supply network so that it was openly responsive to consumer demand. P&G shifted its core operational model to a “consumer-driven supply network” or CDSN. They turned to two metrics of measuring consumer satisfaction, defined as the two “moments of truth”(Gartner 2002). The first moment of truth is defined as the moment when the consumer reaches the shelf and finds that the desired product is, or isn’t, available. This was identified as a critical moment, because if the product was not available, the customer would turn to a rival product and at that point it becomes difficult to win them back (Gartner 2002). The second moment of truth was defined as the buyer’s satisfaction when consuming the product. P&G conducted detailed surveys in July of 2000 and established that in 55% of cases, consumers were not satisfied when they looked on the shelves for the products they wanted, in fact, the size and quantity the shopper sought, was only available less than in 50% of visits (Gartner 2002). It was considered common practice that deciding the right amount of inventory to have in in stock was purely a matter up to the retailer, and the manufacturer was unaware or uninvolved in the process (Gartner 2002). When a store lost sales due to a shortage of inventory, both the retailer and the manufacturer suffered as a result. Significant errors in forecasting volume just weren’t acceptable in a highly competitive market. P&G was one of the first companies to realize the significance of this discrepancy and created a solution by shifting their