P& G Case Facts a Strategy Is Needed Case Study

Excerpt from Case Study :

P&G

Case Facts

A strategy is needed for P&G management to continue to compete in the market for one of against competitors. P & G. has a long history of success however there had been little change in their product lineup from the mid 1980s. This allowed competitors who listen to the voice of the customer to move ahead of P&G in the market. Competing companies have taken away market share from P&G. The competition has responded to the trend of using the Internet, inventory management systems, and Point of Sale systems, taking advantage of the latest technology to improve processes that reduce labor and supply chain costs. P & G. has remained stagnant by maintaining present product lines, and using outdated technology and managerial practices for its global operations. Brand management at P & G. begin realizing that in order to regain its market share it was essential to innovate its top product lineups. They also understand that key decisions to improve operations require a strategy that may include reviewing retailer purchasing practices along with manufacturing to reduce inefficiencies and improve business process distribution. Proctor and Gamble (P&G) had a long history of promoting their packaged products through coupons and discounts. Retailers would purchase extensive inventories of these goods at a low cost due to long shelf life. This would cause problems by distorting actual sales and marketing data. It would also increase production during at times when the actual market may be down further distorting decision making by P&G brand management. As P&G responded to these spikes in sales, there were internal controls put in place adding more resources and overhead costs. Eventually this caused greater inefficiencies to which P&G decided to make major changes in technology and business processes. First with the Efficient Consumer Response System (McKinney & Clark, 1995), designed to improve efficiency in consumer pricing. Secondly with Category Management, requiring restructuring of the organization to align operations with successful brands.

Main Issues

The main dilemma was inefficiencies due to stockpiling inventories by retailers causing spikes and inaccuracies in market data projections. The present business processes for acquiring inventory and distribution of products are simply too slow to respond to retailers and consumer demand. Lack of technical support in understanding retail operations and market trends is also of great concern.

Brand management was depending on outdated technology to support a global market requiring real time processes and up to the minute marketing data for decision making by management. This was leading to inefficient use of resources and faulty data reporting.

Restructuring of the organization is what is necessary to accurately manage the contribution or lack thereof for each distinct brand. Use of Category Management is necessary to align managers with the power and authority to respond to changes in global markets.

First Alternative: Remaining in present market with no changes.

Pros

P&G is well recognized and an industry leader representing quality products at a value price. P&G has 32% of market share which is nearly a full third of market share.

P & G. has several well-known brands that continue to do well in the market.

Food Retailers which is one of the largest distribution channels, is profitable for P & G.

Revenues of $30 billion dollars annually.

Cons

Continued loss of market share due to problems in manufacturing and inventory management.

Product replenishment unorganized and out of sync with actual consumer demands.

Slow response to changes in the market.

Managing suppliers of resources and raw materials using manual processing causes delays in productivity and reliability of accurate reporting.

Inability to manage inventory levels and manufacturing causes costs overruns, shortages, and problems with productivity.

Being a global company, any inefficiency in manufacturing can result in millions of dollars in lost revenues.

Second Alternative: Investing in new technologies and business processes to monitor inventories, understand consumer trends, and manage retail operations.

Pros

Opportunity to increase market share by getting an accurate assessment of inventory, ordering, and manufacturing processes.

Brand management aligned with operations to track and monitor each product line category.

Use of the Internet for procurement (ordering, tracking, logistics) systems, greatly reducing waste and inefficiencies throughout the global enterprise, saving millions of dollars.

Improving inventory processes through use of Consumer Response System, POS, and EDI.

Accurate reporting for management through automated ordering, inventory, and pricing systems.

Ability to share real time data about sales, marketing, inventory, with stakeholders through online Consumer Response reporting systems.

Cons

Initial costs to update systems requires a large capital investment.

Restructuring the organization will require all levels of management and employees to change current processes.

Discussion of Second Alternative

With the growth of P & G. into a global enterprise there is a greater need for the integration of business processes to keep brand management informed of trends. This will aid them in making decisions based on live data.

A plan of action to address the dilemma is the use of technology to get accurate information from retailers, suppliers, sales, and marketing. Use of EDI, Electronic Data Interchange technology for procurement business processes for example. This will allow updates on inventory and distribution to flow between retailers and P & G. On a daily basis. This will greatly improve inventory control through order supplier management.

Adding to this POS systems (Point of Sale) that integrate Consumer Response through direct access to transactions in real time through scanned products allows P&G to get accurate reporting of consumer buying. Procurement processing will occur through electronic payment systems for ordering and transferring payments reducing errors in pricing and invoices from retailers. This speeds up processing orders to retailers plus greatly reduces errors due to lost or missing invoices and payments. All business processes can not be tracked using the Internet for real time reporting access to information by management at any time, anywhere in the world.

However simply adding technology is not enough the organizational culture and structure must share the same goals and mission provided by upper management.

By integrating Category Management with technology and business processes, the most can be gained in improving efficiencies and meeting consumer needs. Aligning brands by integrating the business processes that occur between the various components of product distribution, retailers along with P & G. can benefit from faster time to market. Category management allows Brand management access to information about the products in real time, significantly impacting key decisions such as pricing, success of new product lines, and problems with suppliers.

Recommendation

Recommendation is to move forward in developing technology solutions and restructuring the management culture. Staying within the traditional supplier chain will guarantee traditional market share but not allow P&G to expand into competitors market. Though the traditional numbers are growing, it may be due to factors unrelated to gaining market share over competition. Such as more consumers entering the market from other countries or new distribution channels being opened.

Rationale

Should P&G decide to move forward with investment in technology solutions and restructuring the organization through changing traditional management processes. This is a key decision that will allow P&G to expand its distribution channel to compete with smaller competitors.

A smaller manufacturer may not have used this approach since the capital investment of resources required to develop and integrate Consumer Response Systems, Internet procurement Systems, and Category Management processes may not be a viable option.

Due to the size and capital available to P&G the decision not to make the necessary changes in the short-term are costing them millions of dollars. In the long-term it may cost P&G continued losses in market share as smaller companies continue to respond to consumer and retailers faster.

New information technologies is a key component in P & G's efforts. This will improve customer service and reducing labor costs. How, by capturing information about the best selling products…

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