P&G supply Chain

Presented ByMohnish Singh 29NMP46Neerja Malik 29NMP47Harshwardhan 29NMP48Sanjay Yadav 29NMP50Jayakumar S 29NMP94

PROCTOR & GAMBLE: USING AGENT BASED MODELLING & RFID

ABOUT P&G

•Procter & Gamble Co., also known as P&G, is an American multinational consumer goods company

•Headquartered in downtown Cincinnati, Ohio, United States

•Established in 1837 : Made Soap and Candles•Today P&G is recognised leader in development, distribution and

marketing of FMCG

•300 brands 5billion consumers 160 countries•102000 strong work force in more than 80 countries work every

day to provide products of superior quality and value to the customers worldwide.

P&G AND THE SUPPLY CHAIN INNOVATION

•From supply chain to supply network•50% reduction in cycle time and inventory•$300M savings by investing 1%

•Optimised supply chain operations•Improving the Dock Loading Throughput

•From product innovation to supply chain innovation

HOW DID THEY DO THAT???

HOW DID THEY DO THAT???

ITS ALL ABOUT LOGISTICS..........

•Visibility of information•Agent based modelling of complex adaptive systems

•RFID

•Eliminating human errors•Reengineering and automating site business processes•Real time recovery of items and insurance claims

•Vendor managed inventory•The “offensive terminal point”•No “one size fits all”

AGENT BASED MODELLING • Supply chain at P&G is not actually a chain, it

is a supply network.• Such complex networks has multiple

interactions betwen its elements.• Understanding how overall system reacts to

changes in certain parameters is important.

SUPPLY CHAIN SUPPLY NETWORK

Agent Based Modelling

• Software Simulation Model by Nutech• Software agents represent the individual component

of system- plant, stores, etc.• Behaviour of each agent is programmed via rules that

mimic actual behaviour.• Rules were varied during simulations based on

following policies:Plant shipping and store DC order policiesStore DC allocation policiesLead time between Plant and store DC, Store DC and stores.

Plant

Store Dist.Centre

Store HQ

Store

Model components

AGENT BASED MODEL

• Model used Actual customer demand profiles to determine

daily sales.Actual promotion frequency with associated

increase in demand at stores for each item.• Supply chain efficiency was gauged by:

Amt. of inventory need to be carried by a store to avoid stock out

Daily plant shipping variability

WHAT IF ANALYSIS

• What if analysis were conducted to test impact of new logistic rules on 3 metrics:– Inventory levels– Transportation costs– In-store stock-outs

• Effects of demand spikes, promotional events were also simulated.

• Useful changes were noted & implemented.

TOWARDS A ‘RESPONSIVE’ SUPPLY CHAIN

Product Innovation to Supply Chain Innovation

• P&G used to be a mass marketer .• Mass marketers understand the market segments.• These segments were defined by demographics and

psychographics .• They adapt/differentiate their products to fit these

markets.• Supply chain is then organized based on the product

and the segment it serves.• Here, Product Innovation drives the Supply Chain

Innovation.

DOCK LOADING THROUGHPUT- OPPORTUNITIES

•Bottlenecks at the Loading Docks.•No space on the Dock for stacking pallets to be shipped.•Production Stop .•waste of time and Productivity.•Moving the pallet twice.•Productivity and profit declines

•Chaotic Business Processes.•Prone to human Error

AIT

AIT-Automatic Identification Technology

Modification of Data

Security of Data

Amount of Data

Cost

Standards

Life Span

Reading Distance

Potential Interference

CRITERIA

Source: Supply Chain Management Study Material

BENEFITS FROM RFID

• Increase the speed of Loading• Loading time reduction by 40%• Better utilization of Space and Personnel• Avoiding the costly Mistakes of loading• Fewer insurance Claims• Fewer out of stock• Increased Product visibility • Increased responsiveness

EFFICIENT SUPPLY CHAIN

RFID CLIP

RENDEZVOUS WITH WALMART• SCM of P&G underwent a new change due to its

interaction with Wal-Mart.• Earlier P&G used to have arms length relationship with

Wal-Mart.• Focus shifted to– Inter company supply chains– Vendor managed inventory

• Wal-Mart's profits increased due to optimum inventory management support.

• P&G became favoured supplier.

CHANGED STRATEGY FOR OTHER ACCOUNTS

• P&G changed its strategy for its small accounts.

• It realized that “one size fits all” approach is not appropriate.

• While it continued its product innovation, P&G made another supply chain innovation.

OFFENSIVE TERMINAL POINT

• Narrower the front, Deeper you can penetrate the battlefield.

• P&G’s customer engagement front was very broad.

• Hence, its offensive terminal point i.e. Its inter-company supply chain ,was shallow.

• It decided to develop deep offensive terminal point with Big customers.

NEW STRATEGYWal-Mart• Inter

company Supply chain processes

Medium Accounts

Arms length relationship

Small AccountsNo direct

relation.Relation

through Master distributors

It is this process of choosing and managing the development of different relationships with different customers that characterizes the Age of Precision Markets

PRODUCT INNOVATION TO SUPPLY CHAIN INNOVATION

PUSH SUPPLY CHAIN

REPLENISHMENT CYCLEMANUFACTURING CYCLE

PROCUREMENT CYCLECustomer Order

Cycle

PUSH/PULL BOUNDARY

THE IMPACT

REPLENISHMENT CYCLE MANUFACTURING CYCLE

IMPACT

“Re-stock every 24 HRS”• Relaxation of rigid rules• Flexibility and adaptability• Reduced Order cycle time• Reduced Inventory

• Reduced in store stock-out• Culture

• “Every product Every day”• Re-tooling the manufacturing

• Short Runs

LOGISTICS RELATINSHIPSLo

gisti

cs C

ost

Improved Transportation service

COLS

TRTC

Inve

ntor

y

Order Cycle Time

IMPROVEMENT

IMPROVEMENTIMPACT

OPTIMUM

50% Inventory

50%

Cycle Time

STRATEGIC FIT

EFFICIENCY FRONTIER

RESP

ON

SIVE

NES

S

EFFICIENCY

THANK YOU!