Procter and Gamble

Improving Customer Value Through

Process Redesign

Customer Relationship Management

Group 5 PGP 2012

Dheeraj Kumar (1211180)
Gautam Punj 1211186)
Parambrahma Panda (1211282)
Vishrut Shukla (1211314)
Ravi Purohit (1211049)

O Question 1: What were the key decisions

taken by P&G in relation to distribution

channel?
Could a mid-sized manufacturer have used
this approach?

Key Decisions
CRP
Implementatio
n

Transmit data daily from retailer to P&G on warehouse product shipments to

each store with the help of EDI (Electronic data exchange)
Quantity shipped based on shipment information rather than retailer orders
Quantities were computed with the objective to provide sufficient safety stock,
minimize total logistic cost & eliminating excess inventory at retailers.
JIT basis shipment of products on the basis of retailers actual sales data .

OSB Changes

Improve consistency and overall service levels by integrating many separate

systems that did not work well together across functions and product sectors.
Automated existing processes & provide flexibility to meet needs of different
sectors & functions
Common database for product pricing and product specifications with the vision
of Simplify, Standardize , then Mechanize

Pricing
Restructure

Change from high-low pricing to Value Pricing.

Encouraging CRP adoption by providing benefits to retailers.
Reduced the number of pricing changes at P&G from 55 per day to 1 per day in
around 2 years of time

ECR System

Timely, accurate , paperless information flow between Supplier, Distributor,

retailer and consumer
Change from brand to category management helped in standardizing product
lines.

The Case of Mid-Sized Companies

Comparison between P&G v/s a Mid sized Company
Parameters

P&G

Mid Size
Companies

High (Strong customer pull due to big brand

name, sales through multiple channels)

Medium

Economies of scale

High (Presence in multiple product segments ,

volume is high )

Medium

Financial Strength

High (Fund for Technology investment is easily

available, $30 billion sales in 1993)

Medium

Capability to drive
Industry

High (Sale of CRP system to IBM for increasing

attractiveness of CRP for Industry)

Low-Medium

Risk taking
capabilities

High ($459 in 1987 and $1746 in 1993 spent for

cost of restructuring)

Low

Bargaining Power
over customers

Conclusion: The capabilities of mid-sized companies as compares to P&G dont

seem adequate to implement this approach.

O Question 2: How important are the new IT

technologies in P&Gs efforts?

Importance of New IT for P&G

CRP and EDI Systems of
P&G
Areas of Improvement
Increased retail sales through CRP retailers : Due to increased
availability of P&G products.

KPI
4%

Expansion of product line (exp Diapers), efficient management of

increased number of SKUs.
Problems with order quality: Due to removal of human buffer, data entry
errors were not caught at early stages leading to collection issues.
Cost reduction : Due to elimination of excess capacity because of better
control on demand variations
Areas of Improvement

10%
KPI

Reduction in time delays and paperwork

Reduction in transaction costs.

Channel
Partners

Inventory reductions and service level improvements, reduction in stock outs.

Areas of Improvement
Increased availability of P&G products due to reduced stock outs.
Customers

Reduced fluctuations in prices ; reduced dissonance

KPI

Importance of New IT for P&G (contd.)

Order, Shipping and Billing
Systems
Areas of Improvement

KPI

Financial Transactions : Improvement in billing accuracy,

perfect orders, deductions resolved in favor of P&G

Billing Accuracy: 10%

Perfect Orders: 20%
Deductions: 50%

Improved on time delivery, reduction in returns and refusals

Perfect orders : 20%

Areas of Improvement

Channel
Partners

Improvement in order quality, shipset quality and reduction in

order entry errors, reduction in order cycle time

Order Quality: 35%

Reduction in price and promotion changes per day

Change 55 : 1 p.d

Constant procurement costs for retailers, elimination of forward

buying by retailers

Areas of Improvement

Customers

KPI

Increase in brand loyalty as promotions reduced, reduced

customer dissonance

KPI

O Question 3: To what extent has P&G

changed its strategy to take advantage of

ECR?

Changes in P&Gs Strategy

Strategic Area

Channel
Relationship

Strategy prior to ECR implementation

Non harmonious relationship with retailers and

wholesalers
Trade based on negotiations over short term initiatives

Retailer determined order quantities & timing,

Inefficient operations (LTL shipments, stock outs)
Forward buying behaviour by retailers (buying for profit)
led to artificial demand creation

Channel
Logistics

Pricing Strategy

Multitude of promotional programs by P&G

Large variable promotional discounts & allowances led to
forward buying by retailers

Operations /
Manufacturing
planning

Management /
Organisation
Structure

Product
Strategy

Industrywide
Standardisation

Change in Strategy for maximizing ECR benefits

More collaborative and mutually productive relationships

Focus changed from negotiations to collaborative efforts to
meet consumer needs

P&G determined order quantities and timing based on

warehouse shipment data sent through EDI
Efficient operations through CRP implementation led to
accurate demand forecasting -> Lower inventory, fewer stock
outs

Value pricing program in lieu of frequent special programs

Elimination of geographic pricing differences
Focus on brand-loyal consumers rather than price-sensitive
consumers

Excess capacity build up for meeting uncertain demand

variations
Inefficient use of capacity

Efficient utilisation of plant capacity

Elimination of entire plants due to productivity gains
Reductions in employment levels

Organization structure based on brand management

approach
Brand managers had complete product responsibility

Organization structure shifted to Category management

Category manager responsible for overall pricing & product
policies

Focus on individual brands

High product variations or large no. of SKUs
Conflict between same branded products for resources

Focus shifted to fulfilling consumer needs through category

management -> New product innovations
Elimination of weaker brands
Standardisation of product packaging/labelling ->
Restructuring of SKUs

Decisions based on short term horizon -> Focus on

profit making

Long term strategic focus -> Sale of CRP system to IBM to

increase the adoption of CRP by other companies

O Question 4: What do you think the next steps

are for P&G?

Next Steps for P&Gs CRM Strategy

Area
Do more with
real-time CRM
data
Inbound

Actions
Obtaining store-level PoS data from retailers to get real-time data on demand, SKU
availability, consumer behavior, consumption patterns ideas for NPD
Continuous plan-make-ship processes; logistics innovation (eg: cross-docking)
Backward integration of CRP with suppliers to automate inbound sourcing
Segment customers: Key Account, Strategic Partner for collaborative marketing

Different
levels of CRM
engagements

SCM CRM (Key accounts) E-Business Automation (Strategic)

Customer-driven supply network, Vendor Managed Inventory for Key Accounts
Collaborative planning, forecasting and replenishment for strategic partners

Replication

Expansion of Value Pricing, CRP and category management to all product lines
Adaptive, dynamic approach of monitoring and evaluating the health of P&Gs supply
chain where alerts and actions can be triggered automatically

Enhancing
CRM Systems
& Processes

Ensuring reliability, uptime, recovery & high-availability of CRM-related data and

systems deployed globally to guarantee business continuity at all times
Simplified CRM application and data architecture to allow integration of new global
operations, customers and network alliances in the future

Metrics

Carefully define & track metrics for value additions through CRM engagements

Thank You.
Questions?