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Supply Chain Management (SCM)

Describe about the Supply Chain Management of Procter and Gamble Company?

This paper highlights the various aspects of using a supply chain management software in an organization. In order to do so, the supply chain management software used by the US based multinational company Procter and Gamble has been considered.

Supply Chain Management (SCM) is the activity of managing the flow of goods into and out of an organization and the associated services (Cao, Ren, Shi & Li, 2011). The activity includes management of the procurement and storage of the raw materials that the business needs for its production, the management of the inventory of the ongoing products and that of the finished goods: starting right from the point that the raw materials are produced to the point at which they are consumed (Demmer, Weinmiller & Pieroth, 2004). The interconnection of mutually linked business nodes, business channels and network which are responsible for providing the services and products of the company to the customers form a supply chain. The technology of supply chain management can technically be defined as the process which looks after the design of a supply chain, the plan of its execution, the actual process of execution, the control over the execution process, and performs the monitoring of various supply chain functionalities with the aim to create a net value, and build an infrastructure which would be competitive, would be able to leverage logistics from all over the world , would be able to synchronize the supply of the products according to the worldwide demands and thus be able to measure  the performance of the product globally (Han & Thomas, 2013).

The activities which are performed in the process of Supply Change Management have the ability to help an organization to effectively increase the efficiency of the  production cycle of the products, while a downward pressure  will be put on its costs, so  as to implement a safeguard procedure towards the  maintaining and if possible, increasing the profit .

Procter & Gamble Co., famously known as the P&G Co, is actually a multinational company based in the United States of America. The company produces goods for consumers  and has its headquarters located in downtown Cincinnati, Ohio, the United States of America. The company was actually founded by British nationals James Gamble and William Procter, hence the name of the company.

Procter and Gamble manufactures a very wide range of consumer products which include products used for the purpose of personal care, for cleaning agents, food for animals and pets and much more. The Procter and Gamble company also used to manufacture edibles, that is, food products and beverages before they actually sold of  company sold off ‘Pringles’ to their prime competitor company, the Kellogg Company.

P&G had declared a total revenue sale of $83.1 billion in the year 2014.

Until the year 1987, the pattern of accepting or processing orders in the sector of supply chain for consumer products was hugely dependent on the terms and decisions made in between the sales officer of the manufacturer and the retail customer. The situation continued until Procter & Gamble incorporated a mainframe computer application from the IT vendor IBM, which aimed at   "continuous replenishment" of goods. P & G appointed IBM to re-engineer the whole application such that it could be used in retail sectors dealing with consumer products, re-wrote it for consumer goods to retail sectors dealing with consumer products, thus dramatically changing the management of supply chain. The whole process of ordering now became based on proper sales data and revenue generation. This particular application was re-engineered several times more in order to be implemented into other domains and as a result dramatically changed that entire process of value chain by driving orders based on DC withdrawals and sales data (Han & Thomas, 2013).

Procter and Gamble Company: the history of supply chain management

In a legendary meeting in between the then CEO of P&G company and Sam Walton, a CR program was devised which later on changed the history of supply change management. This particular program became instrumental in propelling Wal-Mart towards retail dominance, thereby building the foundations for various other strategies like Category Management, Continuous Planning, Efficient Consumer Response (ECR),   Forecasting and Replenishment (CPFR), and much more (McLaren & Manatsa, 2011).

P&G manages inventories for most of the large retailers who buy food, mass merchandise and drug from them. The representatives of the customer service of the company use CRP for the purpose of monitoring the movement of products at the distribution center of the retailer, based on goods that being sold every day  or the replenishments of these goods and their movements, and thus are able to make short term predictions on the movement of goods and the condition of the inventory. The daily replenishment process of the company can be handled by the software itself and it needs no or very less human intervention for the process, until and unless there are situations which can be thought of being exceptions or situations that fall outside the established domain or parameters (Mohtashami, Deek & Im, 2011).

These customer service representatives are able to maintain a consistent and close collaborative business relationship with the retail customers or partners, with the aim of facilitating the forecast of any promotional replenishments or customized offers more accurately than ever before (Priem & Swink, 2012).

The company representative and the category manager of the company’s retailer customer can decide on the amount of the order of any promotional product or offer product. This particular figure then has to be manually inserted into the database system that CRP supply chain management program that IBM maintains for Procter and Gamble. Based on these figures, the software is able to calculate or estimate the total amount of replenishment that the retail customer would need ('Special Topic Forum on Resources and Supply Chain Management', 2013).

The information flow in the supply chain management software used by Procter and Gamble was one of its kinds. Its unique facilities provided the organization with exact figures and numbers of product that the retail customers of the company require. This information helps in the process of timely shipment of orders to the right customers, such that the P and G products are always available in the market. Beside creating and maintaining the goodwill of the company, the replenishment strategy also lets the company keep a keen eye on their exact figure of productions (Viterouli, 2014). The company can track all  their products very minutely and decide on which range of products need further promotions, which products need to be rebranded and products need to be re launched in the market ('Special Topic Forum on Supply Chain Management in Emerging Markets: Critical Research Issues', 2013). A tight vigilance on all the products of the company, the revenue generated by them and an assumption of popularity of a product the market based on the patterns of replenishment that retail customers need, has helped P & G to maintain the quality of their products. Even various management decisions including those of streamlining their various products and selling off others to their competitors are taken based on information gather from their replenishment system (Tate & Ellram, 2012).

After incorporating the supply chain management system in their business strategy, P& G has been benefitted in the following ways (Viterouli, 2014):

  • Complete and on time orders which have been invoiced correctly and which have been delivered without any damage to the products are termed as perfect orders. After the incorporation of the supply chain management software in their business, P& G’s perfect orders were increased by about 5 percent on what previously was.

  • The reports of damaged products reduced by 19%.

  • Reports of retail customers returning product orders due to damaged products, incomplete orders, untimely orders and/or incomplete invoice have reduced by 36%.

  • Production plants suffer from surges in manufacture of products, from time to time, due to the variability in shipments and sales of products. However after incorporating the supply chain management software, P& G has been able to reduce such surges in production as the software is able to level up the peaks and valleys of demand. The reduction in the surge of products have helped in maintaining the quality of the products and also makes the maintenance of the machineries used in the production plants easier than before.

  • As replenishment orders from the retail customers can be predicted before hand, transit facilities can also be planned previously. This procedure has actually reduced the transit and transport charges of the company by a whopping 38%. The savings from this sector alone proves the utility of using the supply chain management system in the organization.

Conclusion:

An in-detailed discussion about the supply chain management software used in the organization has been made in this report.

Reference:

Cao, C., Ren, C., Shi, W., & Li, J. (2011). A Study on Supply Chain Management of Software-Focused Products. AMM, 66-68, 995-1000. doi:10.4028/www.scientific.net/amm.66-68.995

Demmer, A., Weinmiller, S., & Pieroth, G. (2004). Investitionsrechnung bei Procter & Gamble Value Finders at Work. Controlling Und Management, 48(S1), 6-14. doi:10.1007/bf03255751

Dodgson, M., Gann, D., & Salter, A. (2006). The role of technology in the shift towards open innovation: the case of Procter & Gamble. R&D Management, 36(3), 333-346. doi:10.1111/j.1467-9310.2006.00429.x

Han, C., & Thomas, S. (2013). Is Open Innovation Working? The Case of Procter & Gamble. Academy Of Management Proceedings, 2013(1), 16776-16776. doi:10.5465/ambpp.2013.16776abstract

McLaren, T., & Manatsa, P. (2011). Distinguishing the indistinguishable: exploring differences in supply chain software packages using centering resonance text analysis. International Journal Of Logistics Systems And Management, 8(2), 167. doi:10.1504/ijlsm.2011.038601

Mohtashami, M., Deek, F., & Im, I. (2011). Critical factors in collaborative software development in supply chain management. IJITM, 10(2/3/4), 233. doi:10.1504/ijitm.2011.042589

Priem, R., & Swink, M. (2012). A Demand-side Perspective on Supply Chain Management. J Supply Chain Manag, 48(2), 7-13. doi:10.1111/j.1745-493x.2012.03264.x

Special Topic Forum on Resources and Supply Chain Management. (2013). J Supply Chain Manag, 49(3), 111-111. doi:10.1111/jscm.12028

Special Topic Forum on Supply Chain Management in Emerging Markets: Critical Research Issues. (2013). J Supply Chain Manag, 49(1), 116-116. doi:10.1111/jscm.12017

Tate, W., & Ellram, L. (2012). Service Supply Management Structure in Offshore Outsourcing. J Supply Chain Manag, 48(4), 8-29. doi:10.1111/j.1745-493x.2012.03283.x

Viterouli, M. (2014). How can a company increase its market share? The case of Procter & Gamble. International Journal Of Decision Sciences, Risk And Management, 5(4), 421. doi:10.1504/ijdsrm.2014.068159

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