What has changed?
The consumer goods industry is facing one of the biggest changes in the competitive landscape: the rise of the digital consumer . Procter & Gamble (P&G) is relying on the application of digital technology and advanced analytics to meet the increasing needs of the digital consumer, and drive better innovation, higher productivity, lower costs, and the promise of faster growth .
Digitization brings down the walls, and the supply chain becomes a completely integrated ecosystem that is fully transparent to all the players involved — from the suppliers of raw materials, components, and parts, to the transporters of those supplies and finished goods, and finally to the consumers demanding fulfillment .
Product Flow through Supply Chain
P&G’s march towards digitization
P&G is leading transformation across several pillars of the end-to-end supply chain to minimize the cost of operations, reduce inventory and offer impeccable service without compromising on quality.
Immediate focus areas:
- Manufacturing plants: Digitize the production line data so any product can be tracked as it gets manufactured in the plants through various processing steps. This would enable real time troubleshooting and thus enhances productivity. Also, P&G is working on integrating the operational system with the financial system to see the costs of the product at the same time .
- Transport & Logistics: P&G created a digitally enhanced operational program to reduce “deadhead” movement by about 15 percent. This aids in customer service improvement and reduction in inventory across the supply chain .
- Retailers: P&G uses and supports Global Data Synchronization Network, which is basically a standardized data warehouse that allows them to do commerce with their retail partners in a totally automated way, with no human intervention. This helps minimize errors in orders between retailers and suppliers, and thus avoiding potential cost hurt .
- Advance Planning & Optimizer (APO) system: APO is a suite of supply chain planner applications that increase overall knowledge of the supply chain and provide forecasting, planning and optimization. P&G is transitioning the ordering systems to APO. Supply and demand signals would originate at any point and travel immediately throughout the network. Low levels of a critical raw material, the shutdown of a major plant, a sudden increase in customer demand — all such information will be visible throughout the system, in real time. This would make the supply network both resilient and responsive .
- Improving data at source: P&G tracks key metrics on a cockpit interface on the computers, and deep dive immediately if anything goes beyond tolerances. Because the company rely on external data partners, getting the data becomes part of the currency for the relationship. While doing the joint business planning with retailers, P&G would have a scorecard, and the algorithm is all about value creation .
- Improving sales forecast accuracy: The use of big data and analytics to sense and adapt to fluctuations in demand, and to respond accordingly when unexpected changes arise . P&G is partnering with predictive analytics experts to improve sales forecasting and better understand the impact of macro-economic factors on demand. This has the potential to reduce the safety stock inventory by around 15% .
- Leveraging artificial intelligence: P&G also focuses on such applications as AI-based “bots” for customer service payment processing (which can also be used for IT support and operations), and machine learning for optimizing marketing spend, supply chain, and trade promotion (which benefits both P&G and its retailer customers) .
Supply chain professionals expect digitization to bring significant economic benefits to both top and bottom lines: Companies with highly digitized supply chains and operations can expect efficiency gains of 4.1 percent annually, while boosting revenue by 2.9 percent a year .
There is some progress but a long way to go. P&G would have to increasing operational efficiency across many more areas at a faster pace by leveraging Supply Chain 4.0 (model developed by Mckinsey ) – the Internet of Things, advanced robotics, analytics, and big data – to jump-start performance, and customer satisfaction. Supply Chain 4.0 will affect all areas of supply-chain management. This is evident in the way the main Supply Chain 4.0 improvement levers shown in the outer circle of Exhibit map to six main value drivers (the inner circle). In the end, the improvements enable a step change in service, cost, capital, and agility.
Have we figured out everything? May be not
- As supply chain becomes more digital, the challenge is to ensure the supply chain remains resistant to cyber attacks. How?
- For most of the multi-national companies, maximum growth is coming from emerging markets. Will emerging markets be able to keep pace with digitization, and that too in a cost effective way?
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