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ANALISYS OF OPERATIONS MANAGEMENT

PROCTER & GAMBLE

By:

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MGMT 6100: Productio !d O"#r!tio$ M!!%##t


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ii


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TABLE OF CONTENTS

1' COMPANY (ISTORY 1

)' OPERATIONS )

)'1 G##r!* o+#r+i#, o- o"#r!tio$ )

)') Product$ .

)'. Proc#$$ /

)'/ #rtic!* It#%r!tio

)' 2#!d M!!%##t

)'6 C!"!city 6

)'3 F!ci*ity *oc!tio 6

)'4 I+#tori#$ 3

)'5 Su""*y C!i M!!%##t 3

)'10 Or%!i7!tio89or Forc# M!!%##t 5

)'11 ;u!*ity 10

.' PROCTER & GAMBLE E


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1' COMPANY (ISTORY

William Procter and James Gamble founded P&G as a partnership in 1837 in Cincinnati, Ohio

by merin Procter!s candle ma"in company #ith Gamble!s soap business$ %he company re#

to 1mn in sales by 18'($ P&G!s initial foray into brandin #as %he )oon and *tars, a

trademar" that appeared on all company products startin in the early 18+s$ -n 1887, P&G

became one of the first companies in .* to offer a profit/sharin proram for its employees$ -n

1(0, P&G #as one of the first companies to create a mar"et research department to study

consumer preferences and beha2ior$

%he company!s mar"etin oraniation and brand manaement system bean to e2ol2e in the

early 1(3s$ -n 1(33, P&G!s O4ydol soap po#der sponsored a radio serial proram$ P&G had

been a late lobalier$ 5ut after World War --, P&G bean its international e4pansion in riht

earnest$ -n 1(8, it established an o2erseas di2ision #hile openin its first 6atin merican

subsidiary in )e4ico$ P&G entered urope in 1(', *audi rabia in 1(+1 and Japan in 1(73$ 5y

1(8, P&G #as operatin in 03 countries and reportin o2er 1bn in annual sales$ 5y the mid/

(s, o2er half of its sales came from outside .*$ s its lobal e4pansion proressed, P&G

continued to modify its structure and internal processes to ma4imie lobal le2erae$ 9arious

initiati2es #ere launched to facilitate e4chane of "no#lede and best practices across the

company$


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P&G!s lobal success has led to top honors for the company, for achie2ements ranin from

en2ironmental protection and animal/testin alternati2es to superior product ?uality and

mar"etin e4pertise$Fortune maaine has included P&G in its EWorld@s )ost dmired

CompaniesF list from 1(8' to 01 and, most recently, iff/Ha2is Smart Business editors

included Procter & Gamble in their 01 list of E%op ' >et *a22y .$*$ Oraniations$F

>o#adays, P&G is transformin its lobal structure from one based on four eoraphic reions

into one based on product lines$ %he ne# structure #ill create se2en lobal business units

responsible for buildin mar"ets at the local le2el and raisin brand a#areness amon

consumers$ On the production end, P&G is standardiin production lines #orld#ide to better

alin them #ith o2erall manufacturin capacity$

)') Product$

P&G!s products are di2ided into the follo#in maIor roupsB

S#%#t Br!d$

B!?y C!r# Pampers, 5ibsters, 6u2s

B#!uty C!r# Old *pice, Co2er Girl, )a4


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Product life cycle :P6);B P&G, bein a mar"et leader #ith more than ' cateories and about

3 brands, has products life cycle in all the four staes, namely introduction, ro#th, maturity

and decline$

Product He2elopmentBP&G is uni?ue #hen it comes to inno2ation$ %he company bases its

product de2elopment stratey onB

deep understandin of consumers, their habits and product needs$

%he capability to ac?uire, de2elop and apply technoloy across P&G@s broad array of

product cateories$

%he ability to ma"e connections bet#een consumers@ #ants and #hat technoloy can

deli2er$

)'. Proc#$$

%he processes 2ary #ith products rane and brand lines$ With the lare 2ariety of product

cateories and brands to produce, inputs rane from fabrics, to chemical, health, and food

inredients$

Process %echnoloyBP&G inno2ation focuses on t#o main approaches, thus it becomes an

industry leader in technoloyB

*ettin ne# performance standards in e4istin cateoriesB Kecent e4amples include %ide

and riel compact deterents that remo2e stains and sanitie laundry #hile protectin

the oriinal fabric colors$


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Creatin entirely ne# cateories and benefitsB Kecent e4amples include


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dynamic replenishment$ P&G initiated the Consumer/Hri2en *upply >et#or" based on the

modelin #or" that 5iosGroup did$

s a result, P&G is mo2in to a system that has brouht se2eral ad2antaesB

P&G is loo"in at real/time demand triers, such as point/of/sale information that

comes directly from a retailer!s scanner$

P&G is chanin the #ay it plans and manufactures oods$ -nstead of doin batch/

plannin in plants, #hich the company currently does once a day, the company realied it

could update the plan t#o or three times durin the course of the day if it had real/ or

near real/time information$

s far as less/than/full truc"loads, P&G has made an educated uess and decided to rela4

the rules by up to 1 percent$

)'6 C!"!city

P&G ha2e mainly lare 2olume output capabilities as their process is continuous or lare batch

sies and mainly produce/to/stoc" rather than produce/on/demand$ 5ein a leader in many of the

product lines, P&G mainly ta"e ad2antae of economies of scale to ensure product a2ailability to

consumers$

)'3 F!ci*ity *oc!tio

P&G #as moti2ated by Politics, con2enient access to maIor hih#ays and rail#ays, ta4

incenti2es, and financin$ 4ample, P&G announced in January 01 plans to build an 8',/

s?uare/foot distribution facility at Gate#ay Commerce Center in )adison County in -llinois$


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P&G mo2e to consolidate their business at Gate#ay Commerce Center in *outh#estern -llinois

is proof of ho# ?uic"ly this area is becomin a location of choice for transportation/sensiti2e

companies$

%he company chose to locate the )id#est facility in *outh#estern -llinois because of the area@s

con2enient access to maIor hih#ays and rail#ays and the #illinness of local, state and county

o2ernment to #or" #ith them on nterprise one and %a4 -ncrement


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Pre2ious #or" has reduced the company@s supply/chain cycle from 1/plus days in the 1('s

throuh the 1(8s to 13 days in the 1((s$ %hrouh an initiati2e the company calls fficient

Consumer Kesponse --, P&G is loo"in to reduce the cycle further to +' days, ho#e2er, it is not

an easy tas"$ Currently P&G has , internal Web sites, 0', oraniational nodes, 7,

materials, 0, products, ', customers, and 1 million parts$

EWe@re chanin our o2erall approach to supply chain manaement to become e2en more

consumer centric,F said )i"e Po#er, President, Global 5usiness *er2ices$ EWhen consumers

#al" into a retail en2ironment, they #ant the riht product at the riht time at the riht place$

%hey don!t #ant to find it out of stoc"$ %hat@s a disappointment to them and a lost sale for us$

*ystems based on real/time data allo# us to deli2er a much better result, meanin fe#er out of

stoc"s, on time deli2ery, more desirable products, and a 2ery satisfied consumer$F

Goin for#ard, P&G!s 2ision is to e4tend its diital capability to re2olutionie the #ay business

ets done$


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)'10 Or%!i7!tio89or Forc# M!!%##t

Oraniation 0'B %his is a proram that aims to chane P&G@s culture from a conser2ati2e,

slo#/mo2in, bureaucratic behemoth to that of a modern, fast/mo2in, -nternet/sa22y

oraniation$ P&G #ants to ma"e faster and better decisions, cut red tape, #rin costs out of

systems and procedures, fuel inno2ation, set more aressi2e sales oals and nearly double its

re2enue$

-t in2ol2es comprehensi2e chanes in oraniational structure, #or" processes and culture to

ma"e employees stretch themsel2es and speed up inno2ation$ %he proram also see"s to le2erae

P&G!s lobal presence$ -t is intended to boost sales and profits by introducin an array of ne#

products, by closin plants and by eliminatin Iobs$

%he cultural chanes introduced by Oraniation 0' is creatin an en2ironment that produces

bolder, more stretchin oals and plans, bier inno2ations and reater speed$ s of the #hole

stratey the re#ard system #as redesined in order to strenthen the lin" bet#een e4ecuti2e

compensation and results$

OutsourcinB *ee"in to focus on increasin sales of its consumer products, P&G is proressin

#ith a plan to hire other companies to ta"e o2er 2arious administrati2e tas"s$ P&G says this plan

#ill allo# it to use the e4pertise of other companies in certain areas, so it can concentrate on

buildin sales of its nearly 3 consumer brands$


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P&G has an areement in principle #ith Jones 6an 6a*alle -nc$, a Chicao/based real

estate manaement firmL the deal is to co2er all of P&G@s research centers and offices$

1/year contract for =e#lett/Pac"ard Co$ to assume its information technoloy ser2ices$

=e#lett/Pac"ard is to absorb 1,8' P&G employees$

P&G also hopes to reach separate deals to hire out its employee ser2ices and accounts

payable operations, #hich also #ould in2ol2e transferrin #or"ers to the contractors$

)'11 ;u!*ity

P&G uses its Muality ssurance Proram to help the company achie2e superior business results

by pro2idin hihly effecti2e and user/friendly ?uality systems #hich simultaneouslyB

ssure consumers et productspac"aes at desined acceptance$

ssure productspac"aes and sites meet all reulatory re?uirements

*inificantly contribute to speed and profit oals

stablish a World Wide Muality Culture

-n order to facilitate this 9ision, P&G utilies a system of 1( "ey elements that allo# it to

measure the results in its ?uality systems and implement chanes in such a #ay that help it

achie2e its obIecti2es$ %hose Dey lements are as follo#sB

1$ 6eadership

0$ %rainin

3$ Hesin, Construction & -nstallation

$


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+$ 9alidation

7$ =ouse"eepin, Pest Control, *anitiation & )aintenance

8$ *tartin )aterials

($ )a"in Operations

1$ Pac"in Operations

11$ *torae & =andlin of


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impro2e PG$com$ We@re constantly tryin to impro2e the ?uality of the ser2ices and features #e

offer on PG$com$ Ho you ha2e a suestionN -nternet is a reat #ay to stay close to increasinly

#ired consumers :5arlas, 03;$

.'1 Bu$i#$$ to Co$u#r

P&G has o2er 3 different consumer sites promotin its products$ )ost products ha2e their o#n

site, #here customers can learn product tips, technoloy behind the products, ne# inno2ati2e

uses for the products and pro2ide feedbac"$ P&G@s main corporate #eb site, httpB###$p$com,

has 2aried information about the company and in addition it is e/commerce enabled$ Consumers

interested in ne# and cuttin ede products li"e Crest White*trips #hich are not yet a2ailable

nationally, can purchase them there$ On 5eauty sites, li"e Olay, consumers can submit their

names and addresses to recei2e samples of their preferred products in the mail$

%estin ne# products and sendin samples to consumers is an e4tension of an old P&G

mar"etin techni?ue, #hich is usin the #eb to better taret customers$ P&G usually sends out

millions of samples #hene2er they launch a product in a ne# mar"et$ >o# they do it o2er the

-nternet to customers #ho are interested in the products, impro2in the response rate$

P&G ad2ertises its products on -nternet sites li"e yahoo, #omen$com and bebe$com, #here it

percei2es it@s taret audience to be$ 5anner ads #ere the first -nternet initiati2e that P&G too"

before it e4panded into sponsored sites and content on #omen$com and bebe$com$ P&G is

e4perimentin to see #hat #or"s on the -nternet$ -t is usin the net to e4tend its old techni?ues of

mar"et research, samplin, feedbac" and pro2idin coupons to users$ %he techni?ues that #or"

best shall be adopted and the others discarded$


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.') Bu$i#$$


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*copeB P&G intends to create one lobal information system usin the -nternet and internet

technoloies$ -t is #or"in on creatin tradin standards so that all it@s customers and suppliers

can easily use online mar"et places to trade and impro2e supply chains$

*trateic prioritiationB P&G is ma"in the #eb part of e2erythin it does$ %he company mo2ed

slo#ly in the initial years e2en thouh they snapped up a fe# hundred domain names$ >o# they

ha2e put appro4imately + of them up for auction on GreatHomains$com, an -nternet domain

name auction site$

.'/ P&G=$ Itr!#t

-nternally, P&G bean the e2olution to an e/culture by connectin nearly all employees to the

-nternet and pro2idin self/ser2ice applications, includin a broad rane of e/employee

applications li"e online benefits enrollment, salary manaement, and option e4ercise, to name a

fe#$

P&G!s corporate portal is no# a2ailable to more than +8, employees #orld#ide, 3', of

#hom ha2e adopted it as their primary tool for daily Iob/related information access$ P&G

e4pects impro2ed access to internal information and applications #ill help sharpen mar"et focus,

shorten product de2elopment cycles and impro2e sales throuh faster in?uiry response$ Other

benefits includeB

-ncreased producti2ity

-mpro2ed resource utiliation

Content consolidation and cost reduction

*tandards for future application de2elopment


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hihly reliable results that enable P&G to et to mar"et faster #ith ne# products that customers

#ill buy$

/' CONCL>SIONS

arly -nternet initiati2es, at P&G, in2ol2ed ta"in current business processes to the

-nternet$ P&G became a maIor ad2ertiser on #ebsites, and it created destination #ebsites

for its products$ -n the ne4t phase, P&G is reducin costs by ta"in its supply chain to the

-nternet, it is increasin re2enues by offerin its patents for licensin or sale, and it is also

usin the -nternet as a collaboration tool bet#een it@s 2arious research centers around the

#orld$ 2entually P&G #ishes to see all its processes -nternet enabled, to impro2e

supply chain manaement, collaboration and mar"etin of its products$

%he company!s strenths lie in its commitment to pro2idin products of superior ?uality

and 2alue that impro2e the li2es of the #orld!s consumers, bein a #orld leader in

rele2ant scientific research and technoloy, and maintainin economic success based on

P&G!s e4perience in manain the business #ith e4cellence and in2estin in a #ell/

trained #or" force$


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KC*

Proctor & Gamble, Chemical Webpae$ :n$d$; httpB###$pchemicals$com?uality$shtml$Ketrie2ed on July ', 03

Ha2is, J :)arch 13, 00;$ Proctor and Gamble re#or"s its supply chain$httpBarchi2e$info#orld$comarticleshn4ml13131313hnpn$4ml$ Ketrie2ed on July ',03

scet :1(((;$ 9olume 1$ Proctor & Gamble$ httpB###$ascet$comdocuments$aspNd-HQ03Ketrie2ed on July 7, 03

*onini, )$ 6$ :00, *eptember 1(;$ ComputerWorld$ Procter & Gamble turns to *P@s POfor supply chain boost$httpB###$computer#orld$comsoft#aretopicserpstory,181,73+,$html$Ketrie2ed onJuly 7, 03

-ntellient nterprise :01, July 0;$ >e# & nalysis$ Procter & Gamble %a"es on the *upplyChainhttpB###$intelliententerprise$comonlineonlyne#s170$shtml$ Ketrie2ed on July1, 03

5arlas, H$ :03, pril 11;$ 6ine '+$ Proctor and Gamble$httpB###$line'+$comarticlesdefault$aspNrticle-HQ'+8&mlQ3$ Ketrie2ed on July 7, 03

)cGar2ey, K$ :00,


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Proctor & Gamble :n$d$; 5usiness in ndes 03, 5alancin conomic Opportunity and PoliticalKis"$ httpB###$foreinpolicy$comandeansponsorsProctor&Gamble#$pdf Ketrie2ed on July7, 03
http://www.foreignpolicy.com/andean/sponsors/Proctor&Gamblew.pdfhttp://www.foreignpolicy.com/andean/sponsors/Proctor&Gamblew.pdfhttp://www.foreignpolicy.com/andean/sponsors/Proctor&Gamblew.pdf

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