Supply-Chain Integration Supply-Chain Integration through Information through Information

Sharing:Sharing:Channel Partnership between Channel Partnership between

Wal-Mart and Procter & Wal-Mart and Procter & GambleGamble

Presented by:- Pearl JunejaPresented by:- Pearl JunejaNaveen KumarNaveen Kumar

RajlaxmiRajlaxmiAnupamAnupam

Mohit GuptaMohit Gupta

INTRODUCTIONINTRODUCTION

One of the major transformations in the One of the major transformations in the rapidly evolving digital economy occurs rapidly evolving digital economy occurs in the supply chains of both traditional in the supply chains of both traditional and e-commerce companies. Information and e-commerce companies. Information technology has enabled channel partners technology has enabled channel partners to trade goods, share information, and to trade goods, share information, and integrate their processes, thereby integrate their processes, thereby reshaping the inter-organizational reshaping the inter-organizational dynamics and resulting in more efficient dynamics and resulting in more efficient channels. Electronic integration of data channels. Electronic integration of data and the automation of business practices and the automation of business practices has driven costs down and built sales by has driven costs down and built sales by better satisfying consumer needs.better satisfying consumer needs.

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major players in their industries, P&G and major players in their industries, P&G and Wal-Mart found a way to leverage on Wal-Mart found a way to leverage on information technology by sharing data information technology by sharing data across their mutual supply chains . Because across their mutual supply chains . Because of the information partnership described in of the information partnership described in this paper, the resulting channel has become this paper, the resulting channel has become more efficient because channel activities more efficient because channel activities become better coordinated. There are reduced become better coordinated. There are reduced needs for inventories with increased sales needs for inventories with increased sales by focusing on selling what the customers by focusing on selling what the customers want. All in all, the supply chain between want. All in all, the supply chain between P&G and Wal-Mart has adopted a much better P&G and Wal-Mart has adopted a much better customer focus through the channel customer focus through the channel partnership. And it is partnership. And it is mutually beneficial.mutually beneficial.

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The power of inter-organizational information The power of inter-organizational information systems (IOIS) is well know in the literature systems (IOIS) is well know in the literature of information systems research. It has of information systems research. It has proven to be an effective tool for reducing proven to be an effective tool for reducing transaction costs. But the P&G and Wal-Mart transaction costs. But the P&G and Wal-Mart partnership has gone further. To understand partnership has gone further. To understand the impact fully, one has to think about the impact fully, one has to think about three progressive degrees of IOIS: three progressive degrees of IOIS: transactional, operational, and strategic transactional, operational, and strategic (Seidmann and Sundararajan, 1998). The (Seidmann and Sundararajan, 1998). The strategic partnership is the most involved, strategic partnership is the most involved, with the greatest commitments from the with the greatest commitments from the partners and requiring the strongest trust. partners and requiring the strongest trust.

we will now see how P&G and Wal-Mart we will now see how P&G and Wal-Mart developed this partnership,the main developed this partnership,the main initiatives adopted in the process, and initiatives adopted in the process, and how the two companies, who are at the how the two companies, who are at the same time competitors and partners, same time competitors and partners, created values from the partnership. created values from the partnership. Furthermore, it is a partnership that Furthermore, it is a partnership that started with sharing information, but started with sharing information, but has since permeated throughout all has since permeated throughout all levels of the two organizations.levels of the two organizations.

Business backgroundBusiness background

By : Pearl JunejaBy : Pearl Juneja

Business backgroundBusiness backgroundIt explains the business relationship It explains the business relationship between P&G Wal-mart. The business between P&G Wal-mart. The business situation in 1988 between P&G and Wal-Mart situation in 1988 between P&G and Wal-Mart was broken. The business itself was $375 was broken. The business itself was $375 million and growing. In spite of this, the million and growing. In spite of this, the business relationship between the two business relationship between the two companies was poor. P & G had organized companies was poor. P & G had organized itself into12 different internal product itself into12 different internal product divisions.divisions.

Each division had different sales managers Each division had different sales managers that would separately and independently that would separately and independently call on Wal-Mart. These individuals were call on Wal-Mart. These individuals were accountable for the sales results of each accountable for the sales results of each division and never came together to division and never came together to represent P&G as a whole.represent P&G as a whole.

Contd…Contd…

Due to the Adversarial relationship, Due to the Adversarial relationship, Wal-Mart did not like doing business Wal-Mart did not like doing business with P&G, because P&G organizations were with P&G, because P&G organizations were too complicated and inflexible.too complicated and inflexible.

Transactional focus. P&G were obsessed Transactional focus. P&G were obsessed by day by day selling, in which success by day by day selling, in which success was that you got the order today - was that you got the order today - failure was that you did not. Efforts failure was that you did not. Efforts were made to push for sales irrespective were made to push for sales irrespective of what the customer needed, or was of what the customer needed, or was rewarded for. There were no testing or rewarded for. There were no testing or long term planning.long term planning.

Contd…Contd…

Fragmented processes. Relationship Fragmented processes. Relationship and activities were managed by the and activities were managed by the buying and selling function only. The buying and selling function only. The selling function within P&G was selling function within P&G was responsible for all customer responsible for all customer activity. They were responsible for activity. They were responsible for selling at the customer. The role selling at the customer. The role that information systems played in that information systems played in the relationship was non-existent. the relationship was non-existent. The IT group typically got involved The IT group typically got involved only after phone calls down the chain only after phone calls down the chain informed us that a technology project informed us that a technology project such as Electronic Data Interchange such as Electronic Data Interchange (EDI) was requested by the customer.(EDI) was requested by the customer.

Contd…Contd…

The point from where relationship got The point from where relationship got completely destroyed. When Sam Walton completely destroyed. When Sam Walton called Procter and Gamble’s CEO to inform called Procter and Gamble’s CEO to inform him that Wal-Mart had awarded P&G their him that Wal-Mart had awarded P&G their prestigious “Vendor of the Year” Award.prestigious “Vendor of the Year” Award.

P&G began to re-think the way it P&G began to re-think the way it approached its customers about the same approached its customers about the same time. The newly appointed Vice - President time. The newly appointed Vice - President of Sales of P&G met with Sam Walton and of Sales of P&G met with Sam Walton and discussed the P&G/ Wal-Mart relationship. discussed the P&G/ Wal-Mart relationship. Mr. Walton indicated that it was a shame Mr. Walton indicated that it was a shame that two quality companies could not work that two quality companies could not work together effectively.together effectively.

He shared that P&G had an extremely He shared that P&G had an extremely overcomplicated and inflexible sales overcomplicated and inflexible sales organization. He stated if P&G thought of organization. He stated if P&G thought of Wal-Mart stores as an extension of the P&G Wal-Mart stores as an extension of the P&G company, P&G would treat Wal-Mart company, P&G would treat Wal-Mart differently. This challenge became the differently. This challenge became the rallying cry for the two companies.rallying cry for the two companies.

Working Relationship between Working Relationship between P&G and Wal-Martbefore the P&G and Wal-Martbefore the

Channel PartnershipChannel Partnership

Working Relationship between Working Relationship between P&G and Wal-Mart the P&G and Wal-Mart the Relationship TodayRelationship Today

Contd…Contd…P&G and Wal-Mart have improved the P&G and Wal-Mart have improved the profitability of both companies by using profitability of both companies by using multifunctional resources to drive out multifunctional resources to drive out costs and improve sales. Together they use costs and improve sales. Together they use technology as a method to drive out costs, technology as a method to drive out costs, and openly share data to better understand and openly share data to better understand our joint customer - the consumers.our joint customer - the consumers.

Technology has played a key role with Wal-Technology has played a key role with Wal-Mart in three areas:Mart in three areas:

1. Joint scorecards and measurements1. Joint scorecards and measurements2. Driving out costs through automation2. Driving out costs through automation3. Sharing data to better understand the 3. Sharing data to better understand the consumer and drive salesconsumer and drive sales

Channel Collaboration Channel Collaboration and Information and Information

PartnershipPartnership

By: AnupamBy: Anupam

Channel Collaboration Channel Collaboration and Information and Information PartnershipPartnership

Reporting system was done geographically Reporting system was done geographically to track the amount of product sold.to track the amount of product sold.

But they didn’t have system to track total But they didn’t have system to track total product sales by customers.product sales by customers.

P&G shipment data proved helpful to know P&G shipment data proved helpful to know business with Wal Mart.business with Wal Mart.

Some of the question were in mind of Wal Some of the question were in mind of Wal Mart to understand customer needs were:-Mart to understand customer needs were:-

How much product was sold at stores last How much product was sold at stores last year.year.

How many customers brought P&G productsHow many customers brought P&G products

What were profitability of these products What were profitability of these products in realation for both P&G and Wal Mart.in realation for both P&G and Wal Mart.

Wal Mart is now online to track all Wal Mart is now online to track all sales of all products in all stores.sales of all products in all stores.

P&G & Wal Mart jointly developed a P&G & Wal Mart jointly developed a data highway for sharing information data highway for sharing information just to meet customer needs.just to meet customer needs.

Another aspect of information system Another aspect of information system function was to drive cost by function was to drive cost by leveraging technology.leveraging technology.

Information Sharing Information Sharing and Continuous and Continuous ReplenishmentReplenishment

By : RajlaxmiBy : Rajlaxmi

Additional Benefits of Additional Benefits of Information SharingInformation Sharing

&&Category ManagementCategory Management

By: Mohit GuptaBy: Mohit Gupta

Additional Benefits of Additional Benefits of Information SharingInformation Sharing

Industry standard Electronic Data Industry standard Electronic Data Interchange (EDI) were used to Interchange (EDI) were used to communicate key business documents.communicate key business documents.

Purchase orders, invoices, advanced Purchase orders, invoices, advanced shipment notification & financial shipment notification & financial payment are the few examples of EDI.payment are the few examples of EDI.

But simplifying the business process is But simplifying the business process is good then applying technology.good then applying technology.

P & G’s relationship with Wal-P & G’s relationship with Wal-MartMart

By 1990, it was headed in positive By 1990, it was headed in positive direction.direction.

Joint sales, standard scorecards were Joint sales, standard scorecards were the proud of the progress of the the proud of the progress of the partnership.partnership.

But they always had the issues in the But they always had the issues in the area of accounts payable/receivablearea of accounts payable/receivable..

Issues in the area of accounts Issues in the area of accounts payable/receivablepayable/receivable

P&G had developed a billing accuracy P&G had developed a billing accuracy system that was use to measure P&G’s system that was use to measure P&G’s invoices against the Wal-Mart’s purchase invoices against the Wal-Mart’s purchase orders.orders.

P&G found that Wal-Mart’s accuracy was 95% P&G found that Wal-Mart’s accuracy was 95% more in comparison to them.more in comparison to them.

Wal-Mart stated that P&G was their worst Wal-Mart stated that P&G was their worst vendors with the lowest purchase order to vendors with the lowest purchase order to invoice match rate.invoice match rate.

Assessment of the IssueAssessment of the IssueP&G placed a person from their customer P&G placed a person from their customer service organization into Wal-Mart ‘s service organization into Wal-Mart ‘s accounts payable group.accounts payable group.

After a 3 weeks assessment, P&G found After a 3 weeks assessment, P&G found that they had different definitions of that they had different definitions of billing accuracy.billing accuracy.

The automation through EDI only moved The automation through EDI only moved bad data transfer and hence resulting in bad data transfer and hence resulting in re-working both systems.re-working both systems.

Solution of the IssueSolution of the Issue

Always technology plays an Always technology plays an important role in identifying & important role in identifying & correcting pricing errors.correcting pricing errors.

Customer Table Checking Tool.Customer Table Checking Tool.

Customer Table Checking Tool

FinallyFinallyP&G purchase order invoice match rate P&G purchase order invoice match rate went from 15% to 95%.went from 15% to 95%.

This new system has resulted in P&G This new system has resulted in P&G moving from one of Wal-Mart’s worst moving from one of Wal-Mart’s worst vendors to one of the best.vendors to one of the best.

Now this tool has been used with P&G Now this tool has been used with P&G customers worldwide.customers worldwide.

Category ManagementCategory ManagementUsing the technology of data sharing Using the technology of data sharing allowed P&G and Wal-Mart’s partnership to allowed P&G and Wal-Mart’s partnership to make better consumer based decisions.make better consumer based decisions.

The key decisions made by retailers are -The key decisions made by retailers are -

– What are you going to buy?What are you going to buy?– Where are you going to put it?Where are you going to put it?– How are you going to price it?How are you going to price it?– When should it be promoted?When should it be promoted?

Category Management (contd…)Category Management (contd…)

Key questions from retailers can be Key questions from retailers can be answered by integrating data from three answered by integrating data from three sources -sources -

– Manufacturers market data.Manufacturers market data.– Retailers internal point of sale Retailers internal point of sale systems.systems.

– Third party market data providers Third party market data providers such as Nielsen or IRI.such as Nielsen or IRI.

Category Management Category Management (contd…)(contd…)

Retailers Point of Sale Retailers Point of Sale (POS)(POS)

It shows the results of the consumers It shows the results of the consumers choice, thus providing the actual choice, thus providing the actual demand.demand.

It provides the platform resulting in It provides the platform resulting in information on what is selling and the information on what is selling and the selling price.selling price.

Manufacturers Consumer Manufacturers Consumer DataData

It is helpful to understand why a It is helpful to understand why a product is being purchased.product is being purchased.

P&G studies consumer trends and P&G studies consumer trends and understanding these trends provide understanding these trends provide insights that the retailer itself does insights that the retailer itself does not have.not have.

Third Party Data ProvidersThird Party Data Providers

These helps in explaining the market These helps in explaining the market dynamics of a product.dynamics of a product.

It provides insight into consumer trends It provides insight into consumer trends and provides a perspective on growing and provides a perspective on growing consumer needs.consumer needs.

Key Key

The key is the integration of these 3 The key is the integration of these 3 data sources for making decisions.data sources for making decisions.

An integrated manufacturer/retailer An integrated manufacturer/retailer database should be used to share common database should be used to share common data scorecards & allow for quick data scorecards & allow for quick analysis by all parties but a analysis by all parties but a manufacturer and a retailer should agree manufacturer and a retailer should agree upon this earlier.upon this earlier.

ToolsTools

Retail link by Wal-Mart.Retail link by Wal-Mart.

Customer table checking tool by P&G.Customer table checking tool by P&G.

Again TechnologyAgain Technology

On the supply side, Wal-Mart have moved On the supply side, Wal-Mart have moved from EDI purchase orders and invoices to from EDI purchase orders and invoices to looking at CPFR (Collaborative Planning looking at CPFR (Collaborative Planning Forecasting and Replenishment).Forecasting and Replenishment).

The internet will provide the technical The internet will provide the technical platform to exchange information between platform to exchange information between manufacturers, retailers and third party manufacturers, retailers and third party data providers.data providers.

The Use of EXTRANET in Supply Chain

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