Procter and Gamble Company’s Strategic Supply Chain Management

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Introduction

Procter and Gamble Company have had superior performance over the years since its establishment. The firm deals with manufacture and distribution of a variety of consumer products on a global scale. The firm’s operations are divided into 3 Global Business Units (GBUs) which include well being, health and beauty. In the 21st century, consumer goods industry has become very competitive. This has made it paramount for firms in this industry to consider integrating effective competitive strategy. One of the strategies that the firm’s management has considered is the takeover strategy. In 2005, the management team of Procter and Gamble made a decision to take over Gillette Company. This resulted from a consideration of the fact the Gillette Company operates within the same industry as the firm and is its major competitor.

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In its operation, Procter & Gamble Company has incorporated an effective strategic Supply Chain Management (SCM). The SCM is also referred to as procurement strategy. Mentzer (2001, p.4), define supply chain management as a network involving a number of firms that are linked in their downstream and upstream operations. Considering the intensity of competition, firms must integrate effective supply chain management for them remain competitive. The ultimate objective of this linkage is to provide value to the final consumer.

The firm’s supply chain strategy has been formulated to fit with its corporate strategy which entails ensuring effective network optimization. The management team of Procter & Gamble Company has managed to be efficient in its SCM through integration of the concept of operation management. The strategy entails ensuring efficiency in all the firm’s operations through minimal resource utilization and effectiveness in meeting the customer’s needs. In the 21st century, consumers have become more health conscious. As a result, the management of Procter & Gamble intends to improve its competitiveness in its health and wellness segment by integrating Gillette Company‘s SCM into its SCM. In the initial integration phase, the firm’s management team has considered integrating oral care products into its own SCM.

Aim

The report is aimed at analyzing how Procter and Gamble Company can integrate Gillette Company strategic management issues into its supply chain strategy after taking over the firm.

Scope

The report entails a company analysis through SWOT analysis, Pestle analysis and Kra ljic models. The firm’s integration position is evaluated through consideration of process integration, manufacturing flow and physical distribution. In addition, the impact of the integration of the firm’s outsourcing strategy is outlined. Justification and impact of the integration on the firm’s corporate strategy are analyzed. Finally, a conclusion and recommendations are considered.

Company Analysis

SWOT analysis

The table below gives an illustration of Procter & Gamble strengths, weaknesses, opportunities and weaknesses in relation to health and wellness products.

Strengths
  • Consistency in manufacture of high quality products. This contributes towards an increment in the customers’ level of customer loyalty.
  • Strong financial base which enables the firm to be effective in implementing diverse operational strategies.
  • The firm has a 1strating in manufacture of oral care products such as mouthwash.
  • Effective integration of product diversity in production of oral care products
Weaknesses
  • Decline in revenue in some of the regions
  • Ineffective differentiation of the company products. This limits the competitiveness of the firm’s products.
Opportunities
  • A high probability of the firm improving its supply chain operations through integration of the emerging technologies such as the internet.
  • Achievement of synergy through integration of diverse expansion strategy. This will contribute towards the firm attaining a high competitive advantage.
  • The firm can improve its competitive advantage relative to its competitors by exploiting entrepreneurial opportunities resulting from demographic changes in emerging markets such as China.
Threats
-Intense competition from other firms such as Johnson & Johnson, Unilever and Kimberly-Clark Corporation.
-Economic slowdown which may culminate into reduction of consumers’ purchasing power.
– New regulations imposed by the government and other regulatory agencies may hinder the firm’s operation.

PESTLE analysis

According to Mentzer (2001, p. 9), the operations of a firm are affected by external business factors. These factors originate from political, economic, social, technological and legal environment. The table below gives an illustration of how macro-economic environment are affecting the operation of Procter & Gamble Company.

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Political and legal environment Economic environment Social environment Technological environment
China has enjoyed legal and political stability for a number of years. This has enabled Procter and Gamble to continue manufacturing and marketing its products in this market. Over the past decade, China has witnessed a high rate of economic growth. As a result, the country’s Gross Domestic Product has been greatly improved. This has culminated into an improvement in the consumers’ disposable income (Holz, 2005, p. 3). -The society is becoming more health conscious. This has culminated into a change in their consumption patterns. For example, the consumers are intensifying their search for product information in the process of making their purchase decision.
-Chinese consumers have developed a high trust for Procter and Gamble products over the years due to their high quality (Rien, 2006, para. 5).
-Increased technological innovation has culminated into an improvement in performance of firms in consumer goods industry.

Kraljic model

Considering the fact that firms dealing with FMCGs face intense competition due to a large number of firms in the industry, it is important for them to consider how to improve their profit levels. One of the ways through which these firms can achieve this is by producing high quality products through effective operation management. Effectiveness and efficiency in product development is attained through effective supply chain management. Through supply chain management, the management will be able to cope with resource scarcity.

Procter & Gamble Integration position

According to Mentzer et al (2004, p. 4), a firm’s supply chain management is integral to its corporate strategy. This means that the procurement or supply chain strategy must fit with corporate strategy. If this is not attained, there is a high probability of both the procurement and corporate strategy failing. For the takeover to contribute towards the firm attaining a high competitive advantage; it is paramount for the management team to consider various concepts of supply chain management. One of these issues relates to supply chain integration. According to Haozhe, Daughery and Landry (2009, p.1), supply chain integration is defined as the process of liking a number of business processes and functions across and within the firms into a comprehensive and effective business model.

In integrating Gillette Company’s SCM issues into its operation, the firm’s management should consider both internal and external integration.

Process integration

In integrating Gillette’s Company SCM, into its operation, Procter and Gamble Company should ensure that it incorporates process management. This entails developing a set of activities which the firm will undertake with predetermined outcomes. In addition, process management should contribute towards the firm improving its operational activities such as marketing, manufacturing and communication. A possible scenario in relation to business process in supply chain management relates to marketing. To attain a high market position, the management team must ensure that the firm sufficiently meets the customer demands. To achieve this, the firm’s marketing department should ensure that it communicates with both its retailers and distributors and those of Gillette Company. This will play a significant role in the process of determining the most effective way of satisfying the market demand. Through process integration, it will be possible for Procter and Gamble Company to leverage the information shared between its supply chain partners and that of Gillette Company.

In addition, effective integration of the Gillette Company SCM will be undertaken through collaborative work between its suppliers and buyers and undertaking joint product development. Alternatively, process integration should be ensured through utilization of shared information and shared information.Mentzer (2001, p. 9) asserts that an integrated supply chain requires the presence of established information flow system. There are a number of activities that the Procter & Gamble Company should consider in undertaking process integration. These include manufacturing flow management, customer relationship management, supplier relationship management, demand management and returns management.

Manufacturing flow

Goldsby and Dastugue (2003, p.33) asserts that manufacturing flow enables a firm to produce diverse products more efficiently. This means that minimal resources are utilized. To be able to attain manufacturing flexibility upon taking over Gillette Company, Procter and Gamble Company management team should ensure that extends its planning and implementation to its business partners (Goldby & Dastugue, 2003, p.1). This will enable the firm to be effective in responding to market changes. Procter and Gamble Company should make adjustment to its procurement process by integrating just-in-time strategy. This will culminate into the firm having shorter cycle time thus increasing the efficiency with which the firm meets its customer demands.

The integration process should also consider the procurement process. This will culminate towards an enhancement of the firm’s manufacturing flow. The procurement process should culminate into a reduction in the process of designing and developing health and wellness products.

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Physical distribution

For a product to contribute towards the firm’s success, it must be easily accessible in the entire market. This is achieved through integration of effective distribution in its marketing strategy. To integrate Gillette Company into its operation, the firm’s management should evaluate its distribution strategy to determine how it can attain effectiveness in its distribution. The management team should analyze the Gillette’s distribution strategy to determine the logistics which have been integrated by the firm in marketing its products. In addition, the management should consider blending both local and central network of suppliers involved in its supply chain.

Effect on outsourcing

In manufacturing the health and wellness products, Procter and Gamble Company will be able to improve on the value of its products. This results from the fact that the takeover will result into a synergistic effect in the firm’s operation. Through the acquisition, Procter and Gamble will improve on its concentration of activities which can be provided in-house with distinctive advantage. Due to the resultant synergistic effect, Procter and Gamble will be effective in focusing at its in-house activities. This means that the firm will subcontract all other activities necessary for the firm’s operation.

Justification of choices

By considering manufacturing flow, Procter and Gamble Company will be able to minimize the cost of operation through effective product development and procurement. In addition, physical distribution will culminate into an increment in the firm’s market share. This is due to the fact that the firm’s distributional strategy will be improved.

Impact on corporate strategy

Integration of Gillette’s company supply chain into Procter and Gamble Company will culminate into the firm attaining a high level of operational efficiency. Efficiency in supply management cannot be attained through ineffective supply chain management. By integrating supply chain and operational management the firm’s corporate strategy will be improved by becoming more responsive and efficient.

Conclusion

Upon conducting a take-over, the firm’s management team should consider of the ways through which it can integrate the SCM of the acquired firm within the organization. Integration of SCM should consider issues such as process integration, manufacturing flow and physical distribution. Through physical distribution, the firm will be able to enhance the distribution of its FMCGs to the entire market. On the other hand, manufacturing flow will enable the firm to respond to market requirements.

Recommendation

For Procter and Gamble Company management team to be able to integrate Gillette’s Company supply chain in its strategic supply chain management, it should consider the following recommendations.

  • Evaluate both Gillette’s Company internal and external supply chain so as to determine how to integrate the takeover into its supply chain.
  • The firm’s management should ensure that the integration results into a fit between the firm’s corporate and procurement strategy.

Reference

Golsby, T.J. & Dastugue, J.G. 2003. The manufacturing flow management process. (On-line). Journal of logistic management. Vol. 14, Issue, 2, pp. 33-52. New York: MCB UP Limited. Web.

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Haozhe, C., Daugherty, P. & Landry, T. 2006. Supply chain process integration: a theoretical framework. (On-line). Web.

Holz, C.A.2005.China’s economic growth 1978-2025: what we know today about china economic growth tomorrow. (On-line).Kowloon, Hong Kong: Hong Kong University of Science and Technology. Web.

Mentzer, J. 2001. Supply chain management. (E-Book). New York: Sage Publications. Web.

Rein, S. 2006. Procter and Gamble China problem; the return of SK II. (On-line). Web.

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