Procter & Gamble – Getting Closer to the Customer

Procter & Gamble (P&G) reported a 5% increase in profit for its fiscal third quarter (period ending March 2014).

The increase was largely attributed to sales growth in its home goods segment as well as cost savings. According to its Chairman, President and CEO, “We’re operating in a slow-growth, highly competitive environment, which places even greater importance on strong innovation and productivity improvement. We’re making good progress on our productivity plans, with cost savings and enrollment reductions ahead of going-in targets for the year.”

Indeed, for a company that sells goods in more than 180 countries worldwide, it has been faced with slowing growth. Although, emerging markets have contributed to the company’s growth, currency fluctuations, competition and costs have led to a drag on profits so Procter & Gamble, like many other companies, have looked towards its supply chain to cut costs and improve efficiencies.

In an earlier blog post, Procter & Gamble consolidates Latin American supply chain planning in Costa Rica, it was noted the company had announced a $10bn restructuring plan. As part of this plan, it has collapsed its regional market organizations from eight to five with Europe combined into one business, India joining the Middle East and Africa and the rest of Asia combining with Australia. The other two regions are North America and Latin America.

Within its North America organization, P&G is continuing its supply chain transformation by reworking its distribution network. Similar to a trend in which retailers such as Amazon are undertaking, P&G is looking to locate these facilities near major US population centers and easily accessible road and rail networks. As such, it has recently announced it would build a multi-category distribution center near Dayton, Ohio. At a cost of $89m, the 1m sq. ft. facility, which Prologis is building, is expected to open in 2015. The distribution center will be outsourced to 3PL, Exel and packager, Quality Associates. A spokesperson for P&G noted the goal is to reduce corporate transportation costs and get products to customers faster. The program will reduce rail and truck miles logged to carry P&G products to stores by 7.0%.

Julio Nemeth, Senior Vice President at Procter and Gamble will be speaking at this year's Chief Supply Chain Officer Forum in Chicago this June 11-13 - see the details and register here.

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