October 25, 1999

Culture Change:
Supply-Side Economics: P&G's Ultimate Supply System

By Marianne Kolbasuk McGee

Culture Change:

An Alternative Culture: Reflect.com's Unique Approach Come Together: The Idea Behind Collaboration Rooms Supply-Side Economics: P&G's Ultimate Supply System The Big Picture: P&G's SourceOne Global Data Warehouse

ne of Procter & Gamble's most significant and ambitious IT projects is its Ultimate Supply System, which involves replacing 4,000 electronic data interchange links to suppliers and retailers with a more cost-effective, real-time system on the Web. The project is a major step in better managing P&G's production and its relationships with supply-chain partners. "This will change the way we do business," says Shaw Skillings, VP of purchasing.

Procter & Gamble aims to reduce product cycle time by half, required cash investments related to inventory by $4.5 billion, and systems costs by $5 billion. P&G plans to submit a proposal for the project to its senior global leadership council in March, and expects to begin the project rollout by midyear.

The project's goal is to eliminate inventory in the channel by letting P&G produce products as they're demanded by retailers. "No value is added when a product sits in a warehouse," Skillings says. At the same time, when P&G products are out-of-stock at retail outlets, that translates to lost sales. The goal for P&G is to produce products based on retailer forecasts. "Right now, we don't get forecasts from customers like Wal-Mart," Skillings says. "We get orders."

P&G is building its Ultimate Supply System in stages. "We started with bits and pieces--with extranets with our customers and suppliers," says business development officer Steve David. "The vision is to integrate these extranets with P&G's corporate intranet and have everyone ultimately working through portal hubs." It will have a Web front end and back end to the company's ongoing SAP R/3 software implementation.

With the system, retailer information, including their category-management needs, are fed to P&G. In return, P&G is "feeding back to retailers marketing and shopper information and market-position information, which goes into decision-support systems with our customers," David says. This information can then be "worked back into the supply chain with P&G suppliers, including P&G's research and packaging people," David says. Information from retailers is treated as "separate entities" to maintain their privacy, says Jim Boyce, VP of P&G global customer business development, E-business.

Supply-chain information gathered through P&G's improved data exchanges with retailers can benefit both sides. Market information from retailers and P&G data mining can help in category management and cross-selling. For example, through data mining, P&G can assist retailers in figuring out the mix of various shampoos that sell best at a particular store location. Boyce says the company can also assist retailers in coming up with an assortment of shampoos that includes fewer bottles while letting the retailer increase its shampoo sales.

go on to the next story, "The Big Picture: P&G's SourceOne Global Data Warehouse."

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