P&G LOGISTICS AIMED AT SHOPPER

Michael Garry / Based on reporting by Julie Gallagher

PALM BEACH GARDENS, Fla. -- In an effort to reduce out-of-stocks, Cincinnati-based Procter & Gamble has undertaken to create a "consumer-driven supply network" that pays closer attention to meeting consumer needs while making products flow easier throughout the supply chain.

The CPG giant's efforts were described last week by Patrick Arlequeeuw, vice president, global consumer driven supply network implementation, at Grocery Manufacturers of America's Information Systems and Logistics/Distribution (IS/LD) Conference here at the PGA National Resort & Spa.

Like most CPG suppliers, P&G faces an "urgent need to address out-of-stocks," said Arlequeeuw. On average, out-of-stocks cause retailers to lose a sale 41% of the time, with P&G losing sales 28% of the time, he noted. However, P&G's consumer focus has already resulted in its out-of-stocks dropping from an average of more than 10% to less than 5% in many of its categories, with less overall inventory.

Arlequeeuw outlined a series of steps that P&G is taking to reinvent its supply network. One of the key changes was starting the design of the process "from the shelf back" rather than from product creation forward, according to Arlequeeuw. The goal is to "design the product and network to win at the shelf," he said. "When you start doing this, you see in many cases what we have today is not built to fulfill shoppers' needs."

As part of this, P&G is working with retailers to design products to move efficiently through the supply chain to the shelf.

Under P&G's new scenario, consumer purchases will trigger real-time information movement throughout its supply network. However, this requires new IT capabilities that enable real-time visibility of this data. "IT needs to make information available to all people in our supply chain," said Arlequeeuw. "That is an area where we have difficulties."