April Mabe
P&G Option Case

1. What were the key decisions taken by P&G in relation to the distribution channel? P&G started testing different methords to change the way merchandisers could order products. In 1985, P&G tested a new approach to channel logistics for replenishment ordering with a moderate-sized grocery chain. This test involved using EDI. EDI,(electronic data interchange) to transmit data daily from the retailer to P&G on warehouse product shipments to each store. P&G decided to use shipment information rather than shipping based on retailer-generated orders, to determine the quantity of products to be shipped. This did reduce costs in inventory, and labor, but however, it ended up costing P&G more. Then after another test, they decided to expand on CRP innovation. Mass merchandisers generated interest from other retailers in the new process. CRP started with diapers but then expanded rapidly to other products. Not only did this reduce costs, but increased grocery sales as well.
2. How important are the new information technologies in P&G’s efforts? The new technologies were very important. Increased sales were an important benefit of the CRP program for P&G and its distributors. EDI alone is not beneficial, but when implemented in parallel with process and systems reengineering, it can become a powerful tool. EDI provided an essential platform for CRP operations. EDI was a good and easy first step. As mentioned in number one, these technologies sparked the interest of others, and all begin to join in. Increased sales and expansion, instead of just the diaper, were the outcome of these technologies.
3. To what extent has P&G changed its strategy to take advantage of ECR? CRP was an important element of the ECR vision. The ECR report ran in January 1993, suggested that 38% of the $30 billion in savings projected from implementing ECR in the grocery industry could be realized through more efficient replenishment ordering. Many grocery channel members were able to realize significant savings immediately by adopting CRP without waiting for the remainder of ECR proposals to be fully developed. P&G was a clear leader and this expanded opportunities in the channel process improvement.
4. What do you think the next steps are?
I would say they need to always do their research. In order to be successful, they need to be aware of what is going on, including any new information. There are always decisions to evaluate when you want to grow your company. Never stop. They need to continue with these technologies, and stay up to date. Continued growth is necessary. They need to continue eliminating non-value added processes. If they continue to do this, they will be on top in the market! They will always be able to provide consumers with the best products at the lowest channel cost.