Supply Chain Management

Last class we discussed a case with Proctor & Gamble having a problem with their production system. They were using a "push" system that moves product to customers. They were only forecasting what they thought people would want, and adding incentives to buy. This makes out for a very inefficient system, because they were ending up with a lot of back stock in their inventory, which in turn doesn't produce the profit that they need.

Their solution was to implement a supply chain management system provided by SAP. Supply Chain Management defined is management of a network of interconnected businesses (such as P&G and your local grocery store) involved in the provision of service and product packages required by end customers.

According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In simpler words, supply chain management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise.

So, as we learned, it is important for businesses to establish a business to business (B2B) network. If all businesses worked together towards a common goal, it simply makes things easier and more profitable. It's a win-win situation. I don't know why Proctor & Gamble did not start out with this method. I see this relationship work well at my work with some companies, but sometimes it is not implemented, and it creates an issue.

Electronics commerce (E-commerce) played an important role in their success as well. They are now receiving the information they need electronically from the retailers that they work with. The retailer gives them information on what's selling and what's not, so P&G can make the simple decision of what to make for their customers. I'll bet they were saying "I wish we would have thought of this earlier."