Case Study – Channel partnership between Walmart and P&G

Made By:Group 4

Key issues &

Learnings

Sales Driven business approach1. P&G was a highly diversified company with 12 product divisions but with a very Fragmented sales approach.2. In 80’s , P&G was obsessed with pushing its sales numbers higher without any consideration for what the consumers are actually demanding.3. Each product division had their own sales targets and they separately pushed for the same without taking the responsibility for the company as a whole.4. A remedy to rectify such personally driven sales approaches could be conceived by doing away with the incentivisation of individual sales managers’ work and instead focus on sales strategy that is in harmony with the overall brand.5. The main factor which led to a positive change in the relationship was communication.6. A paradigm shift in the sales approach of P&G –Walmart was achieved with the use of extensive data sharing and proper research . The approach shifted to a bottom to top approach where the final consumers were treated as the King.

Sales Driven Business Approach7. It was highly important that products now built were consumer centric rather than manufacturer driven or sales driven.

8. Information technology has played a significant role in achieving to create a platform where both the business giants effectively shared their data which led to synergy of operations.9. It was important that before sharing such crucial information , the businesses had complete trust in each other and were sure to go forward for the benefit of the industry as a whole and not solely themselves.10. The importance of conducting operations honestly can be understood by the fact that any such critical information once shared can expose the company to multiple forms of exploitation. For instance :- to increase their bargaining power against each other, they could use such information. Also , potential sharing of the data with other industry competitors.

Non-cordial relations between Walmart and P&G

• P&G organizations were too complicated and inflexible.• P&G’s quantitative approach created a point of friction between

the two companies• The lack of use of IT resulted in lesser exchange of data.• P&G’s non-popular products occupied unnecessary shelf space

on Walmart.• The relationship was obsessed with short-term transactions

ignoring long-term transactions• If P&G had thought of Walmart as an extension of its own,

rather than an independent company the relationship would have been more successful.

Data Delivery Highway Optimization

• Data delivery highway– Shelf space requirements were reduced – Insights about customer choices by P&G– Customer requirements identified by Walmart

• The degree to which intermediary parties were involved was reduced- increased savings, improved relations.

• A better data flow resulted in better forecast for product requirement.

Non-cordial relations between Walmart and P&G

Electronic Data Interchange• Facilitates an automated process of

– purchase orders– Invoices– advanced shipment notification – financial payment

• Pricing areas were corrected through customer table checking tool.• P&G’s purchase order invoice-match rate went from 15% to 95%.

Non-cordial relations between Walmart and P&G

Infrastructure development in IT• P&G felt the need to track the sales by customers in the 12

product divisions• P&G had data from the suppliers side ignoring the value of a

single customer and other retailing details like volumes and margins

• Wal-Mart being a retailer, had no link with the supply chain of P&G

• A consolidated data bank is created where both front end and back information was shared

• Rigidity gave way for flexibility after the information sharing

• Various optimised support applications like Joint Business Scorecard, Replenishment, EDI came into the picture for smooth flow of information

• P&G and Wal-Mart aligned the values using this applications which allowed them to work together towards end consumer using the combined data

• The main point here was the consumer was also benefitting because of the lowered costs due to the optimized supply chain information sharing

Infrastructure development in IT

• Even after developing some new applications it was found that some billing systems were not coherent from both sides

• So continues development was done in creating new tools to smoothen the problematic operations, in this case, Customer Table Checking Tool was built

• Another application which made the process efficient was CRP – Continuous Replenishment Process which helps the Manufacturer to reduce the inventory and do the shipments in time

• In our case, P&G reduced the cycle time by 3 to 4 days• Which enabled Wal-Mart to reach higher financial goals

Infrastructure development in IT

Benefits of Collaboration1. Reduced Average InventoryWith the sales at Walmart getting executed in less than 24 hours of the product delivery to their shelf, the average inventory maintained by Walmart as well as P&G was reduced. This helped to optimize the use of cash in hand with the groups. 2. Increased Sales/RevenueDue to synergy benefits between the two groups, there was an increased sales of 32.5% to the final customers. 3. Industrial GrowthDue to the unique mutual partnership approach followed by P&G –Walmart, it not only helped them individually but also led to the growth of the industry . A example of it can be clearly seen from the increase in sales from $375Mn to a $4 Billion .

SIMILAR CASE IN INDIAN CONTEXT• In the Indian context, companies like Maruti Udyog Ltd have taken full advantage

of such data exchange and information sharing systems technology.• Maruti Udyog in the 1980s and 1990s introduced the concept of Vendor Managed

Inventory (VMI).• Under such an arrangement, Maruti asked its principal vendors to manage the

inventories within its plants.• The vendors’ representative is allowed to access not only the sales data, but is also

informed of seasonal demand characteristics, upcoming marketing and advertising activity, and any other information which may affect the sales of Maruti.

• The vendor, with this data, could manage the inventory in a leaner and a better manner. The inventory carrying costs as well as ordering costs reduced significantly.

• This resulted in a mutually beneficial relationship. The vendor could reduce inventories and this profit was passed on to Maruti, thus resulting in significant cost reduction and a shift from a push based system to a pull based system.