P&G Details Cost-Cutting Productivity Enhancements Across Supply Chain, R&D, and Marketing
Procter & Gamble has been implementing productivity improvements across its business, and the company says it's reaping the rewards.
Andre Schultenn, P&G CFO, recently outlined during an investors conference some of the outcomes the company is experiencing due to improved supply chain, R&D, and marketing processes.
Within supply chain, the company continues to push on its 3.0 upgrades, focusing on digital transformation.
Technology advancements have allowed the company to introduce flexibility into its reformulation strategy, modeling ingredient combinations digitally before deploying them to production facilities. The process has shortened reformulation to mere weeks instead of six to 12 months.
Another example comes from the company’s diaper manufacturing, which now uses sensors and cameras on every line to check for batch issues, detecting defects, improving quality, reducing waste, and cutting back on manual labor.
“Digital and automation is a big topic in what we call supply chain 3.0. It's the enabler of resilience, but it's also the enabler of productivity and quality improvements,” said Schultenn during the Goldman Sachs Global Staples Forum.
Additionally, the company is combatting supply and demand issues by moving from global suppliers to regional sourcing in order to improve material and product availability and lower costs.
These cost-cutting supply chain enhancement are among the biggest drivers of savings for the company, said Schultenn.
“It's the ability to use a lot of the digital investments we've made, a lot of the automation investments we've made … drive productivity in our manufacturing. It's our ability to combine thinking on the full supply chain,” he said. “If you look at an end-to-end chain, the losses to be eliminated increase exponentially. And that's where we find the biggest value.”
Schultenn expects to sustain about $1.5 billion in annual cost of goods savings in large part due to supply chain productivity measures.
Marketing & R&D
While supply chain improvements have taken the bulk of digital investment at P&G in the last year, the company said it is also rolling out new media capabilities, leveraging first-party data and algorithmic solutions to boost reach and optimize marketing.
Additionally, Schultenn said many of the digital tools P&G is implementing in other facets of the business are occurring within R&D as well.
“We're actually getting more innovation and ideas vetted much earlier digitally now that helps increase the speed, but lower the cost of that innovation,” he said. “So, the efficacy is not going down because the percent of sales is going down. In fact, I think it's getting better because we're focusing on fewer, bigger innovations but vetting those ideas out much faster.”
He estimates P&G is absorbing about $500 million in annual savings as a result of these optimization efforts.
“I think the most important element is every unit, every manager, every CEO understands that productivity is a core enabler to growth. So, it's within the DNA,” said Schultenn. “There's no discussion we have on innovation, there's no discussion we have on top-line growth without an equal part of that discussion being focused on productivity.
