AACIMP 2010 Summer School lecture by Oliver Geuther (Procter&Gamble). More info at http://summerschool.ssa.org.ua

1. Integrated Supply Chain
by Oliver Geuther

2. TOP Company
172 years old
300 brands in 180 countries
$79 billion of turnover
25 Research & Development Centers (12 countries)
$200 million of investments in Ukraine economy

3. P&G Ukraine
Kiev General Office
Ordzhonikidze Plant
Dnipropetrovs‟k oblast
Boryspil Plant
Kiev oblast

4. Who Am I ?
Current:
• Boryspil Plant Manager (5th largest FemCare Plant in P&G)
Education:
• MS in Mechanical Engineering
(speciality Chemical Engineering)
Experiences in P&G :
•
• Worked in Germany, USA, Turkey, Ukraine
• Manufacturing, Logistics & Warehousing, Global Planning
• BabyCare & FemCare
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5. Purpose
• To expose you to current trends and
thinking on Logistics & Supply Chain
Management
• To share with you some of P&G’s
experiences and thoughts
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6. Agenda
• 4 Laws of Logistics
• Business Cases
• Communication
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7. Two Moments of Truth for the Consumer
When she chooses and when she uses

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9. European consumer behavior facing Out-of-Stock in store
Retailers and manufacturers loose when a consumer faces an empty shelf
30 % lost 46% lost
opportunities opportunities
for Retailer for
Buys brand Manufacturer
Returns later elsewhere
17% 21%
Doesn't buy
Buys different size anything
16% 9% 4 billion
Euro of
Buys a different lost sales
brand 37% in
Europe!
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10. Supply Chain Management
“Supply chain management can be defined as
the management of upstream and downstream
relationships with suppliers, distributors and
customers to achieve greater customer value-
added at less total cost”.
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11. Mission of Supply
Chain/Logistics
Get your product to the consumer
at the lowest possible cost & cash
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12. What are Supply Chain “Laws” ?
Material Supplier Manufacturing Distribution Retail Customers
Supply Chains conform to Physical / Empirical Laws
Implication:
• Supply chain performance is predictable and can be designed
• By precisely specifying the structure of the supply chain, the
operating strategy and quantifying measures consistently, we can
dramatically improve Supply Chain performance
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13. The Laws of Logistics*
The Law of Lowest Total Cost
The Law of Speed, Quality and Accuracy
The Law of Supply Chain Volatility
The Law of Counter-intuition
The Laws of Logistics are an original concept of Logistics Consulting Partners Ltd.
They may be quoted but must be accredited. © LCP Ltd. All rights reserved
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14. Achieving an Integrated Supply Chain
Stage I: Isolation
Purchasing Material Control Production Sales Distribution
Stage II: Internal Integration
Materials Manufacturing
Distribution
Management Management
Stage III: External Integration
Suppliers Internal Supply Chain Customers Consumers
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15. The Extended Enterprise Viewpoint
Single company thinking Extended enterprise thinking
 Focus on the customer  Focus on the ultimate
consumer
 Increase own profits
 Increase profits for all
 Consider own costs only
 Consider total costs
 Guard ideas, information
and resources  Share ideas, information
and resources
 Improve internal process
efficiency  Improve joint process
efficiency
(Source : A.T. Kearney)
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16. Destructive Negotiations
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17. Choosing The Operating Strategy
Demand Capability
D C I
demand capacity inventory
P
Planning
Operating Strategy – The set of parameters and principles which
guide the way resources will be managed to achieve the business
objectives at the lowest total system cost.

18. P&G‟s approach towards Supply Chain:
Consumer Driven Supply Network
• Win at the first and second month of truth: when the consumer
buys (1st) and when they try (2nd) the product
By Making sure that:
• The Right Product arrives at
• The Right Place at
• The Right Time at
• The Right Cost
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19. 1.The Law of Lowest Total Cost
“The total cost of producing & delivering
product is usually larger than the sum of
the lowest functional costs of each element
in the supply chain”
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20. The Effect of Time
Procurement Manufacturing Delivery
Logistics Lead Time
(90 days)
Customer‟s Order Cycle
Order Fulfillment
(5 days)
Lead-Time Gap 85 days !!!
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21. Demand Predictability and
Lead-time
+
Forecast
Error
to - tn
Lead-Time
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22. Traditional Supply Chain
• Sequential backward action
• Filtering of real demand by
inventory
• Significant batching activity
• Noise in demand patterns
Goods flow • Forecast dependent
Manufacturer DC Store Customers
Demand flow
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23. Continuous flow requires Information Sharing
• Using shared information to reduce time in the supply chain
• Optimize use of capacity
• Managing upstream inventory
• Using shared information to reduce forecast horizon
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24. Why Do We need Inventory?
Inventory Hides the Problems
A
Inventory
B
Volatile
Demand
Inaccurate Unreliable Quality Bottlenecks
Forecasts Suppliers Problems
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25. Dell Computers
• Logistics strategy plays an important role in Dell Computer’s
impressive financial performance.
• Dell’s direct distribution eliminates as much as 2 months of warehouse and
retail storage.
• About 80% of the cost of a PC consists of components.
• Component prices fall while on the shelves at 30% per year.
• The consequences of logistics delays are overpriced products and possible
obsolescence.
• Direct sales also helps Dell in forecasting.
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26. Achieving Speed in the Supply Chain:
Substituting Information for Inventory
Two key techniques:
• Vendor Managed Inventory (VMI)
• Collaborative Planning, Forecasting & Replenishment (CPFR)
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27. 2.The Law of Speed, Quality and Accuracy
“In logistics & supply chain management, faster
simpler and better is almost always cheaper”
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28. P&G Ukraine Supply Chain
• 2 plants and 2 distribution centers
• 40 brands, 3000 stock keeping units
• Products are shipped to 50+ customers
• Imports from 31 foreign plants
• 30 trucks enter Ukraine border everyday
• 30 trucks arrive to customers everyday
• 1500 employees are involved in P&G supply chain
plus 400 from our partner companies

29. Business Case 1: Supply network design
Customization center
P&G DC and buffer
Gillette DC and buffer
Gala DC and buffer
P&G distributors Gillette distributors Gala distributors
Question: do we need change?
If yes, what exactly would you suggest to change?

30. Case 1: what we need to change?
Direct deliveries Direct deliveries
Direct deliveries
Direct deliveries
P&G DC with in-house
customization center
P&G ship to
•optimize number of DCs
•close buffers
•establish in-house manipulation capability
•optimize number of distributors and ship-to
•maximize direct supply from plants to customers

31. Case 1: Streamlined and cost effective
supply net-work design
• Reduced supply chain lead-time
• Reduced inventory
• Improved service
• Improved productivity
• Several $ millions savings annually
Executed by Supply Network Operations department

32. Variety Grows
Increased competition
Consumer demand for new products
Customer demand for new products
Marketing why we are unique
High profit margin products
What happens when variety increases ?
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33. The „Forrester‟ Effect
Consumer
Company A Company B Company C
180%
Required
capacity 100%
Company A 40%
Company B
Company C
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34. Volatility caused by Manufacturing
Shall we produce once a month ?
Every week ?
Every day ?
3 times a day ?
Is there a right answer?
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35. Volatility caused by Logistics
Shall we ship a full truck ?
A small full truck?
Half a truck ?
1 pallet ?
Is there a right answer?
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36. 3.The Law of Supply Chain Volatility
The volatility of final consumer demand is
“
always less than what we experience through
the supply chain by distribution, manufacturing
and suppliers”
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37. Business Case 2 :Logistics at P&G
Load shipment:
By euro trucks – 33 pallets, 20 tons;
Example
Tide detergent weight/pallet– 1000 kg
How many pallets of Tide will fit into truck?
Answer: 1 truck of Tide – 20 pallets
Pampers weight/pallet – 150 kg
How many pallets of Pampers will fit into truck?
Answer: 1 truck of Pampers – 33 pallets
Challenge: how to ship 33
pallets of Tide and 33
pallets of Pampers in 2
trucks?

38. Logistics at P&G. Case 2
Challenge: how to ship 33 pallets of Tide and
33 pallets of Pampers in 2 trucks?
33 pallets,20 tons.
Truck 1:
16 pallets of Tide + 17 pallets of Pampers. (18550 kg)
Truck 2:
17 pallets of Tide + 16 pallets of Pampers.(19400 kg)
2000 kg are left. How to use them?
Loading on top. Truck 1 – 43 pallets, truck 2 – 37 pallets.
Therefore, combining products in trucks helps to reduce
number of trucks (and logistics costs)!

39. Logistics at P&G
In reality: how to increase weight
limit up to 22 tons?
assortment: 600 SKUs, 50 categories, different
densities and pressures.
Limit: total weight, weights on axis
In practice: heterogeneous transport, quality
constraints, different product mix for
different customers, how to implement into
automated processes at warehouses?
Result: 21 – 21.5 tons range

40. Centre of Conflict
If only marketing could
forecast accurately and sales
deliver the orders we could
meet requirements
If only manufacturing would
make what we ask for we
could do the business
MANUFACTURING PREFERENCE ATTRIBUTE MARKETING PREFERENCE
Minimum PRODUCT RANGE Maximum
Stable PRODUCT SET Continually Changing
Minimal FLEXIBILITY “Infinite”
Long LEAD TIME Short Source: Inger
Unacceptable UNFORECAST DEMAND Fact of Life
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41. Circular References
Volatility is caused by time lags
Time lags are created to optimize cost
Cost is not necessarily lowered by slowing things down
Slowing things down is a function of variety and complexity
Variety and complexity mean it all gets „too difficult‟
which is why we don’t trust anyone & we slow things down more
adding more time creates volatility
volatility costs money so we add more time
adding more time makes us careless and unreliable
Unreliability creates volatility…………………………………………………….
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42. 4.The Law of Counter-intuition
“The normal human response to the effects of the
previous laws is to introduce delay in an attempt to
increase certainty which simply makes the situation
worse
- effective supply chain management is counter
intuitive”
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43. What Is the source of
Most troubles at Work ?
Distortion
Of
Information
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44. Distortion of Information
Wrong information
Too much information
Increases confusion
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45. How to Reduce Confusion
• Listening
• Simple language
• Single point accountability
• KPI’s
• Being in touch with reality
• Frequent feedback from customers
• Few layers in the organization
• Daily Reviews
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46. Communication Style Reducing Confusion
• Stick to facts, don’t speculate
• Check understanding
• Avoid slogans, jargon and generic
• Don’t repeat
• Phone/Talk Vs. e-mail
• Know when to stop talking
• Get to the point / conclusion
• Be open / direct
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47. WE BUILD FROM WITHIN
Career in P&G
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48. Education and Career
2009
at Glance Got new role of
Distribution Center
Operations Leader
2007
Graduated from Zaporozhye
Institute of Economics and IT – 2008
Economic cybernetics Joined P&G as
Process Engineer
with immediate
responsibilities
2005
Exchange student at California
State Polytechnic University –
Operations and Technology
Management

49. MBA on the Job:
In 1 year and 4 months at P&G I completed:
• New hires college/3 months on boarding program (50+ training sessions)
(Kyiv, Ukraine)
• New Manager Emerging Leader Training (Kyiv, Ukraine)
• Integrated Supply Chain Training (Moscow, Russia)
• Quality Assurance in Logistics (Prague, Czech Rep.)
• + 35 other specialized web-based logistics trainings!
… and more to come!!!

50. Process Engineer –
I was in charge from the very 1st day:
• Project manager of the distribution
center move project
• Project team of 20 people plus 100
involved on 3 continents
• Completed project in record timing,
below budgeted cost, with no
interruption of business

51. In 4 months I became
Distribution Center Operations Leader:
• Supervise logistics operations at one of
the largest FMCG DCs in UA
• Govern logistics service provider
company with 120 employees
• Work directly with general and
commercial directors
• Own DC cost-saving program
worth > $ 1 million

52. Learn more on our work
and success stories at
… and apply for your future success!!!

53. Supply Chain Business Game
• an intensive one day business game for students in their last 2
years of study or fresh graduates
• an opportunity to join P&G Supply Network department as intern or
full-time employee
When: October 27, 2010
Where: P&G Kyiv General Office
Application deadline: October 15, 2010
Apply and take the challenge!
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54. Internship in P&G is…
2-3 month paid job
interesting and challenging project
comprehensive training and
development program
opportunity to know one of the biggest
international companies from within
chance to express yourself in real
business environment
and in case of success –
chance to get a job offer!
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55. Want to know more?
Want to know more?
Visit our web-site
Thank you!
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