International Case - Reengineering the Business Process at Procter & Gamble

CASE STUDY : 2

International Case : Reengineering the Business Process at Procter & Gamble

Procter & Gamble (P&G), a multinational corporation known for products such as diapers, shampoo, soap, and toothpaste, was committed to improving value to the customer. Its products were sold through various channels, such as grocery retailers, wholesalers, mass merchandisers, and club stores. The flow of goods in the retail grocery channel was from the factory's warehouse to the distributors' warehouses before going to the grocery stores where customers selected the merchandise from the shelves.

The improvement-driven company was not satisfied with its performance and developed a variety of programs to improve its service and the efficiency of its operation. One such program was electronic data interchange, which provided daily information from the retail stores to P&G. The installation of the system resulted in better service, reduced inventory levels, and labor-cost savings. Another approach, the continuous replenishment program, provided additional benefits for P&G as well as for its retailer customers. Eventually, the entire ordering system was redesigned, with the result of dramatic performance improvements. The reengineering efforts also required restructuring of the organization. P&G had been known for its brand management for more than 50 years. But in the late 1980s and early 1990s, the brand management approach pioneered by the company in the 1930s required rethinking and restructuring. In a drive to improve efficiency and coordination, several brands were combined with authority and responsibility given to category managers. Such a manager would determine overall pricing and product policies. Moreover, the category managers had the authority to withdraw weak brands, thus avoiding conflict between similar brands. They were also held responsible for the profit of the product category they were managing. The switch to category management required not only new skills but also a new attitude.

Questions:

1) The reengineering efforts of P&G focused on the business process system. Do you think other processes, such as the human system, or other managerial policies need to be considered in a process redesign?

2) What do you think was the reaction of the brand managers, who may have worked under the old system for many years, when the category management structure was installed?

3) As a consultant, would you have recommended a top-down or a bottom-up approach, or both, to process redesign and organizational change?

4) What are the advantages and disadvantages of each approach.