P&G readies its supply chain for a "VUCA" world

If and when oil prices spike again, Procter & Gamble's supply chain will be ready. The consumer products giant, better known as P&G, is preparing for another run-up in oil costs by consolidating different types of manufacturing in a single location.

That's just one of several steps the Cincinnati-based company is taking to deal with a "volatile, uncertain, complex, and ambiguous" (VUCA) world, said Global Product Supply Officer R. Keith Harrison Jr. at the Supply Chain and Logistics 2010 conference in Dallas earlier this month. "VUCA is the reality for the foreseeable future, and it affects how we think about supply chains and design," Harrison told conference attendees.

In order to meet the needs of the 4 billion consumers who buy P&G's products, Harrison said, the company has redesigned it supply chain to operate in a VUCA environment, at least through 2015. As part of that redesign, the company is now building 19 new manufacturing plants, only one of which is located in North America. (P&G currently has 145 plants across the globe.)

The new plants will combine production units that make different products in the same building or campus. In the past, P&G generally had built a factory that manufactured only one type of product, such as laundry detergent or skincare products, and then shipped those items long distances to customers. Situating more than one kind of manufacturing operation in a single facility will allow P&G to better manage oil price increases because it could reduce shipping distances and thus cut freight transportation costs.

Another initiative under way at P&G is consolidating its production planning function. Harrison said that P&G intends to establish five or six planning centers as a means to develop more in-depth subject mastery among its planners. P&G is also working on the adoption of a single, global set of standards for measuring performance across its entire supply chain organization. "If you're working off a set of common standards, it drives a common culture," Harrison observed.

In addition to worldwide supply chain initiatives, P&G is implementing innovations in regional distribution operations. In Europe, the company has set up its own dedicated rail lines for several routes, such as from northern Belgium to Spain or Russia. Harrison said that the dedicated trains have allowed P&G "to capture the benefits of rail, and bring the reliability of truck."