The Digital Transformation: Technology and Beyond (page 6)
-- Supply Chain Management Review, 1/1/2005
Page 6 of 7
P&G broadened the scope of the St. Louis prototype and used it as the foundation for its much-publicized collaborative partnership with Wal-Mart. And the rest, as they say, is history. The P&G/Wal-Mart continuous replenishment program succeeded because of a trusting business relationship and senior management's support for an initiative that would produce mutual benefits. Sam Walton summed up the philosophy behind this collaborative approach best: "Let's invent a system wherein you ship me product, and I'll ship you money. Quote me a net price, and I'll give you my distribution center inventory turnover hourly. You manage the ordering, shipping, and billing and meet my turnover requirements. You keep the money you make from the savings, and I'll keep mine. Let's work together." Another of Walton's quotes is relevant here as well: "Think of my stores as an extension of your brands. Would you then think differently of how we do business?" You bet P&G did! The result was a collaboration that has sustained the extended enterprise across three decades.Today, P&G continues to innovate and drive improvement in its supply chain operations. The company's current supply network operating strategy is called the consumer-driven supply network (CDSN). It incorporates a number of new supply chain capabilities, technologies, integrated systems, and processes to enable the company and its supply chain partners to sense and react to real-time consumer demand. P&G is targeting to get some impressive results from CDSN by 2008, starting with a 50-percent reduction in total supply chain inventory; a 50-percent reduction in response time from consumer purchase to delivery, and a 20-percent reduction in supply chain costs.
Procter & Gamble's willingness to continually reinvent itself has led to significant competitive advantages and a position of industry leadership. Along the way, the company had to develop and sustain a culture committed to questioning nearly everything with a willingness to change even time-honored practices.
Questions for the Journey Ahead
The Wal-Mart/P&G collaboration is a fascinating story—not only for what it achieved but also as a testament to the power of collaboration. What are the limits of working together for mutual benefit in this new age of information technology? What might be achieved as a result of digital business transformation?
An inquisitive CEO and the supply chain professionals working with him or her might wonder how well their organization is positioned to begin the DBT journey. Answers to the following questions will help them determine whether or not they're on the right track to DBT:
- Are our core processes customer-centric?
- Is my firm willing to continuously "rewrite the rules" to meet the evolving needs of end consumers?
- Have we reviewed and established the value proposition concerning enterprise core processes?
- Are we willing to share strategic information, responsibilities, and resources with our supply chain partners?
- Have we incorporated planning technology to synthesize common supply chain requirements and determine tactics to meet consumer needs while maximizing asset utilization?
- Are we willing to integrate operationally with other firms, potentially even competitors, to facilitate enhanced supply chain responsiveness and performance?
- Does the digital business transformation vision fit our firm?
If the answers to these questions are mostly "yes," you're ready to consider starting the DBT journey in earnest. But if they're mostly "no," you've still got some work to do before you can begin. But don't wait too long. Yes, DBT is a journey and not a sprint. But you don't want to give the competition too much of a head start.
Footnotes
1Michael Hammer, The Agenda, (New York: Crown Business, 2001).
2Internet2 is a research and development consortium led by more than 200 universities in partnership with industry and government to develop and deploy advanced network applications and technologies. These applications and technologies will enable collaboration among people and provide interactive access to information and resources in ways not possible on today's commercial Internet. (www.internet2.edu)
3Donald J. Bowersox, David J. Closs, and Theodore P. Stank, "How Supply Chain Competency Leads to Business Success," Supply Chain Management Review, September/October 2001: pp. 70-78.
4Donald J. Bowersox, David J. Closs, and Theodore P. Stank, "How to Master Cross-Enterprise Collaboration," Supply Chain Management Review, July-August 2003: pp. 18-27. Continued...
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