Supply Chain Matters has previously noted that in these challenging business times, even the best organizational supply chains can experience a snafu.
Procter and Gamble, on just about every influencer’s listing as one of the top rated supply chains, is experiencing an uncharacteristic supply snafu which is gaining wider visibility. The timing is not ideal since P&G recently disappointed Wall Street by reporting a 49 percent drop in quarterly profits (quarter ending Dec. 31), a hefty write-down of previous acquisition costs, and 1600 planned job cuts. The Wall Street Journal reported that P&G lost market share in a greater portion of its business lines during the past quarter partly because competitors held back on product price increases while P&G raised prices. P&G is now reversing some of these previous price increases.
The supply snafu involves the market introduction of a new branded line of Tide Pods, a capsule blended laundry detergent that was originally planned for market introduction in August of last year. P&G product management had to push the market entry date to this month, and it now appears that supply constraints may limit how much supply will be available at retail outlets to support a broad product launch.
An article published on the Cincinnati Business Courier web site cites a Deutsche Bank analyst as indicating a second supply delay involving Pods and that P&G is communicating to retailers that constraints will limit supply for shelf displays only, and that off-the-shelf volume promotions should be timed for no sooner than July of this year. Noted was that the “three-chamber unit dose” delivery system for Tide Pods required special manufacturing processes to be developed. A spokesperson for P&G noted: “Unfortunately, we recently experienced unexpected challenges as we ramped-up new manufacturing capacity and processes in mid-November and December. However, we continue to see improvements in the manufacturing processes and are confident we will achieve the manufacturing capacity we expect on Tide Pods.”
An article appearing on AdvertisingAge noted that P&G appeared to have a first-mover advantage in the biggest laundry innovation in 25 years, but these latest supply setbacks provide an opportunity for laundry detergent competitors to launch their own versions of blended product. That article notes: “A slew of ultra-concentrated detergent “packs” that are slated to hit stores in February are expected to ratchet up marketing outlays in the category by nearly $300 million.” The article also cites an executive at a P&G competitor indicating that “retailers are furious” and that P&G’s sales force is “having to use up chips saying they’re sorry” for changing plans twice in six months.
While competitors will seize on market opportunity, P&G as a leader in global supply chain capability will eventually bounce back and manage this Tide related supply crisis. Articles have also noted that P&G has complete patent protection on this new formulated product. As is often the case, lessons will be learned, especially regarding the alignment of product management, sales, marketing, and global supply planning in new product introduction involving highly complex manufacturing processes. There well may be lessons related to the executive S&OP processes, and in handing competitors an unplanned opportunity to seize on supply constraints.
We suggest that the takeaway for readers is that even the best supply chain teams can stumble, and when it occurs in the public limelight, when disappointing financial news is being communicated the headlines well become magnified.
Bob Ferrari
©2012 The Ferrari Consulting and Research Group LLC, and Supply Chain Matters. All rights reserved.
Seems like P&G’s NPD and product launch process is out of control. I wonder how their gate process can allow launch announcements and promises before their supply chain is assured – basic stuff for a leading fmcg company.