The Supply Chain Matters blog provides the second of a two-part series highlighting supply chain response for certain cleaning and disinfecting product producers in efforts either undertaken or constrained to be able to support opportunistic product demand and make a difference for business results. In Part One of this series, we profiled producers Reckitt Benckiser and Unilever. In this Part Two posting we add Procter & Gamble, GOJO Industries and Clorox.
As noted, the ongoing COVID-19 coronavirus pandemic has presented significant challenges as well as product demand opportunities for certain consumer goods manufacturers and their respective supply networks. Unprecedented spikes in virus related product demand have been attributed to both pantry loading as well as increased market demand opportunity. From an overall supply chain and business integrated planning perspective, the differences in overall performance are clearly being manifested on the ability of connected planning and supply networks ability to pivot to meet opportunistic demand.
Procter & Gamble
Procter & Gamble recently reported its strongest annual sales gains since 2006 as the company responded to consumer needs for essential products. Product demand for cleaning and paper products surged across the United States and in China.
For the fiscal year ending on June 30, organic sales reportedly increased 6 percent. In the fiscal fourth quarter, the broadline consumer products producer posted a profit of $2.8 billion compared to the year-earlier quarter’s loss of $5.2 billion, mostly generated from a write-down of its Gillette brand.
In a Supply Chain Matters blog commentary published in late in April, we highlighted for readers P&G’s impressive fiscal third-quarter response to the pandemic.
CFO Jon Moeller indicated to analysts and investors that on the whole, health, hygiene and cleaning needs have changed forever. The company’s Tide, Mr. Clean, Dawn, and Cascade cleaning products posted 14 percent product gains. Organic sales in China increased 14 percent in the latest quarter and 8 percent for the full year.
Company executives attributed the company’s successful response to the challenge of the pandemic to recent years of restructuring and simplification of processes and decision-making. Selective price increases and the ability of the company’s supply chains to pivot and respond to disruption are added factors. The consumer goods giant reportedly kept all of its U.S. manufacturing facilities operating at the height of the pandemic across the U.S. According to the WSJ report, some factories were able to operate at 90 percent capacity even as staffing levels were halved.
In an October 2019 blog sharing highlights of the annual Kinaxis conference, this Editor shared highlights from a well-attended P&G presentation. Noted by the presenters was that controlling the various moving elements of orders, inventory and physical resources was the implementation of supply chain control towers. A highlight of this capability was describing a before state where planners were forced to dedicate upwards a more than half of their day sorting thru prior day’s data to ascertain what exceptions needed to be addressed, to an after state of planners initially logging-in and being provided a visualization based summary of exceptions. Shared were screenshots of nine essential dashboards that have since been developed which directly relate to quantified impacts to either line-of-business or geographic regional outcomes related to customer service, working capital or operating strategy success factors. One of the more insightful takeaways for the audience was P&G’s supply chain organizational empowerment of what was described as “democratizing all relevant data.”
We surmise that such capabilities have proved instrumental in the past few months.
GOJO Industries, producers of PURELL branded sanitizer, is a third generation Family Enterprise headquartered in Ohio. In mid-March, the company’s President and CEO issued a statement indicating that GOJO had experienced a dramatic increase in orders of products, above and beyond what had been experienced in late January. As noted below, the manufacturer had to implement a customer allocation and prioritization strategy for its branded sanitizer products.
“As part of our demand preparedness planning, we typically hold excess inventory and maintain the ability to increase production several times greater than typical demand. Our manufacturing facilities are operating around the clock to produce many millions of bottles and refills — which amounts to many billions of uses — of PURELL® products each day. We are continuing to work to increase our capacity even further to meet this dramatic expansion in demand. As a company dedicated to protecting public health, our operating principle is to prioritize healthcare facilities and first responders that are on the front line, while also keeping a steady and predictable flow of PURELL® products to our distributors and retailers, so they can supply schools, restaurants, airports, and consumers.”
In a recent GOJO Industries blog, specific supply chain measures were outlined which included a commitment to be vigilant in supporting the health, safety, and well-being of team members.
“The company has been rapidly adapting ways of working to enable social distancing for those whose duties require work on-site and remote collaboration for all who can do their work from home. Specifically, GOJO is supporting its team members with the following:
- A Supply Chain bonus of an average of $1,000 for team members in manufacturing & distribution
- Additional paid sick time of up to 80 hours
- Employee temperature screenings available at all GOJO locations
- Psychological and financial counselors are available at no cost to team members
- Pandemic Child Care Center assurance for all GOJO employees in applicable geographies
- Aggressive adherence to all Centers for Disease Control and Prevention guidelines for team members whose work requires on-site work.
Noted was the accelerated roll-out of robust digital tools and collaboration technologies to enable team-based culture to keep moving at full-speed
While all of these efforts and customer prioritization toward front-line responders and healthcare providers, retail supplies of the company’s noted sanitizer products remain sporadic and retailer’s with any supply sell out rather quickly.
Cleaning products producer Clorox made business headlines this week with the promotion of Linda Rendle to the role of CEO. In her prior role as President, Ms. Rendle had to inform consumers that the company’s iconic branded Clorox cleaning products will likely be in short supply until next summer.
Besides being named as part of an existing small group of woman leading large U.S. companies, Rendle provides supply chain leadership experience having led the company’s supply chain efforts in 2003. She previously served as Executive Vice President for Cleaning, International, Strategy and Operations, and subsequently strategy chief. In that role, Rendle reportedly developed a company restructuring plan to spur growth in perceived weak business units including cleaning and household divisions. That effort was underway when the pandemic struck.
Andy Mowery, Clorox product supply chain chief indicated to The Wall Street Journal that demand for products such as Clorox Wipes and disinfecting sprays has gown five-fold, well beyond existing capacity. With factory production lines at maximum capacity, third-party manufacturers were ramped-up, but raw material supplies have increased become constrained.
Typical of some staple household goods producers, prior to the pandemic, the company was looking to be less self-reliant on cleaning products for future growth opportunities. Yet, sales in the company’s health and wellness segment that includes disinfecting products and vitamins, rose 33 percent in the latest quarter. Despite constrained capacity and likely increased costs, fourth quarter net income increased by $69 million from the year-earlier period.
We can all speculate how much more the increase would have been if the company’s disinfectant supply chains were not so constrained. The company’s outlook for fiscal 2021 indicates sales to be flat assuming continued demand for cleaning products and minimal disruptions from the company’s supply chain.
As Ms. Rendle takes on the CEO reins in September, her leadership and understanding of supply chain will likely play a crucial role in pivoting Clorox to leverage existing robust demand for the company’s cleaning and disinfecting products while positioning other growth segments for a new normal of consumer demand that will likely be far more health conscious. That will likely require creative supply chain segmentation and resiliency capabilities, as well as educating investors in how important it is to continue to invest in supply chain agility.
We have provided the above highlights of certain producers to demonstrate what is meant by supply chain agility and/or resilience capabilities. As readers and actual industry participants can surmise, the significant pandemic related economic and business disruption provided significant product demand opportunities for cleaning, sanitizing and disinfecting products. The same is obvious for Medical PPE products as-well. Concurrently, the pandemic simultaneously provided significant supply chain disruption.
There were realities of a product demand profile that was rather stable and predictable. Upside growth was usually event-driven, such as the peak of flu outbreak seasons, and responded to by contract manufacturing resources. As we have profiled above, some companies were moving away from these product areas as drivers of growth. Some such as GOJO were branded niche providers. Some leaders and investors questioned whether demand levels are panic buying driven or a shift in consumer needs in the post-pandemic period.
COVID-19 has shattered such thinking as the virus has shattered multi-industry business and supply chain strategies. The differences and the innovators have demonstrated that process, people and technology investments in areas of agility and resilience must be able to timelier accommodate whatever consumers demand.
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