Question

From Duracell to Dawn, Pampers to Prilosec, Procter & Gamble markets some of the world’s best-known brands for household needs, health care, personal care, and baby care. Its portfolio includes 25 brands that bring in more than $1 billion each every year, plus another 15 that bring in at least $500 million every year. In all, Procter & Gamble rings up $84 billion in sales through traditional stores and online retailers in 180 countries.

Because nearly all of Procter & Gamble’s products are convenience goods, the company uses intensive distribution market coverage. Among the retailers that carry its products are supermarkets, drug stores, convenience stores, discount stores, and warehouse clubs. Shelf space is valuable, so not all stores carry the entire product line in any given category. In many stores, Procter & Gamble’s branded items compete for shelf space not only with other manufacturers’ brands, but also with store brands. This isn’t always the case, however. For example, Procter & Gamble recently signed an exclusive distribution arrangement with Sam’s Club, making Duracell the only national brand of batteries sold in those warehouse stores. And, knowing that warehouse stores have limited back-room storage space, Procter & Gamble makes more frequent deliveries to ensure that its products are always in stock for club members.

Eyeing long-term growth in emerging markets, which already account for 40 percent of its sales, Procter & Gamble is always looking for a distribution edge that will put its products on more shelves. When the company acquired Gillette in 2005, it also obtained access to the marketing channels Gillette had established for its razors, blades, and other accessories. This helped Procter & Gamble gain additional distribution for a wider range of products in India and Brazil, among other nations.

Procter & Gamble is testing new Internet and mobile channels for some of its everyday products. In one Toronto experiment, it teamed with the online retailer Well.ca to create posters of frequently-purchased products like Crest toothpaste and Pampers disposable diapers, along with QR (quick response) codes that can be scanned by consumers with QR apps on their smartphones. The posters were positioned in a busy downtown building adjacent to the subway, where time-pressured commuters could take a minute or two to scan the items they wanted to purchase and arrange delivery from Well.ca at a convenient hour. In another Toronto experiment, Procter & Gamble teamed with Walmart Canada to create virtual stores inside 50 bus shelters. As consumers waited for a bus, they used their smartphones to scan QR codes for baby products, beauty products, and other merchandise, and set a time for later delivery. Tests such as these help both the manufacturer and retailers to refine future marketing efforts as technology evolves.

In addition, the Internet retailing pioneer Amazon.com has asked Procter & Gamble to help it speed up delivery of products sold online. At Amazon’s request, Procter & Gamble has roped off a small, separate area inside seven of its distribution centers, reserving this space just for the use of Amazon. These centers in the United States, Japan, and Germany hold cartons and cartons of bulky products like Pampers disposable diapers and Bounty paper towels while they await delivery to retailers. Instead of trucking these goods to Amazon’s distribution centers when needed, Procter & Gamble simply shifts them to the separate Amazon section of the building. There, Amazon employees select individual items to fulfill customer orders and ship the boxes directly from the distribution center to consumers. Not only does this save time, but it also saves money for both Procter & Gamble and Amazon.

Efficiency is vital when a marketer like Procter & Gamble distributes products in such massive quantities. In North America alone, the company prepares 800,000 shipments annually for delivery to retailers’ warehouses and distribution centers. Shaving even a few dollars per shipment adds up to a significant savings over time. Greener transportation is also helping Procter & Gamble save money while it helps protect the planet. Although the company maintains a small fleet of trucks, most of its products are transported by 80 outside trucking companies. Procter & Gamble is working with the truckers to significantly increase the percentage of shipments transported by vehicles that run on compressed natural gas, making physical distribution greener in environmental and financial terms.

Questions for Discussion

Do you think Procter & Gamble should use a direct channel to sell to consumers? Identify one or more arguments for and against using a direct channel for disposable diapers and paper towels.

What issues in channel conflict might arise from Procter & Gamble’s special arrangements with Amazon.com?

Would you recommend that Procter & Gamble use any mode of transportation other than trucks to transport cartons to retailers? Explain your answer.

Answer 1

1) Procter and Gamble should use a direct channel to sell to consumers as the adoption of the latest trends within the business environment to remain competitive and ensure long term sustenance and growth is an important strategy to be adopted by every company. Procter and Gamble would lose out on exploiting an important available opportunity by not exploring the profitable direct channel creation of an online platform for e-tailing, which could provide exceptional benefits and profits to the organisation as it has an existing logistics and supply chain infrastructure to support the direct channel without investment of large additional capital which would lead to do will benefit from the existing Framework and infrastructure resulting in optimal utilisation and maximized efficiency. The major disadvantage using a direct channel disposable diaper and paper towels is the voluminous packaging due to the dimensions of the product resulting in additional cost being incurred by the company due to lack of and infrastructure to support the level of logistics required for delivery to the end consumer. This could result in incurring large costs for door delivery services resulting and reduced profitability within the product lines.

2) The issues in channel conflict with the special arrangements with Amazon may result in sacrificing reply to the other resellers of Procter and gamble by providing a large space within the existing warehouse facilities to Amazon. This could result in negative impact on the deliveries to the physical distribution network of Procter and gamble by increasing the lead time or been unable to meet unexpected demand in a quick and efficient manner due to a reduction in available warehousing facilities. However, any situation of conflict can prove to be functionally dynamic when approached in a positive manner resulting in an innovative solution which exploits the disadvantage by converting this into a consecutive advantage. Procter and Gamble want to maximize benefits from multiple marketing plans it leads to optimize the channel conflict management which could be achieved by improved inventory management to optimize utilization of the reduce face through innovative means largely adopted by various companies such as cross-docking, JIT, and an optimized warehouse management system for example.

3) Procter & Gamble can adopt a policy for making a graduate shift to electronic vehicles for transportation of cartons to the retailers which would not only be cost effective but also help the company achieve its Ambition 2030 sustainability goals 100% renewable electricity and cutting of GHG emissions in half. It could also build significant supply chain partnership encouraging the logistics support companies working with it to introduce a fleet of e-vehicles. The company has displayed significant commitment toward corporate social responsibility and taken the initiative to ensure sustainability being adopted within every process in the company and can successfully implement the same within the mode of transportation.