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How Gillette Cleaned Up Its Supply Chain

How Gillette Cleaned Up Its Supply Chain. Supply Chain Management Review , April 2004 by Mike Duffy. The Problem. Executives admitted to important customers that Gillette had failed to meet its customer service level goals and the said they will be solved by 2002. Inventory Dilemma.

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How Gillette Cleaned Up Its Supply Chain

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  1. How Gillette Cleaned Up Its Supply Chain Supply Chain Management Review, April 2004 by Mike Duffy

  2. The Problem • Executives admitted to important customers that Gillette had failed to meet its customer service level goals and the said they will be solved by 2002

  3. Inventory Dilemma • Brand power and popularity of products masked a hard reality – Gillette could not get product to the channel efficiently • 90% fill rate • Customers were “screaming” because fill rates were not meeting expectations

  4. Inventory Dilemma • Channel conflict with regards to new product introduction • Customers continued ordering older versions instead of new products • Sales: frustrated because they had a hard time selling new product because supply chain was focused on current orders for older products • Supply Chain: believed it had OHI but couldn’t explain why product was not being shipped

  5. Inventory Dilemma • Practiced traditional method of maintaining customer service levels: “throw inventory at a service problem” • Benchmarked Finished Goods and Work-In-Process (WIP) inventory performance metrics • Competitors (P&G, Colgate, Unilever) were 50% faster

  6. Gauging the Problem • Surveyed key staff in sales, marketing, and manufacturing • First ship fill rates (FSFR) • Order Fulfillment Leadtime • Expediting rush orders • Few comments ranked Gillette’s performance higher than “average” in 14 categories

  7. Gauging the Problem, cont. • Process mapping and data mining revealed disconnects in key processes • Timing was not synchronized • Definitions did not match • Accountability was limited

  8. Where to go from here?

  9. Addressing the Problem • Identified key concepts • Minimize Complexity • Improve Demand Planning • Improve Product Supply • Restructure the Supply Chain Organization

  10. Minimize Complexity • Product proliferation • 30% of the SKU’s were eliminated • Increased FG turns: 4.8 to almost 6 • Corrected product distribution techniques • Ship product from correct DC

  11. Improve Demand Planning • Planning techniques reflected what Gillette wanted to sell and not what they could sell • Unhook financial performance from the demand plan • Improved forecasting methods • IT personnel sought full advantages of Manugistics software already in place • Trained planners on statistical modeling and tool usage within the software

  12. Improve Demand Planning • Forecast collaboration: Used information from customers to help forecast their needs • Discussed discrepancies in customers and Gillette’s forecast to better understand what was causing the problems • Gillette is now able to segment their demand forecasts with more accuracy Forecast Accuracy increased 46% to 71%!

  13. Improve Supply Planning • Manufacturing flexibility • Increased run frequency of products • Inventory planning: Historically inventory levels would be based on planners’ past experience • Forecasting models used to achieve more accurate levels • Tailoring customer requirements with use of JIT deliveries and VMI programs Fill rates increased to 98%!

  14. Restructure the Supply Chain Organization • Migration from segmented supply chain to integrated value-chain organization • New alignment brought contributors from all sides under one management team • Focusing on overall view of supply chain to meet customer expectations rather than function specific • Walmart “Vendor of the Year” Recipient!

  15. Restructure the Supply Chain Organization • Benefits of an integrated organization (Gillette’s point of view) • Get a more complete understanding of the end-to-end process • Have better and faster communication across all functions of the value-chain • Gain more coordinated understanding of the processes within Gillette’s customer supply chain • Provide one voice to the customer for all value-chain issues

  16. Keys to Success • Did not need to overhaul information systems or spend lavishly to push through necessary changes • Senior management support and buy-in • Process first, organization second • The devil’s in the details • Align the organization around objectives

  17. End Benefits • NAPO saved $100M in 3 yrs • Customer service levels up 35% • $90M cost out of SC • “If you set goals that are outside of normal parameters, people will work outside normal parameters”

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