How Gillette Cleaned Up Its Supply Chain

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”