Procter & Gamble: Third Party Logistics Management Case Analysis

Procter & Gamble (P&G) is the world's leading producer of consumer goods. 1992, P&G entered the Chinese market and set up a large-scale production base in Guangdong. For P&G, which has just entered the Chinese market, whether the products can be transported to all parts of the country in a timely and fast manner is an important part of whether it can seize the Chinese market quickly. In order to save transportation costs, P&G seeks railroad solutions in addition to road transportation, with transportation logistics service needs.

Analysis:

As a manufacturer of daily-use products, P&G's logistics service demand has high requirements for response time, service reliability and quality protection system. According to the logistics service demand and service requirements, there are two main types of logistics enterprises entering P&G's vision: state-owned enterprises occupying the dominant position in the logistics industry and private storage and transportation enterprises. After investigation and evaluation, P&G thought that the state-owned logistics enterprises had single business at that time, either they only managed warehouse storage or were only responsible for contacting railroad transportation, and they had backward equipment in storage warehouses, imperfect quality protection system, backward information technology in transportation, lack of service consciousness of the staff, and the response time and service reliability could not be guaranteed. So, Procter & Gamble set its sights on private storage and transportation enterprises.

Programs:

When screening third-party logistics enterprises, P&G found that P&G contracted the railroad freight forwarding station to provide "door-to-door" service with the business characteristics of "quality first, customer first, 24-hour service". So, P&G put forward its logistics requirements to the railroad freight forwarding station. Therefore, P&G submitted the logistics demand proposal to POSCO, and made a tentative examination of POSCO's logistics capability and service level.

Focusing on P&G's logistics demand, BaoSupply designed business process and development direction, formulated strict process management system, and "took good care of P&G's products" to meet P&G's requirement. Meanwhile, BaoSupply's desire for long-term good cooperation and serious and responsible cooperation attitude were welcomed by P&G. At the same time, POSCO's desire for long-term good cooperation and serious and responsible cooperation attitude were welcomed by P&G, which made POSCO pass the inspection. P&G finally chose BaoSupply as its partner, and the two sides signed the general agent contract of railroad transportation and started the formal cooperation.

In the process of implementing the third party logistics service, Baosupply establishes a nationwide logistics operation network for P&G's logistics service demand, provides value-added service for P&G in the whole process, ensures that the goods are operated in accordance with the same operation methods, modes and standards in the process of transportation, and picks up the cargoes by the Baosupply's employees who have received the special unified training in the storage and transportation of cargoes after the cargoes are transported to the destinations, After the goods are delivered to the destination, the employees of P&G Storage & Transportation who have been specially trained in unified way will pick up, unload and transport the goods to provide door-to-door "one-stop" service for P&G and deliver the products of P&G to the sales outlets all over the country in a fast, accurate and timely manner in accordance with strict GMP quality management standard and SOP operation and management program. The initial cooperation between the two sides has achieved quite good results, POSCO has helped P&G to save cost up to 6 million dollars in one year, and P&G's demand for high quality and high standard of logistics service has also greatly improved POSCO's service level.

With the growth of P&G's business in China, the demand for warehouse storage has increased dramatically. POSCO's good operational performance has been recognized by P&G, which has further outsourced its warehousing business to POSCO. In response to P&G's logistics needs, POSCO plans, designs and implements logistics management system, optimizes business processes, integrates logistics supply chain, meets P&G's individual needs with "tailor-made, integrated operation, personalized service" mode, improves logistics reliability and reduces total logistics costs. Driven by the partnership between the two parties, P&G establishes a high-level information technology system to help manage and provide a comprehensive and effective information platform, realizes real-time online tracking of key logistics information such as warehousing, transportation, etc., and realizes seamless connection with P&G's electronic data, so as to make P&G and P&G's operation process and information effectively integrated, thus making the logistics more efficient, rationalized, and systematized. The strict and high-quality logistics service of BaoSupply greatly reduces the logistics cost of P&G, shortens the order cycle and transportation time, and improves the customer service level of P&G; and P&G has prompted BaoSupply to continuously improve its logistics service level and become a third-party logistics enterprise in China nowadays.

Procter & Gamble chose POSCO as the third party logistics service provider for its own needs and carried out a partnership, and realized the goal of "win-win" under this cooperation mode. The success of P&G's application of third-party logistics will set a benchmark for Chinese industrial and commercial enterprises in purchasing third-party logistics services and selecting logistics service providers under the environment of growing logistics market demand and fierce international and domestic market competition.

Conclusion:

Third-party logistics companies can reduce logistics costs, shorten order cycle time and transportation time, and improve customer responsiveness; they can also create value for customers. Business enterprises choose the right third-party logistics service provider, first need to accurately define their own logistics needs, then choose a provider that can meet the needs and goals of the enterprise, and finally conduct relationship management and performance evaluation of the provider. Enterprises applying third-party logistics can significantly reduce total logistics costs while improving service performance.