Building The Sense & Respond Company

Building the Sense and Respond Company

By Lisa Harrington      

Supply chain management reshapes the future of   leading companies while attracting a lot of C-level attention along the way.

Dr. Sandor Boyson, chief information officer, co-director of the Supply Chain Management Center; and research professor at the University of Maryland's Robert H. Smith School of Business, doesn't like to speak abstractly about the potential impact supply chain management can have on a company's business. Instead, he prefers to tell stories.

In this case, he'd rather talk about two very different companies in two very different industry sectors   --   the Procter & Gamble Co. and Sun Microsystems. Despite their differences, both companies believe beyond all certainty that their future depends, in large part, on real-time supply chain management.

P&G, the consumer products giant known worldwide for such household-name products as Tide detergent, Bounty paper towels, and Crest toothpaste, was founded in 1837 and reported 2003 sales of $44 billion. The company has 250 brands, 13 billion-dollar brands, employees and operations in 80 countries, and five billion consumers in 140 countries around the world.

"There are two moments of truth in P&G's world: the moment when the shopper makes a choice in the market and the moment when the shopper uses the product," Boyson says. "The consumer's experience in both these instances drives re-purchase of that product.

"The first moment is based on availability of goods in the store. On average, 10 to 15 percent of the time the consumer finds the desired product out of stock in the retail store. So the key is having product available on store shelves. With only a two-percent profit margin in the industry as a whole, P&G cannot afford stockouts.

"About half of P&G's sales come from events or promotions that are disruptive," Boyson says. "Because of these promotions, which are out of P&G's control, the last three months of...