PROCTER & GAMBLE INC. :

Procter & Gamble (P&G) is an American multi-national consumer-goods corporation. For over 180 years, P&G has been providing customers with quality products that make everyday life better. P&G has production facilities in about 27 countries across the globe and specializes in a wide range of personal health / consumer health, and personal care and hygiene products. Popular brands owned by P&G include Tide, Head & Shoulders, Oral-B, Olay, Pantene, Gillette and Pampers.In the 1990s P&G discovered bull-whip effect. The company noticed an odd thing about Pampers, its well-known brand of disposable nappies: although the number of babies and the demand for nappies remained relatively stable, orders for Pampers fluctuated dramatically. This was because information about consumer demand can become increasingly distorted as it moves along the supply chain. For instance, a retailer may see a slight increase in demand for nappies, so he orders more from a wholesaler. The wholesaler then boosts his own sales forecast, causing the manufacturer to scale up production. But when the increase in demand turns out to have been only a blip, the supply chain is left with too much stock and orders are cut back. A more reliable flow of information can smooth out these fluctuations. One way of achieving this is to integrate supply chains, as P&G has done with Wal-Mart and other big retailers. The idea is to organise things so that sales information from a store will automatically prompt the level of deliveries needed to keep the shelves stocked. For a company such as Wal-Mart, with more than 60,000 suppliers in America alone, keeping everyone informed is critical. The company does this through its Retail Link system, which suppliers can tap into over a secure internet connection. They can check stock levels and sales down to the level of individual stores. Wal-Mart may have a brutal reputation for driving down costs, but its investment in information systems has played a large part in building one of the world's most efficient supply chains, capable of handling more than $300 billion of annual sales.According to experts, there is a direct relationship between inventory and information. The more information a company has about its suppliers and its customers, the better it is able to plan. A greater understanding of each link in the supply chain can also improve efficiency and reduce risk. This leads to a much higher level of co-operation between the company and the supply chain members.

Questions:-

1. Analyze the above case and describe the operational strategy adopted both by P&G and Wal-Mart.?

2. Explain the bullwhip effect observed in supply chains graphically and the remedial measures Companies need to take to lessen their effect.?