P&G reviews its supply chain model

Higher oil prices will change the way that Procter & Gamble operates its supply chain. The world’s largest consumer products company describes its current operations as being ‘upside down’. ‘They were implemented in the 1980s and 1990s, when oil was 10 bucks a barrel’, according to Keith Harrison, P&G’s head of global supply.
‘With oil at $140, the world has changed. The environment has changed,’ added Mr Harrison, who is responsible for an $80bn global supply chain. Transportation cost is going to create an even more distributed sourcing network’. As a result, P&G has launched a comprehensive review of the design of its supply operations, in response both to rising energy costs and its increasingly global expansion.

‘We’ve kicked off a study that really asks: what is our business going to look like in 2015?’ says Mr Harrison. It will cover issues such as ‘what happens if oil is $200 a barrel, and may end up making major changes to P&G’s current supply system, which is based on ‘large single-category regional production sites with long supply chains’. The chemical industry needs to keep a close eye on this development, given P&G’s importance as a global customer.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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