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A former Procter & Gamble building in Baltimore, Maryland. The 10 strategic decision areas of operations management are addressed to ensure Procter & Gamble Company’s productivity and effectiveness in the consumer goods industry. (Photo: Public Domain)

The Procter & Gamble Company’s operations management (OM) strategy follows goals for optimization in efficiency and effectiveness in satisfying various needs of the business in consumer goods markets worldwide. The strategy addresses the 10 strategic decisions, which pertain to various operational areas of the company. Procter & Gamble’s operations management efforts push for maximum productivity in these 10 strategic decision areas.

Highly productive operations support effective strategy implementation. For example, based on higher productivity, Procter & Gamble’s operations managers can implement higher production capacity directives. These conditions contribute to the company’s ability to stabilize its global business. Current OM strategies and tactics work to fulfill Procter & Gamble’s business goals. However, it is essential to make adjustments in response to changes in P&G’s industry and market variables. Such adjustments should match variables like market demand and technological advances to maintain high performance and support market leadership goals embodied in Procter & Gamble’s vision statement and mission statement.

Operations management decisions determine productivity and the capacity of Procter & Gamble to respond to business needs. These needs change according to consumer goods market conditions and organizational conditions. Procter & Gamble’s operations managers implement changes in the 10 strategic decisions accordingly.

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Procter & Gamble’s Operations Management: 10 Decisions, Productivity UPDATED MAY 25, 2017 LAWRENCE GREGORY

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Procter & Gamble Company’s Operations Management, 10 Decision Areas 1. Design of Goods and Services. Operations managers are concerned about product specifications, which determine other strategic decision areas of operations. Procter & Gamble’s objective in this area is to develop products within organizational capabilities, while supporting goals for innovation. Innovation is a main factor in the company’s intensive growth strategies (Read: Procter & Gamble’s Generic Strategy & Intensive Growth Strategies). In applying this approach, the company’s operations managers focus on cost minimization without sacrificing product quality. In this way, Procter & Gamble’s vision statement and mission statement are satisfied in terms of ensuring quality and value of consumer goods. For example, cost minimization is possible through high quality P&G products designed for high operational productivity levels. Thus, Procter & Gamble maintains high quality standards while keeping flexibility in other related factors for this strategic decision area of operations management.

2. Quality Management. Quality management’s objective is to implement quality standards based on the expectations of target customers or consumers. In this case, the Procter & Gamble Company’s goal for this strategic decision area is to apply high quality standards in OM. These standards support leadership in OM, and business leadership in the consumer goods industry. High quality standards address issues linked to competitive rivalry shown in the Porter’s Five Forces Analysis of Procter & Gamble. For example, products of higher quality are more likely to succeed in the saturated market of consumer goods. At Procter & Gamble, operations managers use current market data to determine the suitability of quality standards. Operational specifications and productivity measures are adjusted according to changes in data pertaining to P&G consumer expectations. Thus, in this strategic decision area of operations management, Procter & Gamble’s dynamic quality standards are used to match market expectations.

3. Process and Capacity Design. The strategic decision in the area of process and capacity design considers the specifications and requirements in Procter & Gamble’s production processes. The company’s objective is to maintain adequate capacity and productivity. In this regard, the operations management approach used at Procter & Gamble involves maximization of automation in production. For example, automation increases productivity and capacity through higher operational efficiency. The resulting condition contributes to the benefits of economies of scale, which is one of the strengths identifiable in the SWOT Analysis of the Procter & Gamble Company. In this strategic decision area of operations management, designs are also based on regular reviews of P&G’s processes. The resulting data allow Procter & Gamble’s operations managers to develop solutions to ensure that the consumer goods business remains highly productive.

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4. Location Strategy. Optimal distances from resources and target markets are the operations management objective in this strategic decision area. Procter & Gamble uses an approach that prioritizes proximity to target markets. For example, facilities are located where it is easy to transport P&G’s consumer goods to retailers. In this condition, Procter & Gamble’s operations managers maximize the benefits of high productivity. For instance, high operational productivity in manufacturing and distribution facilities supports effective market reach through retailers.

5. Layout Design and Strategy. The Procter & Gamble Company addresses layout design and strategy through real-time data. The objective in this strategic decision area of operations management is to optimize the flow of resources and information to support the consumer goods business. In this case, Procter & Gamble’s organizational structure also determines the layout design and strategy. For example, internal business processes are grouped according to the divisions in the corporate structure. Moreover, operations managers are concerned about layouts that suit internal business processes in Procter & Gamble’s corporate offices. The aim is to support P&G employees’ productivity. Understandably, Procter & Gamble’s operations management approach for this strategic decision area adapts to available spaces, considering variations in facilities and regulations.

6. Job Design and Human Resources. Operations managers are involved in efforts to ensure the adequacy of human resources. To address this objective, Procter & Gamble implements employee training programs for innovation and productivity. Employees are among the main stakeholders of the company (Read: Procter & Gamble’s Corporate Social Responsibility Strategy & Stakeholders). The approach used for this strategic decision area also supports leadership and passion for winning as a way to enhance employee morale and career development. Aligned with Procter & Gamble’s organizational culture, these factors and operations management efforts ensure effective and adequate human resources. Adequate HR supports consistency and effective capacity in P&G’s consumer goods business. For example, the strategically developed human resources and its culture make it easier for Procter & Gamble’s operations managers to address operational issues.

7. Supply Chain Management. This strategic decision area of operations management has the objective of strategically aligning an effective supply chain that supports Procter & Gamble’s consumer goods business. The condition of the supply chain determines the capabilities of the company in terms of productivity and capacity. In this regard, Procter & Gamble’s operations managers prioritize external and internal factors that significantly influence the supply chain. The company aims to minimize the negative operational effects of these factors on productivity. For example, the PESTEL/PESTLE analysis of the Procter & Gamble Company shows that ecological factors can create challenges in maintaining an adequate supply chain for P&G. Thus, the company uses data on external conditions and internal conditions to address such challenges and to fulfill the operations management objectives in this strategic decision area.

8. Inventory Management. For inventory management, Procter & Gamble’s operations management team focuses on the objective of matching inventory and organizational needs. At the same time, the company considers consumers, suppliers, and business productivity in this strategic decision area. Moreover, Procter & Gamble’s marketing mix (4Ps) imposes requirements on inventory management activities. For example, the activities of retailers influence P&G’s operations management decisions in this strategic area. The methods that Procter & Gamble applies for inventory management include the periodic method and the first in, first out (FIFO) method. FIFO minimizes spoilage of raw materials and consumer goods. Procter & Gamble’s operations managers also use buffer inventory to address sudden fluctuations in market demand.

9. Scheduling. In this strategic decision area, Procter & Gamble’s objective is to develop and implement short-term and intermediate operational schedules for optimum utilization of resources to support business needs. In this regard, the approach to OM involves fixed schedules for most of

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P&G’s corporate offices, and rotating variable schedules in some facilities. For example, Procter & Gamble’s corporate office employees adhere to their fixed schedules for data processing and analysis. On the other hand, operations managers apply rotating schedules for manufacturing processes. Some of these rotating schedules are variable to enable Procter & Gamble to correspondingly vary its productivity as a way of addressing changes in market demand for consumer goods.

10. Maintenance. P&G has the objective of maintaining effective and adequate processes in this strategic decision area of operations management, in consideration of productivity and capacity, demand, and resources. Procter & Gamble’s operations managers maintain dedicated personnel for each process. For example, for problems involving the supply chain, the company has a dedicated team that specializes in supply chain management. This operational approach ensures continuity in Procter & Gamble’s operations management policies and strategies, leading to consistency in productivity and output of the consumer goods business.

Productivity at Procter & Gamble As a global consumer goods business, the Procter & Gamble Company uses an array of measures or criteria for evaluating productivity. Operations management uses the results of such evaluation to support P&G’s processes. The following are notable criteria used to determine productivity in different areas of Procter & Gamble’s operations:

1. Batches per hour (Procter & Gamble’s manufacturing productivity) 2. Tickets per day (Customer service productivity) 3. Variant tests per month (R&D productivity)

References

Brown, S., Bessant, J. R., & Lamming, R. (2013). Strategic operations management. Routledge. Ceko, E. (2014, May). Relations between Strategic Management, Operations Management and Environment Protection. In International Conference: Fostering Sustainable Development through Creation of Knowledge Society (Vol. 17, p. 18). Chiarini, A. (Ed.). (2015). Sustainable Operations Management: Advances in Strategy and Methodology. Springer. Gundersen, T. F. (2017). Best Strategic Decisions in Management of Complex Operations. In International Manufacturing Strategy in a Time of Great Flux (pp. 85-104). Springer International Publishing. Hernández, J. E., Lyons, A. C., Zarate, P., & Dargam, F. (2014). Collaborative decision-making and decision support systems for enhancing operations management in industrial environments. Production Planning & Control, 25(8), 636-638. Käki, A., Salo, A., & Talluri, S. (2013). Impact of the shape of demand distribution in decision models for operations management. Computers in Industry, 64(7), 765-775. The Procter & Gamble Company – Who We Are. The Procter & Gamble Company, Form 10-K.

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