Procter & Gamble’s Operations Management: 10 Decisions, Productivity

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 fulfil 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.
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. 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.

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
fulfil 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 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:

 Batches per hour (Procter & Gamble’s manufacturing productivity)

 Tickets per day (Customer service productivity)
 Variant tests per month (R&D productivity)