P&G Outsources To Cut Costs

 

As the consumer packaged goods (CPG) market becomes more competitive, manufacturers are developing cost-saving strategies to help them live off thinning profit margins. Procter & Gamble provides the latest example.

 

P&G is studying outsourcing non-core competencies in business administration, such as human resources, accounting and information technology.

 

If this strategy takes hold, it won’t be the first time P&G forged relationships with third-party service providers. It has been outsourcing logistics services in key U.S. locations for years now. What’s new is going global with the strategy.

 

“Logistics needs a responsiveness of 24 hours from order to delivery,” says Gregg Schwerdt, P&G logistics manager.

 

To help P&G pull this off, it is working with global logistics providers in four major regions: Asia, Latin America, Europe and North America. In an exclusive interview, Schwerdt told MHM that although these third parties normally compete against each other, P&G is bringing them together to learn the logistics software, and expects them to share information with each other when necessary.

 

In the world of material handling, competitive advantages come mostly through labor management. P&G’s strategy is to help these third-party logistics organizations minimize product damage while maximizing product flow. One package P&G has been using in this endeavor is AutoPalletP3, which it implemented at several sites with the help of the software’s developer, Tom Moore, president, Warehouse Optimization LLC (www.warehouseOptimization.com). It’s a case-picking and load optimization expert system, designed to eliminate product damage caused by improper trailer loading (see P&G Pickers Hold Key to Product Quality, MHM April 2000).

 

“The program helps us from a damage control and accuracy standpoint,” Schwerdt adds. “It gives third parties the accuracy we hold them accountable for, and it doesn’t cost them anything. They can even offer those capabilities to their other customers.”

 

Moore worked with Procter & Gamble on the initial concept of global flow centers because a significant portion of P&G’s order fulfillment involves case picking.

 

The first P&G flow center to go on-line is in Chino, California. It takes product from all the production plants and flows it to the customer’s dock within 24 hours. It is making this level of service available to customers, along with the alternatively priced options of sourcing directly from P&G plants or regional distribution centers. P&G hopes to win more customers by combining this flexibility with lower costs made possible by reorganization initiatives.

— Tom Andel

 

 

 

Home Depot Signs Exel To Operate Facilities

 

Exel, a leader in supply chain management, announced an agreement to manage four crossdock facilities within the product distribution network of Home Depot. These transit facilities are among the first Home Depot plans to open to enhance the flow of goods, improve service to its stores, and lower costs across its national supply chain. At rollout completion, the transit facility network will consist of 10 to 15 sites.

 

Transit facilities are vendor consolidation crossdock locations designed to increase delivery performance within Home Depot’s vendor-to-store distribution network. Exel will hire more than 90 employees for each location and initiate startup implementations, labor management and order fulfillment functions with no interruption in service to stores.

 

Under the terms of the contract, Exel provides warehouse management, inventory control, yard management, inbound and reverse logistics, and order fulfillment. Product is received from various vendors and manufacturers, then consolidated and readied for shipment via a dedicated transportation solution directly to Home Depot stores within each region.

 

 

Robert H. Pfleger

 

Robert H. Pfleger, founder and president of Pflow Industries, died March 7. Mr. Pfleger was 70 years old. He started Pflow Industries in 1977 when vertical material handling was virtually non-existent. There was no clear definition separating elevators and vertical reciprocating conveyors. His first products were called “slant lift” conveyors because the angle of travel for the conveyor was 70 degrees from horizontal.

 

Pfleger’s contributions to the state of the art were in both design of equipment and, importantly, the development of national standards that define the equipment and eliminate potential conflicts with elevator codes.

 

Prior to founding his own company, Mr. Pfleger worked for Kelley Company, a manufacturer of dock handling equipment.

 

 

 

Managers Making News

 

Tomo Razmilovic, president and CEO, Symbol Technologies, has announced he will take early retirement in May. Jerome Swartz, chairman and founder, has been named CEO. Richard Bravman, currently senior vice president and general manager of the Integrated Systems Division, has been named president and COO.

 

Joyce/Dayton Corp. announced the retirement of its chairman and chief executive officer Warren Webster II. He stepped down in February after more than 40 years. Tom Armstrong, president, will assume the duties of chairman and CEO.

 

Ford Power Products named Bob Mendlesky special projects manager. Mendlesky will be responsible for coordinating the development of new business opportunities via product development projects. Brian Kopf was promoted to strategic planning supervisor. He will be responsible for several key areas in the strategic and business planning processes.

 

 Cattron Group Inc. announced a series of appointments. James C. Robertson has been named president and chief operating officer. Prior to his new assignment, Robertson was vice president and chief operating officer. Also, Frank Rudge was promoted to managing director, Cattron-Theimeg International Ltd., responsible for all aspects of Cattron Group’s affiliate operations outside of the U.S. Carl Verholek has been named vice chairman of the board and chief technology officer, and Michael Pearson has been appointed vice president of finance and administration.

 

Creative Storage Systems Inc. has appointed John Ivey vice president sales and marketing.

 

Dave Sorter has been appointed vice president, sales and marketing at Arca Xytec Systems Inc.

 

Darcor Ltd. has promoted Rob E. Hilborn to president, and Bob Pearce, vice president corporate development.

 

 

 

Companies Making News

 

Ballard Power Systems’ Electric Drives and Power Conversion Division has signed a joint development agreement with Ford Power Products, a subsidiary of Ford Motor Company. They will jointly develop products driven by spark-ignited combustion engines for the generator market.

 

Escort Memory Systems (EMS), a supplier of RFID technology solutions, announced that Siemens Dematic (formerly Rapistan Systems) has integrated EMS’ products to build complete tracking systems at John Deere and Lear Corporation.

 

 

 

Tax Tip for Business

 

Did you know you can say good-bye to excess inventory and hello to a federal tax deduction? Donating overstock, non-moving merchandise to charity can be worth a federal income tax deduction under Section 170 (e)(3) of the U.S. Internal Revenue Code. Eligible items may include returns, seconds, canceled orders, discontinued models and slow sellers. A condensed, step-by-step guide to this business strategy is available from the non-profit National Association for the Exchange of Industrial Resources, 800 562-0955, or naeir.org on the Web.

 

 

 

Sam’s Club Adopts Corrugated Common Footprint

 

SAM’s Club has asked its produce suppliers to begin shipping in new corrugated containers meeting the Fibre Box Association (FBA) Common Footprint Standard. The change became effective February 1, 2002, and applies to shipments of apples and pears, citrus, tomatoes and peppers, summer fruit, melons and mushrooms. Suppliers will pack in half- or full-size corrugated common footprint containers, depending on the commodity. Box height can be varied to optimize protection and space efficiencies according to the unique characteristics of individual commodities.

 

According to Bob DiPiazza, SAM’s Club vice president — perishables, packaging in the corrugated common footprint’s modular, stackable design standard is expected to help improve product integrity, reduce shrink, increase distribution-center productivity and reduce labor costs.

 

 

 

Conveyor Sales Roll

 

The Conveyor Equipment Manufacturers Association (CEMA) reports that its December 2001 Booked Orders Index was 138, up 16 points, or an increase of 12 percent from November’s index. The 12-month index for booked orders indicates an increase of one percent. Billed sales (shipments) were down four percent from the previous month.

 

 

 

Management Changes at AIM

 

Larry W. Roberts has resigned his position as chief executive officer of AIM USA and AIM Inc., the association for manufacturers of auto identification equipment. Roberts had directed the association for more than eight years. Dan Mullen, vice president operations will assume the role of interim CEO for the organization.

 

Tomo Razmilovic, retiring CEO of Symbol Technologies, has decided to resign from his role as chairman of the board of AIM, effective immediately.

 

Brian Wynne, executive vice president global integration, who has served the organization for nine years, has also resigned.

 

After being the editor and publisher of the RFID Newsletter for the association since its inception, Steve Halliday has decided to leave AIM and start his own business.

 

 

 

On-Line Education

 

The following sponsored article appears at www.supplychaintech.com/articlearchive:

 

William Troxell describes how Air Products and Chemicals Inc. has aligned the company’s international operations with data resources and reshaped its enterprise systems management (ESM) environment.  Read this sponsored article “Getting Global Integration Right.”