Why and How Colgate-Palmolive Uses the Principles of Supply Chain Management - Case Study Example

Report on the Supply Chain Analysis of Colgate-Palmolive Introduction This report examines the supply chain management and systems of Colgate-Palmolive. The company is involved in the manufacture of dental care products, shower gels, deodorants and cleaning products (Knolmeyer et al, 2009). Colgate-Palmolive produces 10 million tubes of toothpaste which is sold worldwide every single day (Kolmeyer et al, 2009). The company has its headquarters in New York and has over 38,000 employees located in 200 countries around the world. This report identifies the important elements and structures of the Colgate-Palmolive Supply Chain Management system by evaluating the way the company chooses its suppliers and manages them. The project would also look at the production process employed by Colgate-Palmolive and the management and distribution channels. The importance of the end-user would also be examined in the paper. Supplier Choice System Colgate Procurement System (2013) identifies that the company uses a uniform and fair system of taking tenders and supplier application from producers. The company decides what to buy on the basis of quality and price offered by a supplier. The suppliers reliability, integrity, innovation and commitment to continuous improvement is a basis for decision making (Colgate Procurement System, 2013). Ethical standards are used to carry out the examination and evaluation of different suppliers. This include a number of standards and expectations that must be met by each and every supplier in the list of possible contenders. Once this is done, there are some guidelines that are used to by the Global Procurement Group to authorize a supplier. The Global Procurement Group of Colgate-Palmolive is made up of purchasing and logistic professionals from the regional units of the company. They use teamwork to guide their efforts. The group takes up tenders and quotes from suppliers around the world who fit some basic requirements. The quotes are presented to the Group and they examine and critique it. The company uses various criteria including positive discrimination techniques like identifying minority-owned suppliers and women-owned businesses. The group uses ethical business practices and high integrity levels to set goals and attain them. The company uses the Supplier Code of Conduct to guide the ethical conduct of procurement and they ensure that the best suppliers are chosen. Management of Suppliers. When suppliers are chosen, the company settles down to manage them through various technological and ICT databases and platforms that produce real-time information for decision making and guidance. Every suppliers contract is stipulated and given out to the customer when they join the supply team. The suppliers are monitored by the Internal Supply Chain system and unit. Each supplier is given a lot and a real-time connection device that links it up to Colgate-Palmolives database in their factories. Through this, the company can always be in constant touch with the supplier and the suppliers are aware of the stocks levels and the need levels of Colgate-Palmolive. Colgate-Palmolive has a view of cutting down on the number of lead-time and holding cost (Beyer, 2010). So they aim at ensuring that their suppliers are all informed about when they need new stocks and they deliver just in time for them to acquire stocks to produce as and when the need is necessary. Due to the just in time system used by Colgate-Palmolive, they do not hold stocks. This prevents them from locking up their capital in stocks which can lead to high holding costs and create a risk of destruction of stocks. Thus, Colgate-Palmolive uses the computerized system to get an idea of what consumers want and produce them as and when the need arises. Colgate-Palmolives Advanced Planner and Optimizer (APO) Colgate-Palmolive has a worldwide recognized APO system. The system ensure that there is a constant connection and linkage of their activities and needs with their suppliers. Colgate-Palmolive summarizes information from consumers and they identify the level of production needs from the various sales outlets throughout the United States and around the world. The companys system is able to calculate detailed deviations and scheduled requirements from time time (Hieber, 2012). Through Colgate-Palmolives advanced system, the company can ascertain the quality, production levels and supply quantities. This enables the company to get an inventory control and supplier performance. This is transposed to suppliers and they produce at a given deadline to the respective plants that need them. Suppliers are encouraged to meet exact deadlines to avoid creating lead times and idle times which can mean failing to meet consumer requirements and expectations. Thus, they risk losing goodwill through the shortage that this would cause. Production Process The production process of Colgate-Palmolive is connected both to the suppliers who get real time information about what is needed at every given point in time and the consumers who need to re-stock from time to time. There are 79 factories and warehouses in the United States. There are also several factories in the regional centres of Colgate-Palmolive. All these units have APO systems that link the suppliers and the sales outlets. There are 280 transportation exchanges and 109 consumer distribution centres as well as 40,000 stock-keeping units connected to the APO (Knolmayer et al, 2009). The APO system of Colgate-Palmolive is linked and connected with the production process and the suppliers. Colgate-Palmolive is connected to suppliers and the suppliers produce information relating to the quality, production quantity, and reinforcement. This information is acquired through the summary of information that is presented from the sales and activities carried out by the different units and sales points of the company. Hence, the forecasting unit gets information about what is needed and translates it to the production unit and the required materials are communicated to the suppliers. So the Supply unit in-house plays a major role in forecasting what needs to be sourced by taking information from the sellers and the consumers on the market. Forecasting Techniques and Systems The basic forecasting technique used by Colgate-Palmolive is to identify the different fluctuations in demand over time. Knolmeyer et al (2009) identifies that there are times where demand goes very high for Colgate-Palmolive products. This includes end of the week, after advert campaigns, growth in buying habits for a given product, and after payment of salaries at the end of the month. Thus, the people tasked with the supply chain unit have an insight into when and how these changes would occur. Thus, based on the trends in purchases, they can postulate the volumes of products that would be demanded. Through this, they can adjust the volumes to be produced. This leads to the derivation of the corresponding volume of materials that must be sourced. This leads to the formulation of the volumes to be purchased. Qualitative Elements There is the Supply Assessment and Audit Process (SAP) which supports the Colgate-Palmolive supply chain (Colgate-Palmolive, 2012). There are computer measures that identify the quality of products and the level of satisfaction that consumers get. All this are identified and evaluated through the system of the sales outlets. This provides feedback for decision making and guidance on how to examine and review the kind of products that should be produced (Monczka et al, 2009). This means that the SAP system of the company helps in decision-making and forecasting of volumes amongst other things. This gives Colgate-Palmolive the impetus for continuous improvement. This is because they know what would work and what would not work and they encourage the replication of successful and popular brands. Reporting System Bonneau (2011) identifies that Colgate-Palmolive has a top world class reporting system that is linked to the supply chain system. This enables the company to show the kind of results the supply chain system attained at the end of each year. This include the qualitative and the quantitative elements and provides a report of how well all the relevant stakeholders in the unit operated. This gives room for improved services and activities at the end of the period in question. Management and Distribution Channels The distribution channels come with different structures and systems throughout the United States. These channels are mainly inspired and influenced by the transportation system of the company. It is the main system and structure for the distribution of products and raw materials. There are various transportation and haulage companies that are connected to the suppliers and the distributors. This enables the company to distribute to the different outlets and centres to ensure that there is constant production and the constant distribution of products for consumers to purchase. These distribution channels are linked with the computerized system and they move and transport products as and when the need arises. There are also warehouses that holds stocks for certain wider geographical zones where further distribution is necessary. Managements duty is to take decisions about which quantities should be sold and which quantities should be authorized amongst other things. The implication is that they have to find people who would be in charge of logistics forecasting and supplier interactions. These people would examine and evaluate facts and predict what quantity should be sold at every point in time. Their duty is to ensure that stocks are always available to consumers and also prevent the hold up of too much raw materials which might prove expensive. Global Supply Chain The successes of the US branch of Colgate-Palmolive have been replicated around the world. The regional branches and units produce according to the APO system that is used by the US branch and they try to forecast and identify demand through the use of real-time systems that connect directly with the sales outlets of the companys products. Conclusion Colgate-Palmolive is a company that uses the principles of supply chain management to ensure that they hold a reasonable level of stocks and ensure that their sales units are always making products available to consumers in the right volumes and quantities. References Beyer, S. (2010) Supply Chain Performance Measurement and E-Business Supply Chain Management Berlin: GRIN Verlag Bonneau, L. (2011) “Colgate-Palmolive Empowers End Users with Supply Chain Reporting” Insider Profiles Vol 2 (1) Colgate-Palmolive (2012) Supply Chain Transparency California: Colgate-Palmolive Colgate Procurement System (2013) Global Procurement Group [Online] Available at: http://www.colgate.com/app/Colgate/US/Corp/ContactUs/GMLS/MissionAndGoals.cvsp Accessed: March 12, 2013. Hieber, R. (2012) Supply Chain Management: A Collaborative Perofrmance Management Approach Stuttgart: VDF Verlag. Knolmayer, G. F. , Mertens, P., and Zeier, A. (2009) Supply Chain Management: Based on SAP Systems London: Springer Monczka, R. M., Mandfield, R. B., Guinpero, C. C. and Patterson, J. L. (2009) Purchasing and Supply Chain Management Mason, OH: Cengage Overbeck, S. (2009) Supply Chain Management: A Critical Analysis Berlin: GRIN Verlag Witton, P. (2000) “Cologate Rethinks Supply Chain” Outlook 2000 1(1). Read More