Supply Chain Management – Wal-Mart and Proctor & Gamble – Dealing with Stock-Outs

In the year 1988, Proctor and Gamble (P&G), a well known consumer goods manufacturing company and Wal-Mart, the biggest retail chain in the world came together to sign a pact according to which Wal-Mart was ready to share “Confidential Marketing Data” with their Supply Chain partners Proctor and Gamble (P&G).

Need for Partnership (Frequent Stock-Outs)

In 1970s and 80s Wal-Mart was doing amazingly well in the area of retail, while there was a lot competition in the market, a company named K-Mart was the market-leader back then. Wal-Mart, due to stock-outs was losing a lot of Business. Adding to that, Proctor and Gamble was manufacturing goods but was unable to sell in the market at the pace they would have wanted to. The issue was that there was no such procedure which could notify the manufacturer (P&G) about the stock-out at a retail store, unless or otherwise informed manually.

Walmart P&G - Dealing with Stock-Outs

Walmart P&G – Dealing with Stock-Outs

Solution to the Problem

In 1980s Wal-Mart was using a “Warehouse Management System”, the information of which was confidential to Wal-Mart Employees. After the Supply Chain partnership, Wal-Mart instated their faith in Proctor and Gamble and shared their confidential Customer Data with them. As a result, Proctor and Gamble, could find out when a particular Wal-Mart store runs out of stocks and thus it could be replenished.

This also helped Proctor and Gamble (P&G) streamline their product sales, and thus, this partnership was mutually beneficial. By 1999 both Wal-Mart and Proctor and Gamble (P&G) were able to increase their revenue by more than 8 times.

This is the example of one of the most successful Supply Chain Partnerships and has setup a benchmark in how a successful, stable and trustworthy Supply Chain Partnership can be mutually beneficial.

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