SUPPLY-CHAIN PARTNERSHIP BETWEEN P&G AND WALMART

Major changes in the fast-growing digital economy occurred in the traditional supply chain and e-commerce company. Information technology has enabled channel partners to trade items to share information, and integrate them, thus it will reshape the dynamics of the organization and lead to more efficient channels. Electronic data integration and automation of business practices would have driven down costs and build sales with customer needs.

The development of channel partnership between a manufacturer (Procter and Gamble, or P&G) and retailer (Wal-Mart) .Both major players in their industries, P&G and Wal-Mart found a way to leverage on information technology by sharing data across their mutual supply chains. The result channel has become more efficient because channel activities are better arranged. Reduced needs for inventories but greater returns by focusing on selling what the customers want. All in all, the supply chain between P&G and Wal-Mart has adopted a much better customer focus through the channel partnership and it is mutually beneficial.

The power of inter-organizational information systems (IOIS) is well known in the literature of information systems research and has proven to be an effective strategic weapon. But the P&G and Wal-Mart partnership does further. To understand the impact fully, one has to think about three progressive degrees of IOIS: transactional, operational, and strategic. The strategic partnership is the most involved, with the greatest commitments from the partners and requiring the strongest trust. The two companies essentially stumbled into it and then progressively built stronger collaboration as more benefits were released.

To fully understanding the role that technology has played in the Procter&Gamble and Wal-Mart business relationship, an understanding of the business relationship before 1988 is needed. The business situation in 1988 between P&G and Wal-Mart was broken. The business itself was $375 million and growing. Athough, the business relationship between the two companies was poor. P & G had organized itself into 12 different internal product divisions. Each division had different sales managers that would separately and independently call on Wal-Mart. These individuals were accountable for the sales results of each division and never came together to represent P&G as a whole. At that time, the relationship between P&G and Wal-Mart was characterized as anything but collaborative. As a matter of fact, their relationship was adversarial, obsessed by day-to-day transactions. Furthermore, their business relationship was conducted through fragmented processes.

Looking back over the ten-year period between Wal-Mart and P&G, information technology has created a common language, driven down costs, and provided an avenue for increased sales for the P&G and Wal-Mart partnership. Several key lessons learned for understanding the role that Information Technology can play in the manufacturer / supplier relation.