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Dive Brief:
- Procter & Gamble plans to initiate a supply chain reorganization as part of a two-year restructuring plan set to begin in fiscal 2026, executives said June 5 at the dbAccess Global Consumer Conference.
- The reorganization includes discontinuing brands at the category, country and product level, and “may include some brand divestitures,” CFO Andre Schulten said. The brand changes would drive supply chain modifications.
- “These portfolio moves enable us to make related interventions in the supply chain: rightsizing, right-locating production to drive efficiencies, faster innovation, cost reduction and even more reliable and resilient supply,” Schulten said.
Dive Insight:
P&G unveiled restructuring plans two months after Schulten said the company would take a wait-and-see approach to Trump administration tariffs before altering its supply chain. At the time, Schulten said the company needed more certainty on new levies.
The company currently faces a 2% reduction in the overall market for product categories, Schulten said. It is also monitoring several potentially negative trends, including tariffs, U.S. trade tensions with China and economic uncertainty impacting consumer spending.
“I think we’ve seen a cycle of accelerated growth because of pricing dynamics and inflation dynamics,” Schulten said. “We see now a deceleration because of uncertainty in the consumer space, all of the tariff conversations, geopolitical uncertainty.”
The restructuring project’s overall cost would range from $1 billion to $1.6 billion before tax, Schulten said. The company will disclose more details on its fiscal year-end earnings call in July, he added.
The wide-scale initiative includes “leveraging digitization and automation opportunities” in an effort to make work faster and more efficient, Schulten said. By doing this, the company expects to eliminate approximately 7,000 non-manufacturing jobs, accounting for 15% of its workforce.
“We believe we now have the opportunity to step forward to enable the tremendous growth opportunities we have with an even more focused and efficient portfolio, supply network, and organization,” Schulten said.
P&G has already invested in supply chain technologies to improve alignment of production and inventory levels to consumer demand, COO Shailesh Jejurikar said. This helps to minimize stock-outs, over-production and waste.
The company is also in the midst of a multi-year project to improve its warehouse network. In Europe, the company has connected 50 distribution centers to a single warehousing center, “coordinating warehousing activity from the moment a truck enters the gate until it leaves,” Jejurikar said.
“The central coordination is delivering 50% productivity on our indirect administrative work by eliminating redundant positions at each individual site,” he said.
P&G declined to provide details on whether it plans to implement similar changes to its U.S. warehouse network.
The expected cost reductions from the restructuring plan would be incremental to P&G’s Supply 3.0 initiative, launched in 2023, according to Schulten. The company expects the project to deliver 98% on-shelf and online availability, up to $1.5 billion in annual gross productivity savings and 90% of free cash flow productivity, Jejurikar said.
