News Feature

Interview with Ralph Drayer on CPFR, Business Process Automation and P&G's Deal with Wal-Mart

By Christopher Koch

August 01, 2002 — CIO — Now that every company on the planet is trying to automate the relationship between suppliers and customers, it’s worth remembering who invented this stuff more than 20 years ago: Procter & Gamble. Specifically, teams of business and IT people led in 1980 by P&G Brand Manager Duane Weeks (who now runs his own software company, Exemplary, in Cupertino, Calif.) and in 1987 by Ralph Drayer, P&G’s vice president of customer services (who now runs his own consulting company, Supply Chain Insights, in Cincinnati).

Weeks prototyped the granddaddy of collaborative business processes?continuous replenishment?with P&G automatically shipping Pampers to the warehouses of Schnucks, a St. Louis grocer, without the Schnucks managers having to place orders. Drayer took that prototype, broadened its goals and sold it to Wal-Mart in 1988. Today, P&G’s software and process design is the industry standard.

But continuous replenishment was and is about much more than computing. It was a road sign that pointed to the future. It transformed the business process landscape. It identifies the winners and the losers in the IT era.

Not convinced? Consider this: Drayer successfully piloted his system first with Wal-Mart’s archrival Kmart. But Kmart’s executive team didn’t approve moving beyond the pilot stage. The rest, as they say, is history.

CIO: The story of Wal-Mart and P&G working together on supply chain management in the ’80s has become the stuff of legend. Based on your experience, how should two companies approach one another to build the kind of business process relationship that you built with Wal-Mart?
Ralph Drayer: First, you have to have a trusting business relationship with your counterpart before you’ll get very far in collaboration and, specifically, in establishing jointly managed processes. Secondly, you need senior management support in beginning to work with your trading partner in new ways that have a mutual benefit. Collaborative planning, forecasting and replenishment [CPFR] is a great example of a process that dramatically changes the trading relationship between two companies. [For more information on CPFR, see www.cpfr.org.]

We hear that word trust all the time. What does it really mean?
Trust means you have a working relationship with your trading partner, where you have confidence that they will use information that is given to them and not share it with competitors. That when you say you’re going to do something you do something.

In this industry, there were so many adversarial win/lose trading relationships that trust was at a very low level overall. The relationship between manufacturer and retailer was focused on price with very little time spent trying to understand the consumer and how to work together to deliver value. So the first thing that had to be done before you could start these joint processes was build a trusting trading partner relationship with others. That’s everything from pricing and promotion practices to follow-through. You have to demonstrate that you’re interested in their well-being and success, and can use information that is shared to the benefit of the joint partnership.

What was the first collaborative process you did with Wal-Mart?
Continuous replenishment. We used it to build trust and demonstrate the value of sharing information and focusing on the ultimate consumer. That created some dramatic benefits for P&G and the consumer, and it built the foundation for a bigger sharing.

How did the relationship between Wal-Mart and P&G start?
Who knows who really pushed it, but there was a mutual recognition that there had to be a better way to do business. The way we were working together was not only frustrating, time-consuming and expensive, but we knew both companies could benefit from working with their largest trading partner in a different way.