The encyclopedia · Strategy & Leadership · Strategic decision · 1987–1996
Walmart shared its sales data so P&G refilled the shelf.
Walmart poured sales data to Procter & Gamble, and the supplier restocked to match real buying.
Walmart · Procter & Gamble
the move
The friction was inventory: Walmart's shelf for Pampers alternately ran out and overflowed, and both hurt sales and raised costs, yet nobody on either side could see the true demand signal.
In 1987 Ralph Drayer of Procter & Gamble and Sam Walton agreed to connect their computer systems and share sales and market plans. P&G began managing the replenishment of a national roll-out almost as the manufacturer run it, and 'continuous replenishment' was born.
Rather than Walmart placing orders it forecast, P&G shipped against live sell-through. The forecast moved to the one party with the full picture, and the relationship became a partnership instead of a price tug-of-war.
why it works
- The supplier owns the demand forecast, so the guess is made where the data lives.
- Continuous replenishment smooths the bullwhip, so retail orders no longer swing
- Fewer stockouts and less warehouse stock raise sales per store and cut working capital.
- Two firms trusting each other's numbers opens the door to joint planning later
what transfers
When a supplier knows a retailer's real sales, the supplier can manage stock better than the retailer's own buyers.
what came after
The Walmart and P&G case became the template for collaborative planning, forecasting and replenishment (CPFR) across retail, and vendors let suppliers manage inventory in many categories. It also pushed Walmart toward Retail Link, the data-sharing platform suppliers later used.
references
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