P&G to Cut Distribution Sites in Half

2006-12-15 | 08:22

Procter & Gamble Co. plans to cut its number of distribution centers in half over the next couple of years and is actively pursuing alternative energy sources, executives said on Thursday. The company aims to lower its distribution costs using fewer facilities. But at the same time, McDonald said that P&G is working on more custom products and displays for retailers. Such tactics should help P&G, whose products include Tide laundry detergent and Bounty paper towels, improve margins by 50 basis points to 75 basis points per year, said chief financial officer Clayt Daley. That goal excludes margin benefits the company expects to achieve from the integration of Gillette, which it acquired in October 2005. Daley said that P&G is working with suppliers on alternative fuels like liquefied natural gas. It is also trying to take better advantage of by-products in its plants. According to Daley, next year P&G will start up a co-generation unit at a plant in Mexico that should provide all of that plant's steam requirements and fill some energy needs for other plants across the country. P&G has already moved much of its production to low-cost locations. The company now produces over 30% of its volume of products in low-income markets, up from 20% at the beginning of the decade, Daley said. The changes come as P&G continues to integrate operations previously owned by Gillette. Daley said that the integration is moving ahead on schedule. He also said that the company aims to keep capital expenditures at or below 4% of sales even with Gillette, which had operated with higher capital spending rates than P&G. P&G's capital expenditures are currently less than 4% of sales, down from more than 6% in 2001, Daley said.