CIO: Did you have an inspiration for the continuous replenishment project?

Drayer: We knew there were inefficiencies in the supply chain because of the high inventory and transportation costs and the variability in shipments. We knew there was a fundamental problem in how we were serving customers. And I got the support of the chairman of the company who invested some money to see if we could develop a tool. We actually bought Inform from IBM as the software. What was funny was that in the course of this we rewrote the product and later sold it back to IBM. And they took it and created a de facto industry standard for continuous replenishment with it. [The product today is called CRP.]What were the challenges when you first approached Wal-Mart to begin the work?

It wasn't just Wal-Mart. We took this CRP approach and expanded it to all our key customers. Imagine the scepticism among retailers hearing a manufacturer say they could manage the retailers' inventory better than they could themselves. Buyers at the different retailers were very reluctant to let go of this responsibility.

We had to completely rethink how we used transportation because transportation became a key ingredient in our ability to dramatically reduce inventory at our customer and at the same time improve service levels at retail. We had to re-educate our plants on this whole just-in-time approach. The customers had to learn to receive these trucks immediately when they arrived. Particularly at Wal-Mart, when they were growing by leaps and bounds, it wasn't unusual to have hundreds of trailers sitting in their yard. They had to get used to the fact that there was no inventory sitting around in the warehouses. Those trucks had to be unloaded immediately. So the mechanics of scheduling had to be completely rethought. But once we got it worked out, it delivered a lot of results, and it led us into many more sensitive areas of collaboration.

CIO: Speaking of sensitive areas, how did you break the news to the retailers that you thought you could manage their inventory better than they could?

Drayer: We knew we had a superior tool. We knew we would be giving a lot more attention to our products than the Wal-Mart buyers could ever do. They're focused on hundreds of different products and typically reviewed them only once a week whereas we had a dedicated customer service effort focused only on these products and were focused on the entire supply chain, not just what was going on in the Wal-Mart distribution centre or store. So it just took laying out why we thought we could do it better and starting out small, like anything else. Pick a distribution centre and demonstrate you can do it before you roll it out to all of them.

CIO: At the beginning, did you envision that this would build into something that could involve some of the more sensitive processes?

Drayer: No, we didn't. When we started this whole customer business development team and extending our supply chain work beyond the four walls of P&G, we knew that there was value there, but we kind of learned as we went. We did not know that it would end up serving as a foundation for a vastly improved trading relationship.