In a presentation given by chief financial officer Clayt Daley and CEO A.G. Lafley, the executives outlined how divestment, cutting back on management headcount, reformulating and developing manufacturing facilities closer to the customer base would help to stem costs.
Like all global consumer businesses, Daley pointed out that P&G has two primary hurdles to overcome at present, namely rising commodity prices and challenging retail climates, particularly in the US market.
Daley pointed out that although costs relating to commodities rose progressively during 2007, an expected levelling off of the price in 2008 no longer seems to be a likely prospect.
Commodity price rises passed on to consumer
The company has managed to pass on 75 percent of the increased commodity prices by passing them on to the consumer, but to make up the difference Daly says it is going to have to turn to its own manufacturing and production processes to make up the difference.
Likewise, some of the commodity price increases have also been absorbed through reformulating, which has meant adapting raw material requirements according to availability and pricing - 'without a reduction in product performance or value'.
However, to continue its unbeaten growth track record, it will be looking at a number of other areas to cut back costs in an effort to continue to reduce manufacturing costs.
Undoubtedly the most wide-reaching move will be the company's proposed cut back on the size of its workforce over the course of 2008 and beyond.
Management job cuts on the way
In his presentation Lafley said that the company was 'committed to flat or declining head count for the foreseeable future', which will most affect management level employees.
In particular he said that the company would be looking to cut back its expat manager numbers by 40 - 50 percent, while also looking to reduce the number of workers employed at the general manager level by 10 - 15 percent.
At a manufacturing level the company also sees significant savings from the consolidation and restructuring of its manufacturing facilities on a worldwide basis.
Lafley said that the company would be building more production facilities on a local basis to be closer to its consumer basis and to reduce distribution costs, which means around 70 new facilities mooted for construction before the end of 2009.
Synergies from raw material consolidation
He also said that the company would continue to benefit from synergies through the continued consolidation of its raw materials purchasing business on a global basis.
"The key point is that we're taking a systematic approach to productivity improvement," Lafley said.
In January the company reported net sales growth of 9 percent to $21.6 billion for the three month quarter ending 31 December 2007.
Organic sales were up 5 percent for the quarter, in line with the company's expectations.
The company's predictions for 2008 remain positive with hopes for 4 - 6 percent growth in organic sales, which remains in line with its long-term target range.