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CINCINNATI -- Procter & Gamble here will close more than half of its 475 distribution centers worldwide as part of a major initiative to cut overlapping operations and condense its shipping network following its acquisition of Gillette Co., according to a local published report.
Although P&G declined to specify which centers will close or how many of its American facilities are targeted, the paper said that third parties operate many of the facilities. The process, expected to take place in the next year to 18 months, will include depots that carry products by P&G, Gillette and Germany-based Wella AG. P&G acquired Gillette for $54 billion in 2005 and Wella for $5 billion in 2003.
The broad plan -- which will help P&G operate fewer larger facilities with capabilities to ship a broader array of products with more frequency -- will reduce roughly $1.2 billion in expenses that P&G planned to achieve by the third year after the Gillette takeover, which when combined with the Wella acquisition, nearly doubled the quantity of its distribution centers. The move should "result in both cost savings and fewer out-of-stocks," said Clayton Daley, P&G's c.f.o., in an analyst conference in February.
Local observers noted that P&G's paring of its distribution centers could help it enter new retail areas, since it and Gillette each had strengths in areas where the other had not.