2/22/2014 Procter & Gamble - INFORMS

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Getting Sturted With Anulytics
Procter & Gamble -- Inventory Optimization at P&G:
Achieving Real Benefits through User Adoption of
Inventory Tools
The Problem
lour billion times per day, P&G brands touch the lies o people around the
world. P&G has consistently been at the oreront o supply chain excellence,
being ranked as one o the top ie best-managed supply chains in the world
and winning numerous best practice awards. 1he company`s global reach
proides signiicant scale opportunities to optimize areas such as inentory
management, new product launches, merchandising, and promotions.
P&G`s supply chain analysts employ a standard roadmap to determine which
inentory optimization tools are right or a gien supply chain`s business and
operating conditions. At one end o the spectrum, shorter and less complex
supply chains utilize detailed single-stage calculators to determine optimum
inentory requirements. At the other end o the spectrum, higher-complexity
supply networks require more sophisticated multiechelon tools. In the early
2000s, P&G recognized the need or more adanced inentory tools to allow it
to continue trimming already lean inentories while maintaining its superior
customer serice.

The Analytics Solution
1he adoption o distribution requirements planning systems in the late 1980s
triggered the deelopment o simple but robust models at P&G or setting
inentory targets across a distribution network, one echelon at a time.
Multiechelon technology rom Optiant was selected to sere as its uture
inentory optimization platorm. P&G executed a successul pilot in its most
complex beauty care supply chain in 2005-2006.
1he analytics that underlies the multiechelon inentory planning engine is based
on the guaranteed serice model o saety stock optimization. Although the
basics o this research stream hae been known to apply to strategic supply
chain design or years, considerable adances in both operations research and
computer science hae been required to sole the tactical inentory problem at
P&G`s scale. 1hese analytics adances include modeling nonstationary demand
to relect the seasonal nature o consumer demand, modeling reiew periods to
capture dierent replenishment requencies across the supply chain, and most
signiicantly, the ability to optimize inentory leels and locations in acyclic
network topologies. It is this last adance that has allowed P&G to capture the
multiechelon nature o their supply chains.

The Value
Since 2006, multiechelon inentory optimization has been deployed across more
than 80 o the global beauty care supply chains to sole both tactical and
strategic production-inentory planning problems. Len more importantly, a
closed-loop planning process integrates these two sets o decisions.
2/22/2014 Procter & Gamble - INFORMS
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1hese models hae been ery successully adopted and hae contributed to
multimillion dollar reductions in worldwide inentory. Beauty care supply chains
are achieing incremental total inentory reductions o 3 to rom an
already low base. Some speciic applications o the multiechelon tools to aid in
strategic redesign o a supply chain hae yielded cost reductions o more than
25.
Go to complete case study
(http://interfaces.journal.informs.org/content/4J/J/66.abstract)