Inventory Optimization at Procter & Gamble: Achieving Real Benefits Through User Adoption of Inventory Tools

Ingrid Farasyn (), Salal Humair (), Joel I. Kahn (), John J. Neale (), Oscar Rosen (), John Ruark (), William Tarlton (), Wim Van de Velde (), Glenn Wegryn () and Sean P. Willems ()
Additional contact information
Ingrid Farasyn: Procter & Gamble Services Company NV, 1853 Strombeek-Bever, Belgium
Salal Humair: Harvard School of Public Health, Boston, Massachusetts 02115
Joel I. Kahn: PS Analytics, The Procter & Gamble Company, Cincinnati, Ohio 45202
John J. Neale: Boston University, Boston, Massachusetts 02215
Oscar Rosen: The Procter & Gamble Company, Cincinnati, Ohio 45202
John Ruark: Logility, Inc., Burlington, Massachusetts 01803
William Tarlton: The Procter & Gamble Company, Hunt Valley, Maryland 21030
Wim Van de Velde: Procter & Gamble Services Company NV, 1853 Strombeek-Bever, Belgium
Glenn Wegryn: The Procter & Gamble Company, Cincinnati, Ohio 45202
Sean P. Willems: Boston University, Boston, Massachusetts 02215

Interfaces, 2011, vol. 41, issue 1, 66-78

Abstract: Over the past 10 years, Procter & Gamble has leveraged its cross-functional organizational structure with operations research to reduce its inventory investment. Savings were achieved in a two-step process. First, spreadsheet-based inventory models locally optimized each stage in the supply chain. Because these were the first inventory tools installed, they achieved significant savings and established P&G's scientific inventory practices. Second, P&G's more complex supply chains implemented multiechelon inventory optimization software to minimize inventory costs across the end-to-end supply chain. In 2009, a tightly coordinated planner-led effort, supported by these tools, drove $1.5 billion in cash savings. Although case studies show the mathematics employed, of equal importance is the presentation of the planning process that facilitates inventory management and the decision tree that matches a business to the optimal inventory tool depending on the requirements of the business. Today, more than 90 percent of P&G's business units (about $70 billion in revenues) use either single-stage (70 percent) or multiechelon (30 percent) inventory management tools. Plans are underway to increase the use of multiechelon tools to manage 65 percent of P&G's supply chains in the next three years.

Keywords: industries; consumer packaged goods; inventory/production; applications; multi-item/echelon/stage; dynamic programming; applications (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (14)

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