Procter and Gamble Tries to Optimize Inventory
Chapter 8: Achieving Operational Excellence and Customer Intimacy: Enterprise Applications
The shampoo and lipstick aisles at Target
and
actually sites for an unending struggle among consumer products companies for retail shelf space. No company knows this better than Procter & Gamble (P&G), one of the world 's largest consumer goods companies, with annual revenue surpassing $76 billion and 138,000 employees in 80 countries. The company sells more than 300 brands worldwide, including Cover Girl cosmetics, Olay skin care, Crest, Charmin,
Tide, Pringles, and Pampers.
Wal-Mart hardly seem like battlegrounds, but they are
changes in inventory made by one echelon may have unpredictable consequences on the others.
Multi-echelon inventory optimization seeks to minimize the total inventory in all of the echelons of a company 's supply chain. This is more complicated than traditional inventory optimization because of the additional lead times between each echelon, the bullwhip effect, and the need to synchronize orders and control costs between echelons. Companies with this level of complexity in their supply chains musr replenish and divide their inventories at each distribu_ tion point along the supply chain, as opposed to just one distribution point or even just the inventory of the initial supplier. Each point in rhe supply chain is also unaware of the inventory levels of points beyond those that they have immediate contact with, which creates a lack of visibility up and down the supply chain. Demand variability for P&G 's products from its Beauty division is very high. A popular eye shadow or lipstick color may quickly fall out of favor, while fashion trends call for new products continually to come on-stream. Major retail outlets such as Wal-Mart and Target compete by offering brand-name products at the lowest price possible.
In response to these pressures, P&G is constantly searching for ways to reduce supply chain costs and improve
The shampoo and lipstick aisles at Target
and
actually sites for an unending struggle among consumer products companies for retail shelf space. No company knows this better than Procter & Gamble (P&G), one of the world 's largest consumer goods companies, with annual revenue surpassing $76 billion and 138,000 employees in 80 countries. The company sells more than 300 brands worldwide, including Cover Girl cosmetics, Olay skin care, Crest, Charmin,
Tide, Pringles, and Pampers.
Wal-Mart hardly seem like battlegrounds, but they are
changes in inventory made by one echelon may have unpredictable consequences on the others.
Multi-echelon inventory optimization seeks to minimize the total inventory in all of the echelons of a company 's supply chain. This is more complicated than traditional inventory optimization because of the additional lead times between each echelon, the bullwhip effect, and the need to synchronize orders and control costs between echelons. Companies with this level of complexity in their supply chains musr replenish and divide their inventories at each distribu_ tion point along the supply chain, as opposed to just one distribution point or even just the inventory of the initial supplier. Each point in rhe supply chain is also unaware of the inventory levels of points beyond those that they have immediate contact with, which creates a lack of visibility up and down the supply chain. Demand variability for P&G 's products from its Beauty division is very high. A popular eye shadow or lipstick color may quickly fall out of favor, while fashion trends call for new products continually to come on-stream. Major retail outlets such as Wal-Mart and Target compete by offering brand-name products at the lowest price possible.
In response to these pressures, P&G is constantly searching for ways to reduce supply chain costs and improve