Inventory Optimization at Proctor & Gamble: Achieving Real Benefits Through User Adoption of Inventory Tools
Over the past ten years, Procter & Gamble has leveraged its cross-functional organization structure with operations research to reduce inventory investment significantly. Savings were achieved in a two-step process. First, spreadsheet-based inventory models locally optimized each stage in the supply chain. Since 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 multi-echelon inventory optimization software to minimize inventory cost 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.
While case studies reveal 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 business' requirements. Today, more than 90% of P&G's business units (about $70 billion in revenues) utilize either single-stage (70%) or multi-echelon (30%) inventory management tools. Plans are underway to grow the use of multi-echelon tools to 65% in the next three years.