Procter & Gamble tries to optimize the inventory By:

Neelakanta RaoManipal University

Introduction to P&G

Products

Competitors

Inventory Challenges

Issues on Larger Supply Chain

Importance of SCM

Inventory Optimization impact

Benefits of multi-echelon inventory

Highlights:

History of P&G: Procter & Gamble Co. also known as P&G, is an American multinational consumer goods company headquartered in downtown Cincinnati, Ohio, United States, founded by William Procter and James Gamble.

On August 1, 2014, P&G announced it was streamlining the company, dropping around 100 brands and concentrating on the remaining 80 brands, which produced 95 percent of the company's profits. A.G. Lafley, the company's chairman, president and CEO, said the future P&G would be "a much simpler, much less complex company of leading brands that's easier to manage and operate".

“P&G remains a highly selective employer as less than 1% of all applicants are hired annually”.

Ambi Pur PampersAriel PanteneDuracell TideGillette VicksHead & Shoulders WellaOlay Whisper Oral-B Olay Men

P& G Products:

Procter & Gamble one of the world’s largest consumer goods companies, with annual revenue surpassing $76 billion and 1,38,000 employees in 80 countries.

The company sells more than 300 brands world wide including Cover girl cosmetics, olay skincare, crest, charmin, tide, pringles and pampers etc..

Fast Moving Consumer Goods (FMCGs) are the products that people are using regularly and buy at regular intervals. FMCG companies are the biggest brands in the world. Everyone recognizes their products and they remain in the minds of the customers. High volume and low contribution are the specialties of this industry. Following list contains the top 5 FMCG companies in the world in 2014.

Top 5 FMCG Companies in World (2014)• Nestle S.A. . • The Procter & Gamble Company• Anheuser-Busch InBev• Philip Morris International Inc.• Coca-Cola Company

Multi Echelon inventory system :

Multi-echelon(different levels, ranks, grading) inventory optimization looks at inventory levels holistically across the supply chain while taking into account the impact of inventories at any given level or echelon on other echelons.

For example: if the product sold in a retailer’s outlet is received from one of its distribution centers, the distribution center represents one echelon of the supply chain and the outlet another one.

It should be clear that the amount of stock needed at the outlets is a function of the service received from the distribution center. The better the service that is provided upstream, the smaller the protection that is needed downstream.

The goal of multi-echelon inventory optimization is to continually update and optimize safety stock levels across all of these echelons.

Minimize supply chain costs while achieving optimal services levels.

Optimize interdependencies between all locations and stages of the multi echelon supply chain network.

Understand causes of inventory and cost fluctuations in the supply chain.

Improve productivity of inventory planners.

Why are larger Supply Chains more difficult to manage?

It is very difficult to manage larger supply chains. The reasons are listed below:

• It involves thousands of suppliers, manufacturing facilities and markets.

• Even the slightest of changes at any part of the supply chain has significant effects on all of the other participants.

• Inventory optimization, which is critical in cutting costs and increasing revenue, involves all the branches of the chain.

• The larger the supply chain, the more branches are involved.

• The more branches that are involved, the chance for any errors or inefficiencies to occur with in the supply chain is high.

Managing or maintaining larger supply chains is very costly. So managers of larger supply chains are always searching for ways to reduce the supply chain cost and improve efficiency throughout its entire manufacturing and distribution network.

Global Business Units & Workforce management

Global Business Units (GBUs)

Beauty & Grooming ($26.3 billion)

House hold Care ($37.3 billion) Health & Well being ($ 14.4

billion).

Logistics planning work force

5,000 individuals who plan material supply.

500 Supply Chain Networks. 145 P&G owned manufacturing

facilities. 300 contract manufacturers. 6900 unique product

categories.

Why is supply chain management so important at a company such as P&G?For a giant multinational company like P&G, supply chain management is very important since it needs to handle a wide range of products. Without proper management of this huge assemble of goods, the company could not become such an efficient one.

Supply chain management also helps to minimize different costs and maximize the revenue generation.

• To handle the demand of the customers of the huge numbers of products P&G should have many supply chain management applications so that the company can cope up with the variability of demands of the customers and satisfy them.

• To reducing surplus inventory and huge holding cost, it is important for a large company like P&G to manage the supply chain.

• To achieve better forecasting capability for product movement, supply chain management is important for the company.

Major competitors of P&G such as Wal-Mart and Target compete by offering brand name products with lower price possible. To beat the competitors, it is very important for P&G to achieve a superior supply chain management system as a new way of differentiation.

How did inventory optimization impact operations and decision making at P&G?

• In P&G’s vision of the consumer-driven supply network (CSDN), daily demand updates provide timely warning of changes in product consumption.

• To make the CDSN work, this information must then be rapidly integrated into replenishment plans, which would then involve all partners and suppliers in the supply chain.

Why wouldn’t a small company derive much benefit from multi-echelon inventory optimization as a large company?

• Multi echelon and Inventory Optimization are in fact two separate technologies, but they are typically bundled together in MEIO applications. Multi echelon planning answers the question ”where” inventory should be located, and inventory optimization answers the question “how” much should be maintained in order to meet a certain service level target.

• While small and large company would both benefit from Inventory Optimization, Multi echelon is less applicable to small companies most especially if it has only few suppliers, wherein the “where” can be obviously answered without even processing the array of information.