How P&G is Optimizing it's Inventory

1. Optimizing Inventory Count – Case Study
By
ZUBIN POONAWALLA

2. 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:

3. 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 & concentrating on the
remaining 80 brands, which produced 95% of the company's profits. A.G. Lafley, the company's chairman, president & CEO, said
the future P&G would be "a much simpler, much less complex company of leading brands that's easier to manage & operate".
“P&G remains a highly selective employer as less than 1% of all applicants are hired annually”.

4. Ambi Pur Pampers
Ariel Pantene
Duracell Tide
Gillette Vicks
Head & Shoulders Wella
Olay 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 &
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 & pampers etc..

5. Fast Moving Consumer Goods (FMCGs) are the products that people are using regularly & buy at regular intervals. FMCG
companies are the biggest brands in the world. Everyone recognizes their products & they remain in the minds of the customers.
High volume & low contribution are the specialties of this industry. Following list contains the top 5 FMCG companies in the
world in FY15.
Top 5 FMCG Companies in World (FY15)
• Nestle S.A. .
• The Procter & Gamble Company
• Anheuser-Busch InBev
• Philip Morris International Inc.
• Coca-Cola Company

6. 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.

7. 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.

8. 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.

9. 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 & 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 & satisfy them.
• To reducing surplus inventory & 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 & 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.

10. How did inventory optimization impact operations & 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 & suppliers in the supply chain.

11. Why wouldn’t a small company derive much benefit from multi-echelon inventory optimization as a large
company?
• Multi echelon & 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, & inventory optimization
answers the question “how” much should be maintained in order to meet a certain service level target.
• While small & 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.

13. Thank You