The shampoo and lipstick aisles at target and wal-mart hardly seem like battlegrounds, but they are actually sites for an unending struggle among consumer products companies for retail shelf space No company knows this better than Procter&Gamble, one of the world’s largest consumer goods companies, with annual revenue surpassing 76 dollar 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.
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 efficiency throughout its entire manufacturing and distribution network. It recently implemented multi-echelon inventory optimization system to manage its supply chain more efficiently.
The supply chains of a company as large as P&G are extremely complicated, featuring thousands of suppliers, manufacturing facilities, and markets. Even the slightest of changes at any part of the supply chains are so extensive, the chance for any errors or inefficiencies to occur are greater than with smaller, more compact supply chains. Inventory optimization for a company as large as P&G is therefore critical to cutting costs and increasing revenues. P&G was already renowned for its supply chain management, successfully reducing its surplus inventory with sales and operations planning, better forecasting, just-in-time delivery strategies, and vendor-managed inventory activity. But multi-echelon inventory optimization has provided the company with a new means to achieve even higher...
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