Answer all the questions to BOTH CASES below. Your answers should show that you are giving thoughtful and clear expectations of not only the “do” but the “why” as well. APA is not required but your paper should be professional.
#1ST
Question in link below
http://www.prenhall.com/divisions/bp/app/russellcd…
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#2ND
Multi-Echelon Inventory Optimization at
Procter & Gamble
The various EOQ models presented in this chapter are
known as single-stage models; they only attempt to optimize
inventory of a single item at a single location. The items are
considered in isolation, and not how this single item’s inventory
level might affect the entire supply chain. This is a somewhat
simplistic but necessary view of inventory optimization
for many companies, because of the complexity involved in
considering the relationship among many different inventory
items at many locations for an end-to-end supply chain.
However, many Fortune 500 and other companies across a
wide range of industries are now approaching inventory
optimization from a total supply chain perspective. This
relatively new approach, called multi-echelon inventory optimization,
uses various software packages designed for the
purpose to scientifi cally determine the minimum inventory
levels for multiple materials, parts, subassemblies, and fi nished
goods across the entire supply chain. One company
that has had great success with the multi-echelon inventory
optimization approach is Procter & Gamble.
Procter & Gamble, headquartered in Cincinnati, Ohio,
is one of the world’s leading and best-known consumer
products companies with sales over $80 billion in 180
countries for such products as Crest, Tide, Pantene, Pampers,
Charmin, Cascade, Duracell, Cover Girl, and Gillette,
among many others. Each of its three global business
units—beauty and grooming, household care, and health
and well-being—individually is large enough to be on the
Fortune 200 list. P&G’s supply chain network consists of
500 supply chains that include 145 P&G-owned manufacturing
facilities and 300 contract manufacturers. Inventory
management across a supply chain network of this size
and magnitude is a complex process. P&G’s logistics management
workforce that plans material supply, capacity,
inventory, and logistics across its supply chain network
has over 5000 individuals. P&G’s inventory management
process is implemented in a two-step approach. First,
spreadsheet–based inventory models (employing assorted
mathematical inventory optimization tools) are applied locally
to optimize each stage in the supply chain. These
models are used in about 70% of P&G’s business units.
Next, multi-echelon inventory optimization software is implemented
in about 30% of P&G’s business units across
more complex supply chains.
The North American supply chain for cosmetics liquid
makeup in P&G’s beauty products division includes 500
stages with 8 raw materials, 10 uncolored work-in-process
materials, 24 colored work-in-process materials, 150
packaging materials, 18 intermediate partially assembled
products, and 75 fi nished goods that move from packaging
to U.S. and Canadian distribution centers and then to
retail customers. Material lead times ranged from 7 days
to 8 weeks, production times from 1 to 2 days, review
periods from 7 to 28 days, transportation times from 1 to 7
days, and quality assurance from 1 to 5 days. Demand
forecasts were based on the immediate past 13 weeks of
shipments and a forecast for the future 13 weeks. Among
a number of improvements, P&G’s application of a
multi-echelon inventory approach changed the location of
safety stocks within the supply chain and reduced safety
stock investment for the supply chain by 17% and total
inventory by 5%, while maintaining its 99.5% service level.
The multi-echelon approach at Procter & Gamble reduced
inventory in its beauty division by $100 million, and in one
year alone saved the company $1.5 billion in inventory
costs across all of its supply chains.
Discuss some of the problems a company such as Procter
& Gamble might face in managing inventory across such a
large, complex global supply chain.
