Metrologia

Blending OR/MS, Judgment, and GIS: Restructuring P&G's Supply Chain
Jeffrey D. Camm | Department of Quantitative Analysis and Operations Management University of Cincinnati, Cincinnati, Ohio 45221-0130 |
Thomas E. Chorman | The Procter & Gamble Company, Cincinnati, Ohio 45224 |
Franz A. Dill | The Procter & Gamble Company, Cincinnati, Ohio 45224 |
James R. Evans | Departmentof Quantitative Analysis and Operations Management University of Cincinnati |
Dennis J. Sweeney | Department of Quantitative Analysis and Operations Management University of Cincinnati |
Glenn W. Wegryn | The Procter & Gamble Company 2 Procter & Gamble Plaza, PNC-12 Cincinnati, Ohio 45201-5559 |

In 1993, Procter & Gamble (P&G) began an effort entitled strengthening globaleffectiveness (SGE) to streamline work processes, drive out nonvalue-added costs, and eliminate duplication. A principal component of SGE was the North American product supply study, designed to reexamine and reengineer P&G's product-sourcing and distribution system for its North American operations. The methodology developed to solve this problem drew on OR/MS and information technology, merginginteger programming, network optimization models, and a geographical information system (GIS). As a result of this study, P&G is reducing the number of North American plants by almost 20 percent, saving over $200 million in pretax costs per year and renewing its focus on OR/MS approaches.

P
rocter & Gamble (P&G) makes and markets over 300 brands of consumer goods (Table 1)worldwide in over 140 countries and has operating units (plants, divisions, facilities) in 58 locations around
the world. The company is the worldwide market leader in seven categories: laundry detergents, diapers, feminine protection pads, shampoos, facial moisturizers, acne teen skin care products, and fabric soften-

Copyright © 1997, Institute for Operations Research INDUSTRIES—PHARMACEUTICALand the Management Sciences DECISION ANALYSIS APPLICATIONS
0092-2102/97/2701/0128$05 00
INTERFACES 27:1 January-February 1997 (pp. 128-142)

—Acne Care: Clearasil, Noxzema —Analgesics: Aleve, Percogesic —Baby Diapers: Luvs, Pampers —Baking Mixes: Duncan Hines —Bar Soaps: Camay, Coast, Ivory, Oil of Olay, Safeguard, Zest —Beverages: Folgers, Millstone Coffee —Bleach & Prewash Additives: Biz,Tide —Cosmetics: Cover Girl, Max Factor —Deodorants/Anti-Perspirants: Old Spice, Secret, Sure
—Dish Care: Cascade, Dawn, Ivory Dish, Joy —Fabric Conditioners: Bounce, Downy —Feminine Protection: Always —Fragrances: Giorgio, Hugo Boss, Laura Bia- giotti-Roma, Old Spice, Red, Venezia, Wings —Gastrointestinal: Metamucil, Pepto-Bismol —Hair Care Product Lines: Head & Shoulders, Ivory, Pantene,Pert Plus, Prell, Vidal Sassoon —Hard Surface Cleaners: Comet, Mr. Clean, Lestoil, Spic and Span —Incontinence: Attends —Juice: Hawaiian Punch, Sunny Delight —Laundry: Bold, Cheer, Dash, Dreft, Era, Gain, Ivory Snow, Oxydol, Tide —Oral Care: Crest, Crest Complete, Fixodent, Gleem, Scope —Tissue/Towel: Banner, Bounty (Towel), Char- min, Puffs, Royale (Tissue and Towel), Summit 1100's —Peanut Butter:Jif
—Prescription Drugs & Physician-Selected Products —Commercial Services —Global Oleochemicals Group
Table 1: P&G North America product groups and brands.
ers. P&G had worldwide sales of $33.5 billion in fiscal year 1995 and earnings of $2.64 billion.
The company has grown continuously over the past 159 years. To maintain and accelerate that growth, P&G recently undertook amajor restructuring called SGE (strengthening global effectiveness) to streamline work processes, drive out non- value-added costs, eliminate duplication, and rationalize manufacturing and distribution. This program was major in terms of cost, impact, and savings—P&G wrote off over $1 billion of assets and transition costs. The program affected over 6,000 people, and it saved $200 million...