Procter & Gamble among finalists for INFORMS Edelman Award

HANOVER, MD, March 26, 2010 – Procter & Gamble’s analytics team is among six finalists that will compete for the INFORMS 2010 Franz Edelman Award for Achievement in Operations Research and the Management Sciences in Orlando on April 19 at the Hilton Bonnet Creek.

The finalists for the competition, sponsored by the Institute for Operations Research and the Management Sciences (INFORMS^®), include:

Procter & Gamble Beauty and Grooming, Supply Chain Research and Development with Procter & Gamble Global Business Services, Product Supply Analytics; Boston University Optiant; and the Harvard School of Public Health for “Inventory Optimization at Procter & Gamble: Achieving Real Benefits through User Adoption of Inventory Tools.”

The Problem: P&G’s supply chain analysts employ a standard road map to determine which inventory optimization tools are right for a given supply chain's business and operating conditions. The adoption of Distribution Requirements Planning (DRP) systems in the late 1980s triggered the development of simple but robust models at P&G for setting inventory targets across a distribution network, one echelon at a time. These models have been successfully adopted and contributed to multi-million dollar reductions in world wide inventory.

In the early 2000s, P&G recognized the need for more advanced inventory tools to allow it to continue trimming already lean inventories while maintaining its’ superior customer service.

The O.R. Solution: The operations research that underlies the multi-echelon inventory planning engine is based on the guaranteed service model of safety stock optimization. Advances in operations research and computer science were required to solve the tactical inventory problem at P&G's scale. These O.R. advances include modeling non-stationary demand to reflect the seasonal nature of consumer demand, modeling review periods to capture different replenishment frequencies across the supply chain, and most significantly, the ability to optimize inventory levels and locations in acyclic network topologies. This last advance allowed P&G to capture the multi-echelon nature of their supply chains.

P&G executed a successful pilot in its most complex Beauty Care supply chain in 2005/2006. Since 2006, multi-echelon inventory optimization has been deployed across more than 80% of the global Beauty Care supply chains to solve both tactical and strategic production-inventory planning problems. Even more importantly a closed loop planning process integrates these two sets of decisions.

The Value: Beauty Care supply chains are achieving incremental total inventory reductions of 3 to 7% from an already low base. Some applications of the multi-echelon tools to aid in strategic redesign of a supply chain have yielded cost reductions of more than 25%.

The six 2010 Franz Edelman finalists are:

1. The Delaware River Basin Commission for “Improving Water Release Policies on the Delaware River through Operations Research”
2. Deutsche Postal DHS for “Global Brand Assessment”
3. Indeval for “Indeval develops a new operating and settlement system using Operations Research”
4. New Brunswick Canada Department of Transportation for “Achieving Transportation Asset Management via Operations Research”
5. Procter & Gamble
6. Sasol for “Stochastic Operations Models at Sasol”

This is the 39^th year of the prestigious Franz Edelman competition. The winner will be announced at a special awards banquet on April 19 at Applying Science to the Art of Business: the 2010 INFORMS Conference on OR/MS Practice.

Additional information about the 2010 Edelman Competition can be found online at URL. Additional information about the INFORMS Orlando conference is at http://meetings2.informs.org/Practice2010/.

About INFORMS

The Institute for Operations Research and the Management Sciences (INFORMS^®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. The INFORMS website is www.informs.org. More information about operations research is at www.scienceofbetter.org.

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