Simulations for Procter & Gamble
Procter & Gamble is a $38 billion corporation that controls and consumes a great many assets and raw materials, processes them along parallel and intersecting pathways, and produces a large variety of wares that it then distributes all over the world.
In 1998, some senior managers wondered if their "earth-to-earth" supply chain - the long trail of resource allocation, manufacturing, distribution, and customer consumption - might not be streamlined somehow. Even an incremental increase in its overall supply-chain efficiency, they knew, could yield enormous savings and higher profits.
But this was a problem P&G wasn't capable of addressing itself because, paradoxically, it didn't know what its own supply chain was - not conceptually, at least. The company was responsible for it, operated it, oversaw it, and ran it, but didn't understand it on a theoretical level.
Using Simulation Science experts, a team conducted a full study of P&G's supply chain. It was characterized by three major parameters: total inventory in the system; total time in the system; and out-of-stocks on the shelves. Of these, the only one that couldn't be fiddled with was out-of-stocks. Without exception, P&G wanted to have Tide, Comet, and the rest of its product lines on the shelves at all times.
The Simulation Scientists eventually produced five models of the P&G supply chain and ran them on their workstations thousands of times under different settings and conditions, creating a simulation of the business.
A key insight was that many of P&G's problems with their supply chain were a result of their own policy of requiring all shipments to be made in full truckloads only; partial loads weren't permitted. Having your trucks full when they leave the loading dock maximizes their utility and efficiency, leaves no wasted space, saves diesel fuel, reduces air pollution, and minimizes duplication of effort.
Simulations, however, uncovered that adherence to the full-trucks rule caused disruptions elsewhere in the system. It converted smooth, or laminar, flow into an irregular and jagged shipping stream, creating bottlenecks - and even temporary out-of-stocks - as trucks waited for their cargo holds to be filled. Relaxing the full-trucks requirement would iron out any and all supply-chain kinks.
A profound insight that saved P&G millions. Around $300 million. In the first year.
More information on the SAP web site
Excerpts from Wired Issue 8.06 - June 2000
2006 - The Tipping Point for Simulation Science
Selling Simulation Science
What is Simulation Science?
In 1998, some senior managers wondered if their "earth-to-earth" supply chain - the long trail of resource allocation, manufacturing, distribution, and customer consumption - might not be streamlined somehow. Even an incremental increase in its overall supply-chain efficiency, they knew, could yield enormous savings and higher profits.
But this was a problem P&G wasn't capable of addressing itself because, paradoxically, it didn't know what its own supply chain was - not conceptually, at least. The company was responsible for it, operated it, oversaw it, and ran it, but didn't understand it on a theoretical level.
Using Simulation Science experts, a team conducted a full study of P&G's supply chain. It was characterized by three major parameters: total inventory in the system; total time in the system; and out-of-stocks on the shelves. Of these, the only one that couldn't be fiddled with was out-of-stocks. Without exception, P&G wanted to have Tide, Comet, and the rest of its product lines on the shelves at all times.
The Simulation Scientists eventually produced five models of the P&G supply chain and ran them on their workstations thousands of times under different settings and conditions, creating a simulation of the business.
A key insight was that many of P&G's problems with their supply chain were a result of their own policy of requiring all shipments to be made in full truckloads only; partial loads weren't permitted. Having your trucks full when they leave the loading dock maximizes their utility and efficiency, leaves no wasted space, saves diesel fuel, reduces air pollution, and minimizes duplication of effort.
Such a requirement makes obvious and intuitive sense, yet it is wrong.
Simulations, however, uncovered that adherence to the full-trucks rule caused disruptions elsewhere in the system. It converted smooth, or laminar, flow into an irregular and jagged shipping stream, creating bottlenecks - and even temporary out-of-stocks - as trucks waited for their cargo holds to be filled. Relaxing the full-trucks requirement would iron out any and all supply-chain kinks.
A profound insight that saved P&G millions. Around $300 million. In the first year.
More information on the SAP web site
Excerpts from Wired Issue 8.06 - June 2000
2006 - The Tipping Point for Simulation Science
Selling Simulation Science
What is Simulation Science?
posted by Justin Lyon at
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