CPI has garnered several awards, citations, and recognition via various articles, some of which are below:
'Networking Opportunity: The low cost/best service challenge,' Material Handling Management, 2007, Penton, http://www.mhmonline.com/viewStory.asp?nID=4845&iID=20939&pNum=1
CPI Director Jeff Camm is interviewed in this article about optimizing and redesigning distribution networks in response to changing costs, such as in fuel or transportation; the article was written by David Drickhamer in May 2006. Dr. Camm comments on the wisdom of going with a slightly sub-optimal solution in order to gain robustness of the solution against perturbations in uncontrollable factors like demand. He also notes the importance of trying to get good data on locations being considered for opening or closing operations. Follow the link above to read the complete story.
'Q&A With a DOD Leader: Ted Newton,'DC eVOLVE, the official publication of DistributionOnDemand (http://www.distributionondemand.com), January/February 2006
Ted Newton has over 30 years of experience optimizing supply chain operations. As a DOD Leader, he explains how Network Optimization projects are the most strategic initiatives you can implement within your supply chain.
Network with Ted and ask a follow-up question: tnewton@distributionondemand.com or 513-271-6284.
1. How did you get your start in the logistics industry? What are some positions you've held in your career? What is your area of expertise?
I spent 31 years with Procter & Gamble, most of which was in the Information Technology and Supply Chain areas. My degree (from Iowa State University) was in Computer Science but with electives in Operations Research and Industrial Engineering. This gave me the background to spot opportunities where analytics could be used along with information systems to deliver much higher value business solutions. Some of my positions were as IT Manager for Asia, for Global Supply Chain, for the Beverage Division, and for Corporate Distribution. During some of these assignments, P&G would acquire a company and I could see how modeling both the supply chains of P&G and the acquired company led to major savings. We called these projects siting/sourcing studies or SC Network Optimization. After I retired from P&G, I started working with the Center for Productivity Improvement (CPI) at the University of Cincinnati. CPI had worked with my staff at P&G on some of these types of projects.
2. What is Supply Chain Optimization?
It is a computer model of your supply chain with cost data for manufacturing, warehousing, and distribution. Given an annual demand for all of your customer locations, the model provides an optimal location for all of your DCs, and manufacturing plants that gives the lowest overall cost for your supply chain. It can also be used to select from many suppliers and/or contract manufacturers all over the globe.
3. Why is it important to have your DCs in just the right locations?
Depending on where your customers are located, having the DC locations in optimal locations can improve customer service (days to receipt of the shipment) and reduce the cost of your overall supply chain.
4. Why is Network Optimization so strategic?
Often, when companies do a major project such as an acquisition, or adding new manufacturing capacity, or major improvements to supply chain operation, there is excess capacity and cost in the system. Network Optimization tells supply chain management where to shut down or move a plant or DC in order to get the maximum benefit from your SC project. When I was at P&G, our Supply Chain Senior VP mandated a Network Optimization project anytime we spent over $2 million on new capacity.
5. Do you see Network Optimization as a way to achieve Distribution On Demand?
Yes, SC Network Optimization usually shows how to get quicker response to the customer at a lower cost. It also shows how to source the product all the way up the supply chain from customer to DC to Plant, etc. including back-up sourcing plans to best react to changes in order patterns.
6. Please provide examples for why you declare Network Optimization more strategic than other initiatives a company could do for its supply chain?
If improving customer service and saving money (often reducing 5-15% of total SC costs) aren't enough for you, then consider the following story. After spending millions of dollars on improving reliability at its eight plants, a company performed a SC Network Optimization initiative in order to get the maximum savings from its investment. The computer model suggested shutting down two of those plants, thereby wasting the reliability investment in those two plants. Another example is an ERP project at a large Midwest manufacturing company. After spending millions of dollars and three years of project effort installing an ERP system for its supply chain, this company performed a SC Network Optimization project. The computer model suggested shutting down several DCs and plants where the ERP installation was less than one year old. For each of these examples, if the company had performed a SC Network Optimization FIRST, the waste of money and valuable project team effort could have been avoided. I believe that SC Network Optimization is the most strategic of projects because it should be done both BEFORE and AFTER other types of strategic projects, in order to maximize the value of those projects.
7. What other uses can be made of SC Network Optimization?
If a company is manufacturing and distributing all over the world, a SC Network Optimization can suggest sourcing solutions to reduce customs duties and also corporate income taxes.
8. What can go wrong in performing a SC Network Optimization?
Fortunately, this is one of those rare type of projects where usually only good things happen. Almost always, the project finds some way of improving the SC so that cost is reduced and/or service is improved. Often, the data takes a lot of effort to obtain in order to run the model, which can add to the elapsed time and cost of the project. Often the largest 'bad' thing that occurs is making a decision that does not result in optimal benefits. Most often, this suboptimal result is unseen by the client. If the consultant who does the project is not experienced, causing the data and the computer model to not be well suited to the problem, then the savings may be far less than they should be. Maybe the company is happy with savings of $40 million, but if they knew that the savings should have been $75 million, they wouldn't be very happy with the lower benefit.
9. Are there any trends in the industry where companies are or are not utilizing SC Network Optimization as a strategic part of their supply chain initiatives?
Most large companies do SC Network Optimization when they do an acquisition. Many more companies are doing the project for the distribution-only portion of their supply chain in reaction to higher freight costs. More companies need to realize that modeling the entire supply chain -- including suppliers, DCs, manufacturing plants as well as contract manufacturers -- will produce the biggest benefits. Few companies are using SC Network Optimization before other types of SC projects. Most have to learn the hard way by experiences similar to those mentioned in the answer to question six above, including my own P&G experiences.
10. How can I do a SC Network Optimization project?
Large companies that do these projects all the time such as Procter & Gamble and Federal Express have in-house staff with college degrees in Operations Research or Quantitative Analysis. They build up significant experience because the staff is doing these types of projects all the time. For the typical company below the size of a Fortune 100, it is best to find an experienced consultant. In my experience at P&G, the best of those are NOT the large well-known, general-purpose type consulting firms, but the smaller boutique type firms. Universities can provide good help. We used the University of Cincinnati's Center for Productivity Improvement (CPI). P&G hired CPI for a project in the 90s and performed the project jointly. It was a finalist for the prestigious Franz Edelman award as one of the top methodologies in the world. When I retired from P&G, I wanted to work with CPI to help companies without an in-house staff to learn how to do these projects. Organizations like CPI can do the project or perform an assessment, which would develop the project approach and plan. We then can work with your people to show them how to do the project or recommend a good consultant that fits your needs.
'UC Gets High Marks for Productivity Center,'Cincinnati Enquirer, Feb. 14, 1996
Trying to build close ties with the business community, Dennis Sweeney and his fellow management science researchers at the University of Cincinnati created the Center for Productivity Improvement in early 1993.
'This was part of an effort . . . to move away from the idea that we're all sitting out here in an ivory tower,' Mr. Sweeney, the center's director, said.
Moving from the ivory tower to the maker of Ivory soap, the center teamed with Procter & Gamble Co. as one of its first clients. Its task: To create a mathematical model to help Procter rejigger how its products move from suppliers to factories to store shelves in North America.
The results have exceeded expectations. Not only has the project helped P&G trim $200 million in annual pretax costs, it is now being hailed as a national model.
The project's six-member team -- half from UC and half from P&G -- May 6 will vie among seven international finalists for the Franz Edelman Award for Management Science and Operations Research. The award is considered the top honor within the management science industry.
The UC - P&G team reorganized a supply chain that consisted of hundreds of suppliers, more than 50 products, more than 60 plants, 10 distribution centers and more than 1,000 customers.
The model's innovative twist came in how the group married product supply data with computerized maps. The Graphic Information System maps allowed P&G strategists, from a laptop computer, to visualize the effects of any distribution change.
Mr. Sweeney, who took a one-year sabbatical from UC in the 1970s to work at P&G, said several academic-corporate partnerships have sprouted the past three years. For instance, when three Federated department stores were destroyed by Hurricane Andrew, the center helped the Cincinnati-based retailer forecast lost sales for an insurance settlement.
P&G plans to tap the model again for trimming costs elsewhere in the operation, spokeswoman Linda Ulrey said.
'Math and Management - UC, P&G Team to Save Money,'Cincinnati Post, Feb. 10, 1996
Three University of Cincinnati professors and three Procter & Gamble Co. managers teamed up to save the company $200 million annually in North American manufacturing and distribution costs.
That project, based at UC's Center for Productivity Improvement, is now one of seven finalists in the 25th international competition for the Franz Edelman Award for Management Science and Operations Research Achievement. The team will present the project in the contest's final round May 6 in Washington, D.C., at the Operations Research and Management Sciences meeting. The winning team will be announced two days later. The team includes UC business professors Jeffrey Camm, James Evans and Dennis Sweeney and P&G managers Tom Chorman, Franz Dill and Glenn Wegryn. Beginning in 1993, the six used sophisticated mathematical models to evaluate P&G's North American manufacturing, supply and distribution chain. At the time P&G was beginning its massive restructuring aimed at eliminating 13,000 jobs and 30 manufacturing plants worldwide in order to increase its competitiveness.
P&G's North American operation handles more than 50 products and deals with hundreds of suppliers. It includes more than 60 plants, 10 distribution centers, and more than 1,000 customer zones. The six team members developed a way to present the information from their models on maps so that managers could visualize various scenarios. Blending the mathematical models with the maps' graphics helped P&G strategists make decisions about how to rationalize the systems of plants and distribution centers and decide which ones to keep open. 'One of the most innovative things we did was to use the geographic information system,' said Sweeney, director of the Center for Productivity Improvement. 'The manager can interact with the GIS and get better solutions,' he said. Sweeney, along with David R. Anderson and Tom Williams, is author of 'Introduction to Management Science,' the standard college textbook on quantitative analysis. (Anderson is also a UC professor. Williams is at the Rochester Institute of Technology.)
While the analytical tools developed by the UC-P&G team weren't the sole basis for deciding which plants to close, they helped managers reach those decisions, a P&G spokesperson said. Overall, P&G has been able to save $200 million annually as a result of the system developed by the six-member team. P&G has set up a Center for Expertise in Analytics headed by team member Dill to help solve business problems using quantitative analysis. The center will help apply quantitative analysis to other decisions. Already P&G has begun to use it to evaluate operations in Europe and the Pacific Rim. Text of fax box follows: Cooperation The Productivity Improvement Center was founded by the Quantitative Analysis and Operations Management Department of UC's College of Business Administration in 1993 as a way to bridge the gap between the academic and business worlds. The center has done work for the Kroger Co. and Federated Department Stores, among others.
