A step forward optimizing inventory management: Using a probabilistic discrete-event simulation model to improve service levels and minimize the finished product inventory levels for the Baby care supply chain at P&G

Procter & Gamble is an international producer and distributor of FMCG. The current inventory management practices at P&G, and for the Babycare category in particular, do not result in the target service and inventory levels. This thesis questions how the inventory management practices for the Babycare category should operate in order to achieve the target service levels while maintaining a minimum inventory. Moreover, the added value of the use of an inventory simulation model are explored. In order to do so, first a literature review on supply chain and inventory management is performed and compared with the results of a system analysis of the current situation at P&G to determine possible discrepancies. Next a dynamic inventory simulation model is developed and used to analyze the effects of different inventory settings on the inventory performance measures. The results show that a fixed safety stock is preferred over dynamic safety time.