An Integrated Production, Distribution, and Inventory Planning System

The critical importance of integrating production, distribution, and inventory (PDI) operations has long been recognized by top management of many companies. Now, using the latest advances in Management Science modeling and solution technology, an integrated computer-based PDI system has saved approximately $18 million dollars during its first three years of implementation for a major national firm, Agrico Chemical Company. According to the Vice-President of Agrico Supply and Distribution, an additional $25 million savings is anticipated over the next two years.Brought about by close cooperation between company officials and an outside staff of Management Science consultants, the PDI system has been used extensively to evaluate the benefit/cost impact of alternative capital investments in both short-term and long-term planning decisions. The development of the system underscores the value of recent Management Science innovations that have made it possible to analyze interacting influences too numerous and complex to be analyzed adequately only a few years ago.Advanced network methodology incorporated into the PDI system required only one one-hundredth of the computer time and cost of methodologies previously used. The power and flexibility of the new Management Science tools have also brought about increased communication and understanding of key company operations. This increased communication and understanding stems from the inherent “pictorial” nature of network-based models, which facilitates interpretation of these models and policy recommendations based upon their solution.