Implementing a Distribution-Network Decision-Support System at Pfizer/Warner-

Lambert
Author(s): Vijay Gupta, Emmanuel Peters, Tan Miller and Kelvin Blyden
Source: Interfaces , Jul. - Aug., 2002, Vol. 32, No. 4 (Jul. - Aug., 2002), pp. 28-45
Published by: INFORMS

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 Implementing a Distribution-Network
Decision-Support System at Pfizer/
Warner-Lambert
Vijay Gupta Emmanuel Peters Tan Miller
Pfizer Inc., 201 Tabor Road, Morris Plains, New Jersey 07950
Kelvin Blyden
Lockheed Martin, 199 Bort?n Landing Road, Moorestown, New Jersey 08057
vijay.gupta@pfizer.com emmanuel.peters@pfizer.com tan.miller@pfizer.com kelvin.blyden@lmco.com

This paper was refereed.

We constructed a decision-support system (DSS) to help the distribution network of Pfizer/

Warner Lambert to plan its operations. Using OR tools, databases, programming languages,
and spreadsheets, this system supports decisions concerning daily operations, annual plan
ning, and long-run strategic planning. This DSS improved the firm's ability to make rapid,
better-informed decisions in many different areas of distribution and supply chain ranging
from individual customer deliveries to long-term manufacturing location and technology.
(Decision analysis: applications. Industries: pharmaceuticals.)

consumer sector of Pfizer consists of a number of

To manage
fectively, aa firm
large-scale distribution
must have a well-constructed and network ef
well-maintained decision support system (DSS). A
strong DSS can facilitate effective short-term and long
term decision making. Recognizing the importance of
distribution-network DSSs, Warner-Lambert Com
pany (now Pfizer Inc.) developed and implemented
such a system between 1998 and 2000. It uses basic OR
tools, such as optimization and simulation, coupled
with large-scale databases, spreadsheet tools, and pro
gramming tools, such as Microsoft Excel and Access.
The system is designed to support activities ranging
from long-run strategic network design to short-run
day-to-day operations and customer service.
Company Background
Pfizer is a Fortune-100 manufacturer and distributor of
pharmaceuticals, animal health products, and con
sumer products. In June 2000, Pfizer Inc. and Warner
Lambert Company merged to form the new Pfizer
company, whose annual sales exceed $30 billion. The
global operating units, including the Adams, shaving
products, and consumer-healthcare divisions. These
divisions supply confectionery products, Schick and
Wilkinson Sword shaving products, and over-the
counter drugs and health and beauty aids, respec
tively. In the United States, a single distribution orga
nization warehouses and distributes all of the products
of these three consumer businesses, as well as those of
the firm's pharmaceutical division. We originally de
veloped the DSS to support the premerger shared
service Warner-Lambert US distribution network.
However, Pfizer continues to use this DSS to support
the merged Pfizer/Warner-Lambert US distribution
network.
The original Warner-Lambert US distribution net
work was essentially a two-echelon network. The first
echelon consisted of two large distribution centers in
Elk Grove, Illinois and in Lititz, Pennsylvania and the
second echelon included over 35 small third-party pool
distribution locations dispersed throughout the US.

Interfaces, ? 2002 INFORMS 0092-2102/02/3204/0028$05.00

Vol. 32, No. 4, July-August 2002, pp. 28^5 1526-551X electronic ISSN
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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/Warner-Lambert

(The new Pfizer consumer and pharmaceutical distri
bution network includes all of these locations and
three additional echelon-one distribution centers that
Warner-Lambert's planning-horizon framework
comprised the old Pfizer pharmaceutical and con was a traditional hierarchical framework (Anthony
sumer division network.) Warner-Lambert distributed
finished goods to its customers' receiving locations
(warehouses) either directly from its two major distri
bution centers (DCs) or in shipments that flowed from
a distribution center to a pool distributor and then to
Pfizer7 s annual sales exceed $30
billion.
the customer. As a general rule, large consumer
product orders flowed as truckloads from Elk Grove
or Lititz direct to the customer, while small orders typ
ically flowed from the DC to the pool distributor to the
customer. Most pharmaceutical orders were delivered
by courier services.
about logistics planning over varying planning hori
zons (Figure 1).
1965, Hax and Meal 1975, Miller 2002). In this frame
work, logistics planning and scheduling activities fall
into three horizons: (1) operational planning focusing
on the short-run (one to 18 months), (2) tactical plan
ning generally spanning a 12 to 18 month horizon, and
(3) strategic planning typically covering two to five
years or so into the future. Warner-Lambert wanted a
planning system to address diverse problems and
functions over a broad planning horizon.
Decision-Support Systems Literature
A bountiful and ever-increasing collection of literature
addresses decision-support systems (Table 1). Bowersox
and Closs (1996) and Liberatore and Nydick (1998,2000)
review DSSs in depth.

Motivation for Developing the The Decision-Support System

Decision-Support System
A number of factors motivated the Warner-Lambert
distribution organization to develop a DSS. Like many
consumer-products companies in the 1990s, Warner
Lambert felt increasing pressure from its customers to
improve its supply chain and distribution services.
Distribution services are more than delivering orders
on time and safely. To be considered a preferred ven
dor by a large retailer, a supplier must also monitor,
maintain, and provide information on all key elements
of the supply chain between itself and its customers.
The supply-chain information that requires continuous
review and updating spans a broad spectrum of func
tional activities and processes. However, suppliers and
customers focus on such key drivers of supply-chain
relationships as order cycle time, on-time delivery, or
der and line-item fill rates, and delivery overages,
shortages, and damages. (A rich literature exists on
supply-chain and distribution-measurement systems:
Bowersox et al. 1989, Bowersox and Closs 1996, Fawcett
and Cooper 1998, Johnson and Davis 1998, Mentzer
and Konrad 1991, van Amstel and D'hert 1996.)
Warner-Lambert also recognized that it had to im
prove its ability to make informed, rapid decisions
Warner-Lambert's (WL's) DSS was designed to sup
port strategic, tactical, and operational planning and
management. The foundation of an effective modeling
and DSS system is a comprehensive database that pro
vides historical information (and, ideally, forecast in
formation) on all major transactional distribution ac
tivities (for example, detailed shipment histories, sales,
and freight costs). The database must also have appro
priate summary fields and hierarchical relationships to
facilitate its efficient use. Database elements needed to
support DSSs include
?Historical sales (shipments) by end item, by loca
tion, and by product family,
?Transportation rates, costs, accessorials, duties,
and shipments by origin-destination pair, by mode,
and by weight and cubic area,
?Transit times by origin-destination pair and by
mode,
?Inventory (actual and targets) in units and by cost
by end items (sku) and by location,
?Manufacturing rates and costs by production line,
by plant, by end item, and by product family,
?Purchasing costs and terms by vendor, by loca
tion, by end item, and by product family,

Interfaces
Vol. 32, No. 4, July-August 2002 29

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

Corporate Important Considerations Time Horizons

Objectives
Product/market mix Manufacturing and
Distribution Plans
Capacities Strategic (2 yrs. +)
Facilities
Locations
Resources_

i Aggregate Planning
Allocates capacity and
resources to product lines
Assigns sales regions to
DCs and plants
Constraints

Tactical (12 to 24 months)

Develops warehouse workforce
requirements for planning horizon

t
Conducts carrier selection process

Constraints
Operations Scheduling
Distribution resource planning (DRP)
Master production scheduling
Short run DC workload scheduling

c
Transport scheduling Operational (1 to 18 months)
Constraints
Short-term scheduling
(shop floor)

Figure 1: Warner-Lambert designed its DNDSS to support short-run and long-run planning and scheduling.

?Tax information, local content rules, and intra
company transfer pricing (profits) for global and in
ternational models,
?Accounts receivable, deduction claims, and short
age and damage claims by customer and by location,
and
?A well-defined hierarchical product-line structure
with data available at any level of product aggregation.
WL's information systems group developed and
maintained a database, which included many of these
elements.
Individual Elements of the Strategic
and Tactical DSS
WL's DSS contributed to many decisions concerning
distribution, customer service, and the supply chain.
However, its main purpose was to support decisions
regarding the US network for distributing finished
goods, including warehousing, transportation, and
delivery.
To support long-run planning of warehouse capac
ities in the network, WL developed three linked simu
lation models: (1) a DC storage-capacity model, (2) a
DC picking-and-shipping model, and (3) a DC facility
sizing model (Figure 2). Collectively these models
evaluated the capacity requirements and projections
for the DCs in WL's network over planning horizons
of two and five years, depending upon the decision in
question. WL did its tactical and strategic planning of
warehouse capacities as part of its overall network
planning. For example, in a typical strategic-planning
exercise, WL determined whether its warehouse net
work had enough capacity to handle the demands pro
jected for the next three to five years.
The projected demand was based on a sales forecast.

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

Functional Area Authors Organization Description

Distribution
Distribution
Financial management
Hazardous-waste
management
Health-care management
Marketing
Materials management
Materials management
Natural-resources
management
Boykin and Levary (1985) Monsanto
Van der Heyden and
Ottjes (1985)
ABA Banking Journal
(2000)
Sen et al. (2000)
Wong et al. (2000)
Brown (1985)
Benderetal. (1985)
Ramani (2001)
Giorgio et al. (1985)
Grann Elevator
Meatschappij (GEM)
Fannie May, Freddi Mac,
Home Side Lending,
and Advantor
DOE and other institutions System integrated hazardous-waste clean-up efforts.
Indiana University
Abbott Labs Hospital
Products Division
IBM (New York
manufacturing facility)
MP Trust Hospital
Italian National Research
Council and
International Institute
System determined optimal routes for effective capacity
utilization.
System allocated berths and equipment to loading and unloading
operations.
System provided decision support for mortgage organization,
loan underwriting, and credit authorizations.
System provided comprehensive management of patient records,
including monitoring medications and lab results.
System integrated marketing plans for product portfolio.
Optimization-based vendor selection system identified 5-10
percent savings on commodity purchases.
Integrated materials (inventory) management system resulted in
12-15 percent reduction in annual purchase costs.
System provided efficient management of multipurpose Lake
Como reservoir.

for Applied Resources

Production planning
Production planning
Production planning
Production planning
Workforce management
Liberatore and Miller American Olean Hierarchical production planning system integrated firm's annual
(1985) plan, short-term scheduling, and inventory control. Reduced
distribution costs by $400,000 to $750,000 per year.
Sullivan and Secrest Dairyman's Cooperative System generated daily production plans and inventory forecasts.
(1985) Creamery Association Allowed better coordination between line supervisors and
production managers.
Bloemen and Maes Monsanto Antwerp Model provided a cost trade-off between production and
(1992) inventory costs.
Manjunath et al. (1997) Mattel Toys System developed types and quantities of tools required to
produce toys.
Hall (2000) Lube Management System allocated daily workforce among several stores based on
Corporation real-time demand data.

Table 1: These selected DSSs have been implemented in private industry and the public sector.

Such sales forecasts often consisted of a series of alter
native forecast scenarios, each with a projected prob
ability of occurring. These alternative forecasts facili
tated sensitivity analyses on the base case (the most
likely forecast scenario). Projections of finished-goods
inventory turns also drove the planning process. Be
cause inventory turns are important in determining
storage-space requirements, WL also used projections
of turn rates in its sensitivity analyses.
The outputs of the individual planning models be
came inputs to the other models. In practice, the plan
ning methodology was usually both sequential and it
erative. First, planners input the sales and inventory
projections for the planning horizon into the DC
storage-capacity model and the DC picking-and
shipping-capacity model. Each model projected
capacity-utilization rates (surplus or deficit) over the
planning horizon for its areas of warehouse opera
tions. The outputs of these two models became inputs
to the DC facility-sizing model (Table 2). The DC
facility-sizing model evaluated such factors as the total
networkwide warehouse square footage required to
store, pick, and ship the projected sales and inventory
over the planning horizon.
Projections for sales and finished-goods-inventory
turns were also inputs to the model. Warner-Lambert

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

Five Year
Projections of Sales
and Inventory Turns

DC Picking-and
DC Storage Shipping Capacity
Capacity Model Model

1 Distribution
Network Inventory
DC Facility-Sizing
Model Optimization Model Investment Model

Models
Plans/Analyses for One to Five Years
Inputs and outputs into the Future
Potential Iterative
process

Figure 2: Pfizer developed these principal DSS components to facilitate both strategic and tactical warehouse
and transportation planning.

developed this optimization model of its US network
as part of a project to evaluate long-run warehouse
capacity requirements. This model then became a key
component of the firm's strategic and tactical DSS. The
optimization model was a mixed-integer program
ming model that produced plans for distribution of
WL products over the planning horizon. The model's
results included projected product flows through the
network by individual location from plants to custom
ers. It forecast the future product volumes that each
warehouse would have to handle. In some applica
tions, planners would run this model before running
the DC workload models to identify the projected por
tion of total demand each DC would handle. In other
cases, a supply and distribution plan was in place, and
planners would input the initial forecast for the plan
ning horizon directly into the DC workload models. In
either case, an iterative planning process would typi
cally ensue in which the network optimization model
would evaluate the implications of results from the DC
workload and facility-sizing models, and vice versa.
Planners would also run optimization model sce
narios that simultaneously considered freight, variable
and fixed warehousing costs, warehouse storage and
throughput capacity constraints, and so on (that is,
they would employ a traditional optimization-based
cost-minimization approach). Such runs also included
constraints on customer-order cycle time (for example,
constraints specifying that all customer locations must
be served by a DC within three days transit time of the
customer's location when served by motor carriers).
For evaluative purposes, however, we usually found

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32 Vol. 32, No. 4, July-August 2002

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

Input Factor

1. Maximum throughput capa

2. Projected increase above ma
3. Projected increase in storage
4. Facility space needed per incr
5. Inbound and outbound stagi
6. Area needed per increase of
7. Ratio of increase in racking
(racking positions)/(pallet storag
8. Cost of storage rack per pa
9. Construction cost per sq. ft.
10. Sq. ft. of land required per sq
11. Cost per sq. ft. of land for
12. Total land available at fac
13. Additional supervisors to su
14. Additional nonsupervisory l
15. Cost of additional guards an
16. Cost of supervisor (salary +
17. Cost of nonsupervisory lab
18. Warehouse laborer required
19. Warehouse supervisor requir
20. Material handling equipment
21. Cost per material handling
22. Material handling units need
23. Cost per material handling u
24. Increase in nonlabor and non
25. One-time costs to upgrade
26. One-time costs to upgrade co
27. Years to depreciate all mach
28. Years to depreciate all buildi

Table 2: The facility-sizing m

shown are illustrative and d

that an the other models (Figure 2) using

iterative
plementedscenario-planning
by true
approach. Specifically, they devel op
yielded the most
oped strategic scenarios, perhaps for different num ins
results. bers of DCs for the network (for example, three or two)
The inventory investment model (Figure 2) was the
final major planning element in Warner-Lambert's
strategic DSS. WL constructed several inventory mod
els over the years, including a traditional item-level
statistical safety-stock model and several high-level
portfolio-effect and square-root-of-N models (Evers
and Beier 1993, Maister 1976, Talion 1993, Tyagi and
Das 1998, Zinn et al. 1989). For most strategic appli
cations, the portfolio-effect and square-root-of-N mod
els provided sufficient accuracy. WL planners typically
integrated the inventory decision-support models with
or the iterative,
sequ
and alternate locations. For each scenario, the inven
tory model would project the overall inventory in
vestment for the network. This projection would then
be disaggregated to the DC level. Planners need these
projections to calculate the inventory investment and
carrying cost of each scenario and as validation of the
DC storage-capacity-model projections for individual
scenarios.
Over several years, the DNDSS system provided key
inputs for a number of long-run distribution studies
and decisions, including the following:

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

Projection
Output $(millions)
1. One-time cost for buying and installing rac
2. One-time cost for facility-expansion constr
3. One-time cost for land for expansion 1.0
4. One-time cost for material handling equipm
5. One-time cost for material handling equipme
6. Annual cost of labor for full 2nd shift 2.0
7. Annual cost of labor to support facility abov
8. One-time cost for operating a 2nd shift and
9. Increase in annual operating cost (excluding
10. Annual depreciation of capital costs required
11. Increase in annual operating cost (including

Table 3: The facility-sizing model for eac

results shown are for one warehouse in
total facility were under consideration.

(1) Determiningportation operations, (2) identified opportunities

whether
expand the first echelon
improving short-run operations, and of
facilitated their
application, and (3)
(for example, expand provided information
from two
(2) Determining immediate
a new decisions. pharmaceut
work, and
(3) Determining the best long-term US distribution
network for the new Pfizer (that is, consolidating the
Warner-Lambert and Pfizer premerger networks).
Elements of the Operational DSS
At the operational level, Warner-Lambert developed a
DSS that contained a toolkit of diagnostic models, anal
yses, and standardized reports, including the
following:
?A customer logistics scorecard,
?An order-cycle monitoring tool,
?An on-time-delivery monitoring tool,
?An inventory-level-and-turns monitoring tool,
?An overage, shortage, and damages monitoring
tool,
?A detention-and-delivery-unload monitoring tool,
?Daily e-mails to transportation-load planners on
opportunities to improve transportation,
?Daily e-mails to planners on delivery perfor
mance, and
?Daily e-mails to customers on any back-orders.
Also, at this level, Warner-Lambert focused on DSS
components that (1) monitored distribution and trans
Warner for
its tw
to support to t
Logistics analysts used the logistics-planning tool
kit, a customized point-and-click system, to monitor
and analyze customer-related activities on the distri
bution network. One component of this tool kit is the
customer logistics scorecard (Figure 3). Warner
Lambert maintained scorecards at the individual
customer level and if needed, at the customer
receiving-location level.
Warner-Lambert also had tools to track critical lo
gistics activities, for example, a report designed to
monitor planned and actual freight costs and flows by
transport lane (Table 4).
One-Time Model Developed from
the DSS
DSS modeling systems often produce benefits beyond
those originally anticipated. An established and effec
tive DSS modeling system often interests groups or de
partments beyond its original users. Warner-Lambert
ultimately developed several optimization models that
served business needs outside the scope of the DSS
system.
Specifically, distribution's implementation of the
US-network optimization model interested several

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

On-Time Delivery Order Cycle Time

Customer Actual Goal Mean Std. Dev. Goal

Customer 1 98% 97% 8.9 3.4 8.0

Customer 2 97% 97% 6.1 2.1 7.0
Customer 3 94% 97% 6.5 2.1 7.0
Customer 4 98% 97% 6.0 2.9 7.0

Line Item Fill Rate Order Fill Rate Freight Cost Per Pound

Customer Avg. Goal Avg. Goal Actual Goal

Customer 1 97.9% 98% 83% 85% $0,024 $0,030

Customer 2 97.1% 96% 83% 82% $0,027 $0,035
Customer 3 96.4% 97% 74% 80% $0,036 $0,049
Customer 4 97.5% 98% 87% 79% $0,031 $0,037

Percent of Cases Picked at DCs in Full

Pallet and Full Layer Quantities Inventory Turns

Customer Actual Goal Actual Goal

Customer 1 94.1% 90%

Customer 2 80.7% 85%
Customer 3 75.0% 70%
Customer 4 96.8% 99%

Carrier Other Unearned

Customer Handling Charges Shortage Claims Carrier Charges Total Accessorials Cash Discounts Unsaleables

Customer 1 $10,000 $5,000 $9,000 $24,000 $50,000 $0

Customer 2 $2,000 $0 $2,000 $4,000 $70,000 $0
Customer 3 $10,000 $10,000 $4,000 $24,000 $0 $10,000
Customer 4 $7,000 $15,000 $7,000 $29,000 $0 $20,000

Figure 3: The customer logistics scorecard monitored key measures of the supply-chain relationship between
Warner-Lambert and its customers.

Adams confectionery colleagues. They decided to em
ploy optimization in support of their global-supply
chain-planning efforts. The Adams division wanted to
enhance its strategic and tactical manufacturing
planning capabilities. Thus, Adams supply-chain per
sonnel worked in conjunction with several people who
had worked on the original DSS to develop a global
manufacturing-and-distribution-planning model.
The Adams global-manufacturing-optimization
model included all its major plants and products. This
represented over 12 plants scattered across the Amer
icas, Europe, and Asia and over 70 product families.
To construct this model, the team identified the capac
ities and costs associated with the three major produc
tion stages (bulk processing, finishing, and packaging)
and then modeled these stages explicitly. Further, it
identified distribution costs, locations, echelons, and
major transport lanes. It incorporated this data into the
model, a traditional mixed-integer formulation (Ap
pendix). For tactical planning, the model could gen
erate integrated production and sourcing plans for
global manufacturing and distribution. For strategic
planning, the model, somewhat enhanced, would sup
port decisions concerning plant location, closing,

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/Warner-Lambert

(3)
(2) Average Shipments
Number of Shipments from per Week from (4) (5)
(1) Regional Warehouse to Pool Regional Warehouse Average Lbs. Average Freight
Pool Point Point During Last 10 Weeks to Pool Point per Shipment Cost per Lb.

Planned Actual Planned Actual Planned Actual

55 5.0 5.5 36,000 37,000 $.04 $.04

50 5.0 5.0 35,000 38,000 $.03 $.03
30 3.0 3.0 37,000 40,000 $.04 $.04
20 3.0 2.0 35,000 17,000 $.04 $.08
45 4.0 4.5 35,000 36,000 $.03 $.03

Total/Average

Table 4: Monitoring reports, such as this table that tracks planned and actual freight costs and flows by transport
lane, are a key component of the logistics planning toolkit.

expansion, and contraction. The Adams division next
requested a more sophisticated model for evaluating
strategic-technology decisions.
A Strategic Model for Planning
Manufacturing Technology
We developed a multiplant model to help the Adams
division make optimal decisions about locating manu
facturing technology. Management wanted to see
whether moving its manufacturing technology among
plants would reduce overall costs. The decision con
cerned relocation and optimizing the costs of moving
equipment, closing and opening plants, manufactur
ing, transporting freight, and labor.
The logistics-planning group and the manufacturing
strategy group of the Adams division collaborated on
the model. It focused on the North Atlantic region,
including Western Europe, Canada, and the United
States, and considered demand for candy and sugar
and sugarless pellet and stick gum and their
manufacture.
In the late 1990s, in the mature markets, the demand
for gum products declined, and demand for new prod
ucts increased. As the firm introduced new products
in the different markets, it used its existing plants in
those markets to produce them. For example, when it
introduced sugarless pellets in the United States, it be
gan production in a midwest plant. Similarly, when it
introduced this product in Canada, it added its pro
duction in a Canadian plant. This practice led to low
volume products being produced by multiple plants.
Thus, a future objective of the modeling project was to
look for opportunities to consolidate the production of
similar products.
With these objectives and the traditional supply
and-demand requirements in mind, we developed a
mathematical model (Appendix). We solved the model
using a GAMS interface with a MIP solver. The results
provided the manufacturing strategy group with new
insights and allowed it to carry out sensitivity analy
ses. The firm implemented results from this study and
obtained some key benefits:
(1) The model identified a new manufacturing and
distribution plan projected to reduce annual operating
costs by $5.9 million.
(2) The revised operating plan required a one-time
investment of about $11 million, with a payback period
therefore of less than two years.

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert
(3) The model identified new manufacturing tech
nologies (and their associated product families) that
should be transferred into a plant facing imminent lay
offs, thus avoiding human hardships and the costs of
layoffs.
(4) In all, the model identified three manufacturing
technologies (and their associated product families) to
be relocated.
(5) The model also identified a plan for transferring
similar manufacturing technologies to one location,
thus reducing the technology spread.
(6) One of the production-technology moves identi
fied would also reduce the transit time by about four
weeks for a high-demand product in a key sales region
and would also reduce in-transit and safety-stock
inventories.
Benefits and Enablers of the
Decision-Support System
Warner-Lambert's DNDSS has generated many bene
fits, some quantified, some never completely quanti
fied, and some qualitative. The important quantified
benefits include
?Annual savings exceeding $0.5 million in freight
costs from improved transportation-scheduling
support,
?The elimination of customer deductions amount
ing to several hundred thousand dollars annually, and
?A strategic manufacturing technology plan that
could save $5.9 million annually.
The DSS also helped distribution managers to un
derstand the cost and service implications of proposed
DSS modeling systems often produce
benefits beyond those anticipated.
strategic network alternatives. The cost implications of
these alternatives ranged between one and 10 million
dollars annually.
The greatest benefits may have been qualitative or
nonquantified. The initial US distribution DSS led to
optimization modeling in other parts of the organiza
tion. Further, within the US distribution organization
and related organizations, the DSS raised people's
awareness and ability to act on supply-chain issues,
Interfaces
Vol. 32, No. 4, July-August 2002 37
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such as customers' shortage claims on deliveries and
the impact of order-cycle time and on-time delivery
performance on the firm's relationship with its custom
ers. The DNDSS raised the firm's awareness of such
issues and enhanced its ability to remediate supply
chain problems and to make proactive improvements.
Finally, other key enablers facilitated the success of
the DNDSS:
?The logistics planners who developed this system
worked on a variety of operational, tactical, and stra
tegic decision-support problems. This mix helped
them to understand, for example, the operational im
plications of potential strategic or tactical decisions
about the long term. This knowledge helped them to
develop better decision-support tools than they would
otherwise.
?The DSS contained tools developed for and used
by field operations (for example, distribution-center
colleagues). The process for developing them in
creased logistics planners' knowledge about field
The DNDSS continues to evolve and
expand.
operations and increased people's confidence in the
planners and the DSS.
?The DSS monitoring functions were based on ex
ceptions reporting.
?Warner-Lambert's activity-based-costing (ABC)
system for evaluating distribution and customer
service operations provided inputs to the DSS
(Liberatore and Miller 1998).
Implementation and Information
Technology Notes
We implemented the DNDSS between 1998 and 2000,
and it continues to evolve and expand. Within two
years, by the end of 1999, the core strategic, tactical,
and operational elements were functional.
In implementing this DSS, Warner-Lambert built the
various components on a project-by-project basis. That
is, planners developed individual DSS components
only to support specific objectives of actual projects
and not to meet anticipated possible needs. Because
Warner-Lambert had limited resources, it constructed
 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

the individual DSS components to support real near facilitated its eventual migration and expansion to
term projects as well as to contribute to the long-term other areas of the firm.
DSS. By developing DSS components as part of indi
vidual projects with specific completion dates and ob
jectives, it created a sense of urgency and immediate
Resources and Costs Required to
need for the DNDSS components. Develop DNDSS
For example, Warner-Lambert developed the stra Warner-Lambert developed its DNDSS with minimal
tegic and tactical components of its DSS (Figure 2) to resources. During the initial development between
evaluate what capacity it needed in its distribution net 1998 and 2000, three or four members of distribution
work over the long term. The firm initially developed with graduate degrees in operations research and
the optimization, inventory, and DC-capacity models operations management spent 50 to 70 percent of their
of the current Pfizer DNDSS to study the Warner time developing the core of the DNDSS. Most of their
Lambert US network in the late 1990s. The firm used
this approach of developing DSS components to sup Warner-Lambert's DSS quickly
port specific projects and then incorporating the com
became an integral planning-support
ponents into the formal DNDSS repeatedly. Typically
it incorporated project components into the DNDSS by component.
appending front-end input interfaces and back-end in
time was devoted to DSS components to support spe
terfaces and reporting technology. The resulting
cific projects. Only 15 to 20 percent of their time was
DNDSS tool readily supported a variety of projects
devoted to pure DNDSS development (to append ge
and applications.
neric front ends and back ends to the DNDSS compo
Because the firm and the US distribution organiza
nents developed for various projects).
tion needed these tools for a project objective, the or
The information systems group also expended effort
ganization did not view them as threatening. Rather,
and resources to develop, maintain, and enhance large
it saw them as aides to making better, quicker deci
scale Oracle databases that indirectly supported the
sions. In addition, people from the distribution orga
DNDSS. However, it started developing this database
nization who had some OR background worked with
system well before the inception of the DNDSS, and
logistics and distribution colleagues to construct this
these databases supported many activities. These da
system. In particular, they provided advice on what tabases were a foundation block of the DNDSS; a firm
decision-support tools would enhance operations. The
without such large-scale databases would incur much
collective, inclusive effort of constructing the DNDSS
greater costs in developing a DSS than Warner
contributed to its positive reception. Lambert did.

Expanded Use of the DNDSS IT Direct Costs and IT Architecture

Outside the Distribution Group The DNDSS required few IT components. To build its
As parts of the organization other than distribution DSS, Warner-Lambert bought an optimization pack
adopted components of the DNDSS, the DSS devel age (SAILS), a simulation language (EXTEND), a geo
opers made existing components available or added graphic information system and mapping package
components on a project-by-project basis. When plan (MAPINFO), and several desktop PCs. (Planners also
ners developed a decision support tool for a particular had GAMS and a MIP solver available and used these
project, they also incorporated it into the DNDSS. very occasionally, for example, to develop the
As other groups became aware of the DNDSS's con strategic-technology-planning model.) In addition, the
tributions to the distribution group, they became in firm made some standard tools available to employees:
terested in having similar decision support. Thus, im Oracle databases, laptop PCs, internal network e-mail
plementing a DSS successfully in distribution and related systems, Microsoft office software, Visual

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

Basic, Microsoft Access, and links to data in the order major plants and products, to facilitate tactical and stra
management system. The one-time costs to purchase tegic planning. Given the multiple purposes and plan
the optimization, simulation, and GIS software were ning horizons we expected this model to support, we
less than $100,000, and ongoing annual software ex formulated several variations of this basic model. These
penditures did not exceed $30,000. included mixed-integer and linear-programming for
Warner-Lambert primarily used Microsoft Access, mulations. The mixed-integer variations could address
Visual Basic, and Excel to develop the interfaces, links, fixed costs at the tactical level (for example, annual fixed
input screens, and reporting systems. We designed the costs for plant or production line) and at the strategic
system to be used by nontechnical logistics, order level (for example, plant openings or closings). The fol
management, and other employees. They typically lowing is a simple formulation designed to provide in
could use input screens to select the customers, prod tegrated production and distribution plans for a sce
ucts, analyses, reports, and so forth that they wanted nario in which the division planned to operate all plants
to use. Standard networking topologies facilated user over a tactical planning horizon. This is the model vari
access from laptops or from several desktop PCs. ation used most frequently.
While Microsoft Access is not a large-scale database We use the following notation:
language, it can support applications of about one mil p = index on the plant.
lion records effectively. Most of the applications in the i = index on the bulk-product family.
DNDSS used fewer than one million records for any k = index on the finished (but not packaged) prod
particular activity. Thus, we developed many DNDSS uct family.
decision tools with Visual Basic programming support. m = index on the packaged finished-goods product
We supported the occasional applications that used family. (Note: i, k, and m have a one-to-one correspon
millions of records with Oracle. The DNDSS produced dence. That is, i = 1, k = 1, m = 1 represents the same
reports as Access, Excel, or even Word documents. An product family in bulk, finished, and packaged forms.
alytic reports in Excel could be used as inputs to users' We use three indices to distinguish where a product
own analyses or monthly reports.
family is in the production process. However, one
could more concisely formulate this problem with just
Conclusion one index representing product families at each of the
Once developed, Warner-Lambert's DSS quickly be three production stages.)
came an integral planning-support component for op ; = index on the bulk production line.
erational, tactical, and strategic activities and deci / = index on the finishing production line.
sions. The system relied on such standard operations n = index on the packaging production line.
research methodologies as optimization and simula Jip = the subset of all lines ; = 1, ... , / that can
tion. Just as important to the success of this system was produce product / at plant p.
the support of people at headquarters and in the field. Lkp = the subset of all lines / = 1, ... , L that can
Colleagues ranging from senior distribution managers produce product k at plant p.
to entry-level employees used the information and in Nmp = the subset of all lines n = 1,..., N that can
sights the DNDSS provided. produce product m at plant p.
r = index on the sales region (country).
APPENDIX t = index on the time periods of the defined plan
ning horizon.
epijt = the variable cost per unit of producing bulk
Integrated Manufacturing and product family i at plant p on bulk line ; during pe
Distribution Planning Optimizationriod t.
Model fpkU = the variable cost per unit of producing
We developed the Adams global manufacturing and finished-product family k at plant p on finishing line I
distribution model, which included all of the division's during period t.

Interfaces
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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/Warner-Lambert

gpmnt = the variable cost per unit of packaging Xpijt = the units of bulk-product family / produced
packaged-product family m at plant p on packaging at plant p on production line ; during period t.
line n during period t. YpkU = the units of finished-product family k pro
apmwt = the cost per unit of shipping packaged duced at plant p on production line Z during period t.
product family m from plant p to warehouse w during Zpmnt = the units of packaged-product family m pro
period t. duced at plant p on packaging line n during period t.
bwmrt = the cost per unit of shipping packaged Spmwt = the units of packaged-product family m
product family m from warehouse w to sales region r shipped from plant p to warehouse w during period t.
during period t. Twmrt = the units of packaged-product family m
cpmrt = the cost per unit of shipping packaged shipped from warehouse w to sales region r during
product family m from plant p to sales region r during period t.
period t. Upmrt = the units of packaged-product family m
hwmt = the cost per unit of carrying packaged shipped from plant p to sales region r during period t.
product family m in inventory at warehouse w during Iwmt = the units of packaged-product family m in
period t. inventory at warehouse w at the end of period t.
hrmt = the cost per unit of carrying packaged Irmt = the units of packaged-product family m in
product family m in inventory at sales region r during inventory at sales region r at the end of period t. (Each
period t. sales region or country has a local warehouse that in
dmrt = the demand for packaged-product family m ventories and ships its products to the customer loca
in sales region r during period t. tions within the sales region.)
iminwmt = the minimum inventory level allowed (or
lowest inventory target) for packaged-product family
m at warehouse w at the end of period t. The Global Manufacturing and
iminrmt = the minimum inventory level allowed for Distribution Model
packaged-product family m at sales region r at the end Minimize:
of period t.
ypik = the conversion factor that translates what 1 jL ?j 2j ?j Xpijtepijt + 2j 2j 2j 2j Ypkitfpkit
p i j t p k I t
unit of bulk-product family / contributes to the output
of finished-product family k at plant p. For example, a "t~ jZj 2-? 2J ?j ? pmntgpmn
p m n t p m w t
value of 1.0 indicates that 1 unit of bulk production
yields 1 unit of finished production. (This factor does
" 2~t 2Li 2-t jLj * wmrPwmr
not change from period to period, and therefore, we w m r t p m r t
omit the subscript t.)
+ 2j 2j 2j ^wmV^wmt
zpkm ? the conversion factor that translates what 1 w m t r m t
unit of finished-product family k contributes to the out
put of packaged-product family m at plant p. subject to
Opijt = the total potential production capacity (in
Iwmt ^ imin^nt for all w, m, t, (A2)
units) to produce bulk-product family i at plant p on
production line / during period t. Irmt > iminrmt for all r, m, t, (A3)
cjpkit = the total potential capacity (in units) to pro
duce finished-product family k at plant p on produc *~wmt ~ *wmt ? l ' jZj ^pmwt ~~ j-j * wmrt
p r
tion line / during period t.
for all w, m
vpmnt ? the total potential production capacity (in
units) to produce packaged-product family m at plant *rmt ~~ -*rraf-
w p
p on packaging line n during period t.
We define the decision variables as follows: for all r, m,

Inte
40 Vol. 32,

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

2j Xpijt ypik ? 2j Ypkit tomers). Inbound shipments to a sales region could

jGjiP l<=Lkp
come from either a warehouse or directly from a plant.
for all p, i, k, t (where i Constraints
= k), (A6) (A6) and (A7) describe the relationships
between the inputs and outputs of the three-stage pro
?-j % pklr-'pkm ~ jLj ?pmnt
leLkp nENmp duction process. As production flows through a plant
from one
for all p, k, m, t (where k = m), (A7)manufacturing stage to the next (for example,
from a rolling-and-scoring process to a coating pro
?j ?ptnwt ' JLd U-pmrt ~~ ?-J ^pmnt
cess), X units input into one stage of production yield
w r tiGNmp
Y units of output (for input into the next stage). Con
for all p, m, t (A8) straints (A6) translate what the total units of a bulk
product family processed during a period on a pro
2i ?/<W Xpijt < 1 for all p, j, I, (A9)
duction line at a plant will yield in units of a
finished-product family. Parameter Y indicates this re
2 (1/fpBt)
k Ypkit * 1 for all p, l, t, (A10) lationship. Similarly, Equations (A7) and parameter Z
capture what the total units of a finished-product fam
2m
Q/vpmnt) Zpmnt < 1 for all p, n, t, (All) ily processed during a period on a production line at
a plant will generate in units of a packaged-product
Y Y 7 ? T 77 7>0
^pijt' 1 pkltf Spinnt' family ready
?pmwt> L for sale. ConstraintsK^pmrt/
wmrtr (A8) ensure that a Lwm
plant cannot ship out more of a packaged-product
for all p, i, j, t, k, l, m, n, w, r. (A12)
family m during a period t than it produces. Plants do
Overall, this model produces
not hold packaged-product families inan integr
inventory but
operations plan thatimmediately
minimizes ship packaged products production
to warehouses or
bution costs subject sales
to regions. In actual practice, shippingproducti
satisfying packaged
constraints and forecast customer-demand
products immediately to a warehouse often means
The output of the model
simply transporting includes a prod
cases of a product by conveyor
from a plantperiod,
for each plant by time to an adjacent warehouse.
by product
Constraints stages
each of the three major (A9), (A10), and (All)
of ensureproducti
that the
model's production
uct family. The model also plans do creates
not exceed capacity lima glo
and sourcing plan that indicates
itations at any of plant-t
the three stages of manufacturing.
These constraints
to-country assignments by include multipliers at each stage
product of
family
period. production (opijt/ qpkU, and vpmnt, respectively) that ad
Constraints (A2) and (A3) specify the end-of-period just for the fact that the various product families that
inventory targets for all packaged-product families at can be produced on a production line (at each stage of
all warehouses. Constraints (A4) ensure that the end production) may have unique production rates. Fi
of-period inventory quantity of each packaged nally, Equations (A12) represent standard nonnegativ
product family at each warehouse equals the ity constraints on all decision variables in the model.
beginning-of-period inventory quantity of that family With straightforward enhancements to this simple
plus shipments received and minus shipments made formulation, one can consider the fixed costs associ
during the period. Equations (A5) perform a similar ated with strategic decisions (such as opening or clos
balancing function at the sales-region (country) level. ing plants or distribution centers) and tactical deci
Specifically, these constraints stipulate that the end-of sions (such as operating a production line for only part
period inventory of each packaged-product family at of a planning horizon). Other manufacturing consid
each region equals the region's beginning-of-period in erations, such as minimum run sizes for product fam
ventory plus inbound shipments received by the re ilies on individual production lines, can also readily be
gion less demand satisfied during the period (that is, incorporated into this model.
outbound shipments from the local warehouse to cus The distribution costs evaluated in a model run

Interfaces
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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/ Warner-Lambert

would typically include such factors as customs, du Hp > O = head-count increase due to increase in
ties, and other local taxes. One could also easily insert production at location p.
variable warehouse-handling costs by product family Qp > 0 = variable to capture the need for existing
and by location as well as warehouse throughput ca manufacturing location p to continue to operate.
pacity constraints. Further, one can easily convert this = 0, if plant p is open.
cost-minimization model into a profit-maximization = 1, if plant p is closed.
model to evaluate tax strategies and intercompany Yp > 0 = variable to capture the need to open a new
transfer pricing. One could also incorporate con manufacturing plant at location p (or need to sign a
straints on maximum allowable transit times between new lease to keep an existing location open).
a warehouse-stocking location and a sales region into = 0, if the company needs to open a new plant at lo
this basic model. cation p.
= 1, if it does not need to open a new plant at location

A Strategic Manufacturing
Technology Planning Model
The Adams division wanted to see if moving existing
manufacturing technology among plants would re
duce overall network costs. Thus, the decision con
cerned relocation and optimizing costs and labor ca
pacities. The costs considered included those of
relocating existing equipment, hiring and firing, clos
ing and opening plants, manufacturing, freight, and
duties.
To capture the decision to move production tech
nology, we defined various decision variables. For
plants, finished goods, and demand regions, we use
the following notation:
p = index on the initial manufacturing plant.
m = index on the finished-goods product families.
p' = index on the new manufacturing plant.
r = index on the sales region (country).
We use the following decision variables:
Xpmp> = binary variable representing the move of
technology to produce product family m from manu
facturing location p to location p'.
= 1, if the production technology for product m is
moved from p to p'.
= 0, if it is not moved.
Tpmr = binary variable representing manufacturing
plant p serving demand for product family m of sales
region r.
= 1, if plant p supplies product m to sales region r.
= 0, if it does not.
Fp > 0 = head-count reduction due to reduction in
production at location p.
Upm > 0 = variable to capture the need for the labor
that exists at location p to produce product m (assum
ing that unneeded labor will be laid off).
= 0, if labor at plant p is needed for producing product
m.
= 1, if labor at plant p is not needed for produ
product m.
We use the following parameters:
bpmp> = cost of moving technology to produce prod
uct family m from ptop' (assuming that a partial move
of technology is not allowed).
lpm ? number of laborers required for producing
product m at location p.
sp = cost of reducing head count by one at manu
facturing location p.
np = cost of increasing head count by one at manu
facturing location p.
ip = original number of technologies present at lo
cation p.
cp ? cost of closing the plant at location p.
kp = new investment required to keep plant p open
or to sign a new lease for p.
ap = number of definite layoffs required at plant p
due to reduced demands.
dmr = demand for product family m at sales re
gion r.
vmr = coverage matrix (0 and 1) indicating other de
mand exists for product family m at sales region r.
gpm = capital investment required at new location
when the move of technology for producing product
family m from p is moved.
?pm = production capacity available at plant p for
product family m.

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/Warner-Lambert

epmr = total cost of producing a unit of product fam S vTpmr = vmr V m, r (B8)
ily m at plant p and shipping m to sales region r.
w = budget available for capital investments. ?jr *- pmr ' -mr ? Opm
z = budget available for expenses.
Using these parameters and decision variables, we + S p'
Xp.mpp'
ov.m - 2 Xpmp. om V p, m
developed the objective function and constraints for
the following linear mixed-integer programming QP s 1, Vp, (BIO)
(LMIP) model: lp I> ^^ m
^i p'^p'mp ^J ^pmp' ? V* * p'
Minimize cost p'
for location that needs new lease, (BU)
2a 2a 2a ?pmr ' u-mr ' * pmr " "
p m r
Yv - Qp (B12)
goods supply cost, (Bl.l)
for location that needs new l
2a $p ' *~p ' 2a 2a Sp ' Ipm ' U-pm
V V m

cost of Model Objective

headcount Func
reduction,
The objective function consists of
X np - Hp ing
+ and
hiring cost,
delivering goods (Equat
of layoffs caused by moving techn
2a 2a 2a \&ptn ' Vpmp'J
capacity (Equation' (B1.2)),
^pmp' '
the costs
p m p'
(Equation (B1.3)), the costs of mov
moving cost, (B1.4) locations and expanding faciliti
(Equation (B1.4)), the cost of clos
2v cp ' Qp + cost of plant closing, (B1.5)
(B1.5)), and investments for a n
(B1.6)).
kp - (1 - Yp) new investment, (B1.6)
subject to Model Constraints
?p ~ 2a ?a
p ?mi 2j *-pm
ipm *x^pmp
^pmp' We developed constraints to meet decision makers' re
m p'
quirements or to determine values for certain vari
- 2
p'
W ' Xp,mp - Fp < 0 Vp, (B2)
ables. Equation (B2) helps in assigning a severance
value. To determine this value at a location p, we eval
2j 2a *-p'm " ^p'mp uate the labor capacity moving out and the labor ca
m p'
pacity moving in to work on relocated technologies.
- 2 m2 m
2Wp'
XpmV - HP - ? VP' <B3> We used a similar approach to determine new hires at
a plant in Equation (B3). Equation (B4) determines
v - 2 2m
JW p'
+ 22m
xp,mp
p' whether any manufacturing technologies remain at a
location and helps determine the value for variable Qp
< (1 - Qp Vp, (B4) A value of zero implies that a plant retains some pro
E v
Sp Fp + 2 wp Hp duction technologies (that is, it should supply one or
v
more products) and thus should remain open. A value
+
p
HSE
m p'
*W ' noXpmp'
of one implies it retains production technologies
and should be closed.

S S 2 ^WEquations (B5) and (B6) place budget constraints

gpm + on k
p m p' expense-related costs and capital investments. Total
2p' X^.
r
+ S Tpmr > (1 - Upm) Vp, m, (B7)expenses and total capital costs have separate con
straints because capital investments are depreciable

Interfaces
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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer/Warner-Lambert

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44 Vol. 32, No. 4, July-August 2002

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 GUPTA, PETERS, MILLER, AND BLYDEN
Pfizer?Warner-Lambert

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Paul Darlington, V.P. Logistics and Customer Ser
vice Operations, Warner-Lambert /Pfizer Inc., 201
Tabor Road, Morris Plains, NJ 07950, writes: "The Dis
tribution Network Decision Support System imple
mented by the four authors of this paper has proven
to be an extremely valuable asset to Warner-Lambert
and the new Pfizer organization. The DSS is unique in
that it uses the same data to perform many important
functions, whether daily operations, annual planning,
or long-range planning.
"To support daily operations, the system generates
exception reports that allow Warner-Lambert/Pfizer
to improve service to its customers and lower opera
tional cost. As an example, Warner-Lambert/Pfizer
can proactively inform a customer of a back-ordered
item or late delivery during the daily planning phase.
"The DSS group has made significant improvements
to a Transportation Planning System that has resulted
in several hundred thousand dollar savings annually
while at the same time reducing costs. The system has
been used to analyze order-cycle times by functional
area, including our customers' processes. The data al
lows Warner-Lambert/Pfizer to deal with facts and not
perceptions to determine how best to improve the cy
cle time. There are many examples where we part
nered with customers to reduce cycle time and im
prove on-time delivery performance using the data
from the DSS.
"For Warner-Lambert, output from the DSS dem
onstrated how we could reduce our transportation
time to a maximum of three days for the Parke-Davis
Division without having to utilize a premium package
carrier for all traffic lanes. The system implemented
was unique to Warner-Lambert. Where feasible, we
used the tonnage from the consumer businesses to
avoid premium cost while still insuring delivery
within three days.
"Over the years, we used the DSS to continually
evaluate our Distribution Network. For example, sev
eral years ago, prior to the merger of Pfizer and
Warner-Lambert, we were able to illustrate to Warner
Lambert management that customer service would not
be improved by adding a third distribution center at
that time. The majority had the perception that an ad
ditional DC was needed to meet customer require
ments. This resulted in a large cost avoidance for
Warner-Lambert.
"In summary, the DSS improved customer service,
reduced operations cost, assisted in the annual plan
ning, and designed the optimal Distribution Network
for the U.S. and some foreign countries. The DSS group
also supported the different divisions of Warner
Lambert in analyzing many supply-chain activities.
We consider it a definite competitive advantage. What
is truly exciting is that the system continues to make
improvements as knowledge is gained. The value to
the company will only continue to increase."

Interfaces
Vol. 32, No. 4, July-August 2002 45

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