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Article Excerpt
Ford-Otosan, a producer of light and medium commercial vehicles, wanted to improve order-to-delivery times while reducing costs in the course of expanding its capacity. It started a six-sigma project to reduce finished-goods inventory while ensuring on-time shipping of orders. Finished-goods inventory consists of vehicles ready for shipment and those needing additional parts or testing. We developed an integer-programming model in a spreadsheet environment to reduce the number of vehicles awaiting shipment and a shop-floor control system to handle perturbations caused by vehicles that require additional work. Upon implementing these systems, we obtained and analyzed data from the new process and found major improvements, including savings of about $1.2 million in 2003 and $2.6 million in 2004.
Key words: inventory-production: applications; manufacturing.
History: This paper was refereed.
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Ford-Otosan, an automotive company, has three facilities located in Turkey for production, service, and spare-parts distribution. Ford Motor Company and a Turkish conglomerate, Koc Holding, established Ford-Otosan as a joint venture in 1998. Because the existing facilities in Istanbul did not permit high-volume production and export operations, the two companies soon agreed to build a new facility containing a pier for supplying both domestic and European markets. They located this facility in Kocaeli, an industrial port town close to Istanbul. The new facility started operations in 2001, producing a limited number of medium commercial vehicles (with the brand name Transit V184/5) for the local market. At the end of 2001 and during 2002, Ford-Otosan launched export production gradually in a few markets. As of late 2002, with the introduction of light commercial vehicles (with the brand name Transit Connect V227), annual production volume exceeded 100,000 units. As it increased production volume, the company increased the variety of export products and began operating a new distribution system through its own pier for shipping export vehicles.
In early 2003, while production activities were becoming more stabilized, finished-vehicle stocks increased, especially for export vehicles. Until then, Ford-Otosan had been exporting 12,000 units of Transit yearly; however, the 2003 target was to export around 60,000 Transit Connects and 15,000 Transits, a total of 75,000 units. Moreover, while it was exporting Transits to four countries (France, Spain, Portugal, and Italy), Ford Otosan was receiving orders for Transit Connects from more than 20 markets, including the Eastern European countries and Israel. In anticipation of growing difficulties, management asked the material planning and logistics department (MP&L) to revise the existing methods of planning and controlling production and shipment, setting an upper limit of about 888 (2.5 days of production) on the finished-vehicle stock levels.
We initiated a six-sigma project with the objective of reducing the finished-vehicle stock levels of export vehicles, while ensuring on-time shipping of orders.
Planning Production
Ford plans production in two phases. In the first phase, Ford of Europe, in Germany, collects monthly demand information from all markets, aligns the production requirements with the production capacities and constraints, and determines the monthly allocation of the vehicles produced to its various markets. These monthly plans are also known as the operating plans (OPs). Each market then submits its orders according to the given allocation and timing. Based on the OP and the submitted orders, a computerized optimized vehicle scheduling (OVS) system centrally (in Germany) prepares weekly production schedules for the month for all Ford plants in Europe. If the weekly schedules are feasible in terms of production and supplier capacities, the system generates daily schedules based on the weekly production numbers. If the capacity is insufficient, planners negotiate with the customers to revise certain orders until they reach a feasible schedule. After this central processing, the system forwards the orders (called segmented/ scheduled orders) to the planning departments of Ford plants in Europe. Because this process is centralized, the individual plants and therefore Ford-Otosan have no direct control in the developing these plans.
In the second phase, the planning department at Ford-Otosan creates component plans through a material requirements planning (MRP) system, using the data provided by the OVS system. Based on the requirements for components, stock controllers check the availability of the supplier parts. If they encounter any supply problems, the controllers modify the daily schedules and generate new plans through the MRP system. For orders scheduled for production within nine days, plant vehicle scheduling (PVS) engineers on the shop floor confirm the start of production according to the schedule. While production is in progress, logistics engineers prepare shipment plans and inform the logistics company 12...
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