Coordinating Decisions for Increased Profits

Abstract

This paper describes how a major tire manufacturer has attained an increase in productivity through the application of Management Science. Like most manufacturers, The Kelly-Springfield Tire Company has long recognized the difficulty and importance of coordinating sales forecasting, inventory control, production planning, and distribution decisions. The evolution of an integrated “Total System” approach is traced, with emphasis on the ability of the latest Management Science system to adapt to the constantly changing tire business. The original Total System, implemented in 1970, reduced production lead time to generate estimated annual savings of $500,000; benefits totaling over $5 million during the past decade. Since the implementation of the latest system in 1976, Kelly-Springfield's share of the auto and truck tire replacement market has increased about 1% in an industry recently characterized by significant losses, excess productive capacity, and intense price competition. Average unit inventory decreased by 19% while customer service improved, productivity increased, and additional savings totaling $7.9 million annually resulted. Numerous data support facilities were developed to attain the desired flexibility. The resulting capability to supply information quickly and accurately has been employed to obtain improved estimates of profit and loss and return on investment, to plan future sales strategies and advertising campaigns more effectively, to purchase production equipment, to analyze market share and product offerings, and to make and satisfy commitments to customers regarding availability of new products.