Ford-Otosan optimizes its stocks using a six-sigma framework

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 implementation of these systems, we obtained and analyzed data from the new process and found major improvements, including savings of about $1.2million in 2003 and $2.6million in 2004.