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Overview

Rolling Tires Manufacturing is a European multinational automotive manufacturing company specializing in producing tires, brake systems, interior electronics, powertrain, and other vehicle components. Founded in the 1800s, Rolling Tires has become one of the largest global suppliers of automotive parts in the world.

The North American division of Rolling Tires is responsible for the US market and has plants in Mexico, the United States, and Canada. Its corporate office is in Charlotte, North Carolina. The tires are produced and are shipped directly to customers (car manufacturers) or to Rollings own distribution centers (replacement market). The distribution centers are where most of the inventory is kept. Distribution centers receive daily orders from hundreds of customers and have to constantly ship tires to those customers. The customers are retail stores, such as car service stores, repair shops, tire shops, and automotive parts stores.

Problem Definition

Helen Patel is the Logistics Manager for the US market; recently she noticed an unusual increase in the number of stockouts at Rollings Tires plant in Monterrey, Mexico. She looked at the historical demand and saw no major increase in comparison to previous months. However, she found that there was an increase in the time between when the orders were placed by the distribution centers to the plant and the delivery of the tires (lead time). The current average lead time is about 23 days.

Helen decided to use the Six Sigma Process Improvement tools to help the Monterrey plant to find out why the lead time to replenish tires has increased. After talking to Enrique, the Operations Manager of the Monterrey plant, she decided to form a team with key people from customer service, warehouse, and transportation to begin the project. The Six Sigma method has five phases: Define, Measure, Analyze, Improve, and Control.

Process Improvement

The team began the Define phase by establishing that the goal of the project is to reduce the current replenishment lead time for tires from Monterrey from the current lead time of 23 days to 17 days. In the Measure phase, the team conducted interviews and observed the fulfillment process, which begins with the orders being created by the distribution centers and finishes with the tires being delivered. Orders for tires, including product model and quantity, are automatically generated by the distribution centers based on forecasted demand, planned inventory level, and estimated lead time. At the Monterrey plant, after receiving the orders, the process is as follows: a) a customer service representative decides which orders are going to be placed in each shipment and schedules the load of the trailer, b) the warehouse loads the trailer with tires, c) a transportation analyst decides which carrier to use and informs the company that the trailer is ready, and d) the carrier picks up the trailer and delivers it to the distribution center. In order to better visualize and understand the process, the team created a Swimlane chart (Figure 1).

Figure 1: Replenish Process Swimlane for Rolling Tires

For the Analyze phase, the team decided to make a cause-and-effect diagram that included all of the possible sources of increased lead time that they uncovered in the Measure phase. For the cause-and-effect diagram, they showed where increase in lead time occurred and its effect, as well as each department or resource involved in the process as branches of potential causes (Figure 2).

Figure 2: Cause-and-Effect Diagram for Increase Lead Time at Rolling Tires

After discussing the results, the team agreed that two main causes were responsible for most of the increase in lead time. Usually, the orders generated by the distribution centers take a few days to be allocated in a shipment, so the plant always has open orders waiting to be shipped. They noticed that the way customer service selected the orders to include in shipments could be one of the reasons for an increase in lead time. Customer service would put the larger orders in the trailer first, in order to make the warehouse process more efficient. By doing that, the smaller orders, in particular the ones with the quantity of tires representing less than one pallet, ended up waiting longer before they were included in a shipment. In a further conversation with the warehouse, the team found out that the warehouse had a capacity to load nine shipments per day but it was shipping only an average of six. In order to understand the impact of order size, or the number of tires in an order, and the average lead time, the team classified the orders into three groups: a) less than 30 tires; b) 31 to 90 tires, and c) more than 91 tires (Figure 3).

Figure 3: Average Lead Time by Order Size

They also realized that the carrier was selected by cost. This meant that the transportation department always preferred to use the lowest cost carrier company for each destination. There was no system in place to evaluate carrier delivery time. To understand the performance of different carrier companies, the team made a Pareto chart with the number of delays for each carrier. They collected data from a sample of 50 deliveries per carrier. Out of 350 deliveries analyzed, a total of 180 deliveries were late (Figure 4).

Figure 4: Number of Late Deliveries by Carrier.

Based on the cause-and-effect diagram and the further investigations, the team moved the project to the Improve phase of Six Sigma methodology. They created a detailed implementation plan to reduce the lead time. For the Control phase, they determined that the lead time should be measured every two weeks. Additionally, in the cases when lead times are more than 17 days, the Monterrey plant should address it immediately. They also implemented control mechanisms to evaluate carriers performance in a monthly basis.

ASSIGNMENT:

If you were part of the Six Sigma Process Improvement team, what improvements you would suggest to reduce the lead time? Justify your answer using data and information from the case.