The Kellogg Company optimizes production, inventory, and distribution

For over a decade, the Kellogg Company has used its planning system (KPS), a large-scale, multiperiod linear program, to guide production and distribution decisions for its cereal and convenience foods business. An operational version of KPS, at a weekly level of detail, helps determine where products are produced and how finished products and in-process products are shipped bteween plants and distribution centers. A tactical version of KPS, at a monthly level of detail, helps to establish plant budgets and make capacity-expansion and consolidation decisions. Operational KPS reduced production, inventory, and distribution costs by an estimated $4.5 million in 1995. Tactical KPS recently guided a consolidation of production capacity with a projected savings of $35 to $40 million per year.