Asset management reduces repair costs and improves warranty tracking in tire manufacturing.

As recently as a few years ago, before a series of tragic failures resulted in a nationwide recall of Firestone SUV tires, few consumers bothered to specify or seek a specific brand or model of tires on their vehicles. Buying decisions were typically based oil durability, appearance and price. For those living in extreme weather regions affected by heavy rain or snow, consumers might have also considered tires that performed well in adverse weather conditions. After the recall, however, many consumers became very conscious of tire brands and models. In fact, practically overnight, reading the fine print on tires suddenly became extremely important to many consumers.

For tire manufacturers, the recall served as the catalyst for changing the way consumers shop for tires, and largely determined the way manufacturers stayed in business. Tires that had one scuffmark or surface blemish, factors that previously would have had little effect on showroom purchases, were now being sent to the reject pile. Tire manufacturers saw a pronounced increase in reject rates, and their margins began to fall.

Particularly in today's economically lean times, no business is safe from the financial stresses that can have a negative impact on the bottom line. This is especially true for lower-margin smokestack industries like tire manufacturers, many of which have been around for decades. In such industries, falling margins can keep company management awake at night.

To remain competitive and sustain profits, tire manufacturers are continuously introducing new raw materials into their products to make tires better and safer. Likewise, many are experimenting with new manufacturing technologies designed to improve production efficiency. Such is the case for the Continental Tire North America plant in Mr. Vernon. IL. From automating its manufacturing capabilities to streamlining processes and distribution, the company is said to continuously integrate new ideas and services throughout its organization in order to provide quality products and remain competitive.

In early 2002, Continental Tire adopted a comprehensive asset management program, and within six months, the company began to save on maintenance expenses. Continental Tire developed creative solutions to ongoing repair and supplier services issues that resulted in up to 30% reduction in electronic repair costs and 100% warranty utilization rates on both new and repaired electronics.

Optimized manufacturing

Continental is the fourth-largest tire manufacturer in the world. The Continental Tire North America facility in Mt. Vernon, IL, manufactures more than 10 million tires annually, providing the respective markets with 8 million passenger and light-truck vehicle tires and 2.3 million truck tires. Tires are made from a wide range of raw materials, including synthetic and natural rubber, carbon black and assorted oils, fillers, chemicals and sulfur. Depending on the type of tire, individual ingredients are mixed together several times to produce sheets of black rubber material that measure approximately three feet wide and three-quarters of an inch thick.

After mixing, the rubber material is sent to an extruder, where the tire profile is formed, or it is sent for calendering, where fabric or wire is coated with rubber. The material is then cut to appropriate sizes. During assembly, various rubber materials are wound in layers to make the base and sidewalls, and melded together to create the tire shape. The tire is next put through the vulcanizing process, where the surface finish, or tread, is pressed and the tire is heated into a hardened state.

After the tires are made, Continental Tire conducts a variety of testing methodologies, including x-ray inspections for roundness, surface irregularities and structural problems, to ensure quality and grade tires for uniformity based on industry standards. The finishing department applies label imprints and sends the tires to a warehouse for distribution.

Inherently good manufacturing is the linchpin that connects all parts of the process. The steady flow of materials, effective equipment maintenance and strong inventory management are all required to manufacture products efficiently.

Tracking systems

While Continental Tire tracks a number of indices, including productivity, defective product rates, material usage, hours logged and company-wide expenses, managers also are concerned with machine-dependent costs, or those costs which involve parts and components that come out of the storeroom. Knowing that effective parts inventory and equipment repair management lie at the heart of efficient manufacturing, the company explored ways to streamline its maintenance, repair and operations (MRO) program.

Continental Tire turned to automation supplier Rockwell Automation to provide an objective viewpoint and help plant officials see the big picture in terms of overall needs and strengths. The first thing the company learned was that it might be able to do a better job of tracking part warranties and usage. Under its existing equipment-repair system, maintenance workers would first determine the parts needed to repair a machine and then request the appropriate parts through the tool crib. But there was no efficient tracking system in place to determine if broken parts were still under warranty, or even if maintenance personnel had returned them to the tool crib.

Continental Tire discovered that improving its store-room inventory tracking and warranty management system presented an ideal opportunity for controlling escalating repair costs. To develop a system that would enable the company to track its spare part inventory and warranty programs, Rockwell Automation brought in an asset management professional to work on-site at the company's facility and help manage its asset management program. The onsite consultant worked with Continental Tire to get the affected parts labeled with tracking barcodes. A strategic inventory management system was developed for new and repairable spare part orders that would enable storeroom managers to analyze levels of spare part usage.

Well-versed in Rockwell Automation and Allen-Bradley equipment, the consultant makes accurate and effective decisions that help Continental Tire obtain the highest possible return on its spare parts investment, through improved warranty tracking and more accurate repairs. As a result, the company better utilizes its warranty programs, tracking and managing its part warranties to ensure that the facility is getting full use of warranty assets. Outsourcing its asset management function has added intellectual capital and enabled Continental Tire to improve process control.

As an added benefit, the consultant's role as liaison between Continental Tire and vendor suppliers allows for the best possible prices on parts repair. When evaluating part or warranty termss the consultant compares these rates to average market prices and works to ensure the company receives fair market value.

Teaming up for asset management

With approximately 17,000 square feet of inventory space and a vast range of parts sorted by type (electrical or mechanical) and vendor, storeroom managers use label tags and barcodes to track parts and equipment. When maintenance personnel request a part, a tag must be filled out, telling the use of the part, where it is going and the identity of the individual who checked it out. Barcodes are used to track repair rates and vendor warranties, and to indicate if the storeroom needs to order replacement parts.

Inventory tracking helps consolidate repairs and track overall repair rates so that Continental employees can identify ways to build efficiencies into the process. For instance, if a pattern of repairs occurs on a particular machine over a period of time, storeroom managers work with maintenance engineers to find and repair the root source of the equipment failure.

The asset management team consists of representatives from each department, including plant management, maintenance engineering, purchasing and the asset management professional. During monthly meetings, everyone on the team has a say in developing the program's structure and defining how the system will work. In particular, the team evaluates monthly repair reports, including the volume of repairs, turnaround time and vendor bids, to determine excessive trends in repairs and costs.

Achieving results

Through a renewed relationship with its local distributor, the asset management team arranged the consignment of new purchases, helping to reduce asset value on the storeroom shelf, as well as reducing the cost of managing and carrying that inventory. The company's distributor now shares in the storage of Continental Tire's critical inventory. Within 18 months of implementing the innovative solutions contained in its asset management program, Continental Tire has achieved several key results, including reducing its electronic repairs costs by up to 30%, obtaining warranties on all repairs and increasing its utilization rate on warranties to 100%.

In the same way it adds layers of materials to strengthen its tires, Continental Tire continues to add layers of proactive initiatives to strengthen its asset management program. The company's next objective is to reduce total inventory count 50% within five years of implementing the asset management program. The plan includes conducting an extensive installed base evaluation to determine where it can further reduce expenses and cut costs.