The encyclopedia · Strategy & Leadership · Operational decision · 1990–2001
Kellogg's KPS linear program planned cereal production and distribution for a decade
One large-scale linear program guided Kellogg's weekly production and shipping decisions, saving an estimated $4.5M in 1995 and $35-40M a year on consolidation.
Kellogg Company
the move
For over a decade, Kellogg's planning system KPS, a large-scale, multiperiod linear program, guided production and distribution for its cereal and convenience foods business. Before it, plant, inventory, and shipping decisions were made with limited visibility across the network.
The operational version of KPS runs at weekly granularity, deciding where each product is produced and how finished and in-process products move between plants and distribution centers. A tactical monthly version sets plant budgets and evaluates capacity-expansion and consolidation options.
The measured results: operational KPS reduced production, inventory, and distribution costs by an estimated $4.5 million in 1995 alone, and tactical KPS guided a production-capacity consolidation projected to save $35 to $40 million per year. The system stayed in service for more than a decade.
why it works
- A network-wide linear program made cross-plant trade-offs explicit.
- Weekly operational runs turned optimization into routine decision-making.
- The tactical layer let Kellogg test consolidation scenarios before committing capital.
what transfers
A single network-wide model beats department-level planning: Kellogg ran one linear program for a decade because it made the whole production-distribution system visible and testable.
what came after
KPS became a long-lived corporate system, and the Interfaces account became a standard reference for large-scale production-and-distribution linear programming in the food industry.
references
- The Kellogg Company Optimizes Production, Inventory, and Distribution — Interfaces (via RePEc)
- The Kellogg Company optimizes production, inventory, and distribution — abstract
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