From Sweden to the World: Swedish Coffee Legacy
Sweden is a nation of coffee-lovers. Coffee drinking is part of the culture, and the average Swede gets through four cups per day. A leading, family-owned Swedish coffee company has been operating since the early 1900s.
A passion for good coffee, as well as a commitment to sustainability and fairness, has served the coffee makers well. Today, the company is one of the largest coffee producers in the Nordics, and among the world’s largest importers of organic and fair-trade coffee.
Most of the company’s coffee is still roasted and packaged in Sweden. From there, it is shipped across Scandinavia, to the Baltics, the UK and more recently, Canada.
Striking the Balance: A Supply Chain Dilemma
This coffee producer serves a broad spectrum of customers – from major retailers and national restaurant chains to small, independent cafés. Many expect next-day delivery. The company buys directly from growers’ cooperatives and coffee retailers in the Equatorial belt and ships the beans back to Sweden – a journey that typically takes eight weeks. The coffee company needs to be able to meet demand, but at the same time, doesn’t want to over-purchase. If they don’t get it right, their purchasers end up having to buy from the spot market, which is a lot more expensive.
These challenges are highlighted by the company’s logistics manager, who explains, “When your customers expect next-day service, but procurement lead times are measured in weeks and months, and production involves a delicate roasting process, you have quite a challenge on your hands. Having a clear and accurate demand plan becomes essential to balance both stock and service levels.”
The company was using Excel spreadsheets for the forecasting process. “We looked three months back, averaged that into the future, and adjusted the numbers based on knowledge and gut feeling. We didn’t have any ability to plan on a longer time horizon,” the logistics manager recalls. The lag in demand information presented the company with some major challenges. He continues, “We wanted to introduce a level of standardization in forecasting, and we wanted to have more trustworthy information at an earlier stage.”
Revamping Production Planning: A Transformation Journey
The coffee company began looking at better and more efficient ways to respond to the ever-changing demand for its coffee. In its search for a forecasting tool, the team recognized that the production side of the business also lacked adequate planning.
The planning functionality offered by the MRP system didn’t take production capacity into account. The company’s planning manager explains, “The plans we had available to us would only tell us how much to buy and produce, but not answer the more critical questions of how, where and when. The RELEX supply chain optimizing tool offered this functionality and has helped us greatly. We now can quickly generate optimized production plans that take into account the most up to date forecasts and order situations, while respecting the capacity and current load of the plant.”
Achieving Precision: An Enhanced Forecasting Process
However, the real cornerstone of the coffee company’s solution is the RELEX demand planning tool.
Today they have a standardized forecasting process across the business. “RELEX demand forecasting allows us to establish a statistical forecast that far exceeds the quality of what we had available to us before. There’s now greater trust in the baseline forecast, which removes the need for the manual tweaking of numbers,” says the logistics manager.
Forecasting now operates at a three-to-four-month time horizon, and the company uses the forecast daily to guide production planning, procurement and delivery. They can now operate with much lower stock levels across the supply chain because they have more confidence in the forecasts.
The company’s logistics manager continues, “Since we’re all working from the same plan, and using the same tool to make adjustments, we are in a much better shape to communicate any changes across the business. It all works together.” Today the team has a greater awareness and understanding of the forecasting process and the importance of forecast accuracy. “With more trustworthy demand plans, we can not only serve our customers better with less stock, but we can also plan our sourcing to get better prices and avoid expensive spot market purchases.”
He also stresses that one of the reasons for choosing RELEX as a partner was their proven expertise. “It soon became clear that with RELEX we didn’t just have a software vendor, but an experienced partner that could provide us with real know-how. They really understand supply chain planning and the many challenges it presents to a business. Also, their deep knowledge of integration with ERP systems such as our Movex solution was of great value to us and helped facilitate the whole implementation process.”