One leading branded consumer products company in the Nordics, and one of Norway’s largest companies, has a long and colorful history dating back to 1654. Over the years, they have been active in industries as diverse as metals, pulp & paper, chemicals, and media. Since 2011, the company has focused on becoming a pure branded consumer goods company.
With hundreds of brands in the portfolio, and close to 50 production facilities, it is easy to imagine the complexities they face when it comes to coordinating their planning activities.
Navigating a complex and challenging environment
The planning situation at their food plants is highly complex due to a large number of SKUs, and in combination with campaigns and seasonality. Historically, the planning team used planning functionalities in their ERP system, but it could only generate unconstrained plans which didn’t take production capacity and material availability into account. This left them with plans that needed a lot of manual adjustment just to make them possible to execute. It also created massive challenges whenever something changed in terms of delivery priorities, plant capacity, or materials availability.
“To become a truly agile branded consumer goods company, and improve our performance, we understood that we had to do this differently,” says their COO.
The team began looking at advanced planning and scheduling tools. Their supply chain planning manager explains, “While we run most of our business in SAP, we realized that we needed a planning solution that was both flexible and powerful enough to meet our needs. When you operate in an industry with such tight margins, planning is simply too important.”
The project: build constraint-based plans
In May 2015, the consumer goods company initiated a pilot with RELEX at its factory, the biggest production site in Norway. The plant produces sauces, soups and cake mixes under one of their brands.
The pilot provided the team with the confidence to move forward with RELEX. The five-month implementation project included a complete review and re-engineering of the existing planning processes. To manage the inevitable risks associated with any change to a core process, the company decided to address the stability of the supply plans first. The priority was to secure a high and consistent delivery performance level – the goal was 98% – before starting to look at reducing inventory levels.
The consumer goods company uses SAP to support most of its business functions, including both manufacturing and distribution. Their COO admits that the integration was initially a big worry for the team, “We thought it would be complicated and expensive. But while ironing out some issues took some work, it wasn’t as difficult or costly as we initially imagined.”
Constraint-based plans give this consumer goods company the agility it needs
The site went live in spring 2016 with the RELEX supply chain optimization, inventory optimization and analysis capabilities, and the improvements were immediate. Delivery performance quickly stabilized at a level even exceeding the target of 98%.
The supply chain planning manager comments, “With the RELEX optimization and modelling capabilities, we can today quickly generate an optimized and up-to-date supply plan. The plans are already validated and can be executed as they stand. This is immensely valuable to us.”
The company’s COO continues, “We now have realistic, constraint-based plans that are built on the actual conditions we’re dealing with. If we need to adjust anything, we can run new plans extremely quickly. We didn’t have this capability before. Another important part of the project was the automated classification and grouping of products. Based on each SKUs forecast accuracy and contribution margin, we can dynamically optimize our safety stocks to match our target service levels.”
The supply chain planning manager stresses that working with an advanced planning solution like RELEX requires you to look hard at your planning processes. “It is a fundamentally different way of working with planning, and the processes need to be aligned accordingly. But once you start taking advantage of the solution’s potential, planning shifts to become a decision-support tool for the entire business. A great example of this is the ability to generate instant ‘what-if’ scenarios that can be used to improve an existing plan, or to test the sensitivity or impact of a specific event.”
The company is also using the intuitive dashboards and reporting capabilities from RELEX to support Sales & Operations Planning meetings. Members of the management and those involved in S&OP have accurate and up-to-date plans and scenarios available at their fingertips.
The company’s COO also mentions the synergies that a common advanced planning solution offers. “We can already see improved communication across our planning team, and there is also an increased level of interest in planning from management, as plans have become much more accessible and dynamic.”
Detailed production scheduling remains the responsibility of the schedulers at the respective factory sites. The company’s COO feels that the optimized tactical plans from RELEX that feeds the plant schedules have made life a lot easier.
He explains that success is not just down to the RELEX strengths, “RELEX´s industry experience and expertise in supply chain planning has been invaluable to us. They live and breathe planning. They know how to address the issues, and always come up with sound recommendations and solutions.”
The supply chain planning manager concludes, “Manufacturing is entering a new era. There is much talk about Industry 4.0 and the move towards digitization. The RELEX solution is an example of a modern tool that enables this shift. When you combine the technical capabilities with the knowledge that RELEX brings – you have something very powerful.”