Mastering Supply Chain Challenges in a Diverse Product Landscape
Orkla is the leading branded consumer products company in the Nordics, and one of Norway’s largest companies. The group has a long and colorful history dating back to 1654. Over the years, Orkla has 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.
Orkla Foods is the largest business area within the group, accounting for almost 50% of sales. With hundreds of brands in the portfolio, and close to 50 production facilities, it is easy to imagine the complexities Orkla Foods faces when it comes to coordinating their planning activities.
The planning situation at Orkla Foods’ 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 enhance agility and performance in their consumer goods business, the company realized the need for a different approach. This led them to explore advanced planning and scheduling tools. They acknowledged that while SAP was a significant part of their business operations, the necessity for a more flexible and powerful planning solution was evident, especially in an industry where precise planning is crucial due to tight profit margins.
Orkla’s Pilot and Integration with RELEX at the Arna Factory
In May 2015, Orkla initiated a pilot with RELEX at its Arna factory in Bergen, the biggest production site in Norway. The Arna plant produces sauces, soups and cake mixes under the brand name TORO.
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, Orkla 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.
Orkla employs SAP to facilitate a majority of its business operations, encompassing manufacturing and distribution activities. The team initially had concerns about the integration process, fearing it would be complex and costly. However, despite some challenges that required effort to resolve, the integration process turned out to be less difficult and expensive than they had initially anticipated.
Constraint-based plans give Orkla the agility they need
The Arna 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 team expressed satisfaction with the optimization and modeling capabilities of their new planning system, noting its ability to quickly generate accurate and executable supply plans. They found immense value in having plans that are both validated and ready for implementation.
They also highlighted the system’s ability to create realistic, constraint-based plans tailored to actual operating conditions. This feature allows for rapid adjustments and the generation of new plans when necessary, a capability they previously lacked. An important aspect of the project was the automated classification and grouping of products, enabling dynamic optimization of safety stocks based on forecast accuracy and contribution margin of each SKU, aligning with their target service levels.
Furthermore, they emphasized that adopting an advanced planning solution like the one they chose necessitates a thorough examination of existing planning processes. It requires a fundamentally different approach to planning, necessitating alignment of processes. However, once fully utilized, the system transforms planning into a decision-support tool for the entire business. A notable feature is the ability to instantly generate ‘what-if’ scenarios, enhancing existing plans or testing the impact of specific events.
Orkla Foods 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.
This approach has led to enhanced communication within the planning team and sparked a greater interest in planning from the management side. The plans have become more accessible and dynamic, further improving the overall planning process.
Detailed production scheduling remains the responsibility of the schedulers at the respective factory sites. Optimized tactical plans from RELEX that feed the plant schedules have also streamlined the process.
The success achieved was not solely attributed to the strengths of the RELEX system. It was also due to the industry experience and expertise in supply chain planning that the RELEX team brought to the table. Their deep understanding of planning and ability to address issues effectively, providing sound recommendations and solutions, was highly valued.
In conclusion, it was observed that manufacturing is transitioning into a new era, characterized by Industry 4.0 and a move towards digitization. The RELEX solution was cited as a prime example of a modern tool facilitating this shift. The combination of its technical capabilities and the knowledge provided by the RELEX team was described as a powerful asset in this transformation.