Breaking the curve

Royal Greenland: Master planning

At the beginning of 2013, Royal Greenland initiated the project “Breaking the curve” to conduct a pre-study of how the inventory level could be lowered in the North Atlantic flow. The outcome of the project was a number of initiatives to be implemented. Royal Greenland decided to prioritise two of these. One was to improve the sales and operations planning process, and the other was to improve the detailed production planning in the Greenlandic factories and trawlers.

Royal Greenland: Master planning

What is the situation at Royal Greenland?

Royal Greenland runs more than 25 factories and more than 10 trawlers in Greenland spread across the coast all the way from Narsamijit in the South to Qaanaaq next to Thule in the North, making the company the biggest employer in Greenland. The supply of raw materials at Royal Greenland is primarily based on fish and prawns caught in the waters around Greenland, processed to different levels in the Greenlandic factories and then pushed onwards in the supply chain. Furthermore, there are relatively long lead times that vary greatly over the season due to the ocean freezing to rock-hard ice in long periods.

Understanding the pain and the needs

The catch has a significant seasonality profile, which has led to rumours that a good and stable detailed production plan was hard to achieve, since “the catch cannot be predicted”.

The low quality of the previous detailed production plan makes it hard to commit to large sales contracts, since it was difficult to tell whether there was enough finished goods to sell or not. Therefore, sale was often first initiated when the goods had been received in Denmark.

In other words, the production has up until now only been demand-driven to a small extent, sometimes resulting in production of low-selling products. Furthermore, Royal Greenland also has a strategic target of lowering the overall inventory level, and to do so it was crucial to bring production and demand closer. Henrik Toudahl (Group Demand Planner in Group Demand Planning) summarises the situation: “Balancing demand and production together with what we have in stock is increasingly essential to lower our inventory levels. We needed to be able to make a highquality production plan that could take the variability in the inflow of raw materials (catch) to the factories into account”.

Royal Greenland Master planning - figure 1

Solving the problem in the simplest possible way

The solution was not as straightforward as one might think. First, it was necessary to investigate to what extent the catch could be predicted.

The catch

The analysis of the catch showed a strong seasonality profile, and for most species a trend. However, the seasonality was very stable, and the trend could, in most circumstances, be explained by the overall catch quota. Interviews also showed that the local factories possessed knowledge and had detailed expectations to the catch, especially on a 1 – 2-month horizon.

The catch was even predictable in each factory.

To ensure the best possible quality of the catch plan, each factory must review and re-submit the catch plan on a monthly basis before an agreed deadline. The “forecasting” process is completely manual and is only supported by historic data and the current catch quota as well as the local insights.

After having seen that the catch could be forecasted to a sufficient extent, the next question that arose was: “How can a stable and feasible production plan be created based on the catch plan while taking the variance of the catch into account?”

The production plan

The most important feature in the new detailed production plan is that it is more a prioritisation of finished goods with desired production quantities than a detailed plan cast in stone. In addition to this, the production plan must include prioritised finished goods for all possible raw materials (fish caught). This ensures that the factory knows at all times, which finished goods they must produce if a given fish (size, type and quality) is to be processed.

The lead time

To make it all work together, it was necessary to find a way to deal with the variability in the lead times from the Greenlandic factories to the central hub and inventory in Aalborg, Denmark. Since all Greenlandic production goes through the same hub in Aalborg, this point in the supply chain was chosen as the point of balance for the whole Greenlandic flow. Then the variable lead times were mapped for each factory, which showed that it was necessary to match the production mix with the demand mix on at least a 6-month horizon, primarily due to the long lead times during winter, where the northern part of the sea is frozen, and no outflow is possible.

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The process

To support the planning process, a new master planner position was established in Greenland. The role of the master planner is to drive the process, administer all contact with the many local factories and derive the production plan. Siverth Heilmann (newly appointed Master Planner) says: “I am very excited about this new position, and I know that the factories also welcome this initiative. The new structured process and our new tools enable us to create far better production plans that ensure balance in our entire Greenlandic flow. Furthermore, it enables us to do production follow-up on a weekly basis – this way, we can spot abnormalities in the catch very fast and act upon it”.

Royal Greenland Master planning figure 2

The tools

Creating an environment with the necessary tools for the master planner was one of the largest challenges, since there were no tools to support the planning process. “We have had some Excel spreadsheets, where we tried to match demand and production. However, we could not make a solid and trustworthy plan on a 6-month horizon – we had problems creating the necessary transparency”, says Anders Skadhauge (Category Coordinator for cooked and peeled prawns).

The solution was to create one tool in MS Excel, where the master planner loads data from SAP and BW into it automatically, and based on relatively simple functionalities the master planner directs the catch into finished goods by matching the volume with current inventory and demand.

Choosing MS Excel might seem as a very basic planning tool, however, it was important to build a tool that could be supported internally at Royal Greenland. “By using a simple Excel tool, we could build a robust and very transparent process – at all times, we understand the numbers from the planning process”, says Henrik Toudahl.

Making it all work together and creating true impact

The single most important element in the master planning process is to achieve a high level of plan compliance at the many factories. This posed, and still does, one of the largest challenges. The language barrier was significant, the internet connection was too slow for video conferences, visiting all factories would have been extremely expensive and take too long.

Therefore, the factories were divided into two groups: 1) factories with a fixed production plan – approximately 80 % of the factories – and 2) factories with a variable production plan – the remaining 20 % of the factories. The factories in group 1 have low-volume production and will receive a production plan once every month.

However, the plan will often be identical to the previous month. The factories in group 2 have a much higher production volume and will receive a production plan once a month with weekly adjustments if necessary. By dividing the factories into these two groups, communication was simplified significantly, and achieving a high level of plan compliance for the factories in group 1 was easier. Communication to the factories in group 2 is much more detailed, and the master planner is in direct contact with these factories every two weeks.

The new master planning process has high priority at Royal Greenland. Therefore, a monthly management report that keeps track on production, catch plan and a number of other KPIs is distributed at CxO level. This report is prepared by the master planner and enables high transparency in the Greenlandic flow. “The new master planning process enhances our ability to control the Greenlandic flow and planning-wise brings the customer closer to the origin of the fish. The process is an important step in our strategy towards becoming “The North Atlantic Champion”. Michael Riis, Group Logistics Director at Royal Greenland.