Sig Combibloc Case

1-June-2005 05-06-003SIG Combibloc - Supply Chain Innovations It was July 2002 and Theodore Streng, Head of Supply Chain Management (SCM) of SIG Combibloc, the second biggest supplier of aseptic packages for food and beverages just tried to prioritize the aspects he was about to present at the meeting of the executive committee on strategic positioning. The key issue of this meeting was the benchmark report which compared SIG Combibloc to its main competitor Tetra Pak. The results of the study were striking: “Whereas both companies are head to head in all major qualitative aspects, SIG Combibloc lags behind in speed of implementation of new printing designs and customer order lead time”. Senior management was obviously very uncomfortable with these negative benchmarking results and expected him to address this issue and to come up with a solution. Theodore Streng and his team had identified the key problem and would take the lead in the improvement project. This however would involve a radical change in the supply chain management strategy. Theodore Streng realized that it would be on him and his team to convince the executive committee to make the change happen and to decide about the “when”, “where” and “how”. It was clear to them that it would take several months if not years for the effects to materialize. But they were determined that they could turn his vision of an integrated supply chain that linked suppliers and customers to the same platform into reality. Company Information In 1853, SIG Swiss Industrial Group was founded in Neuhausen (Switzerland) by 3 partners as a train car manufacturing plant, employing 150 people. The location was deliberately chosen due to the “Rheinfall” where the waterpower could be used to run the factory. To diversify operations, SIG started the production of small arms in 1860, and became the supplier of the Swiss army as well as the manufacturer of choice for high-precision sporting guns at world championships, and Olympic Games. SIG also transferred the know-how acquired throughout the years to other activities, and set up complementary business lines. Its extensive experience in the treatment of steel for example eventually led to the construction of pneumatic hammers, and hydraulic pumps, which later entailed further diversification. Along the way SIG also became involved in the manufacturing of products like automobiles, planes and vending machines, which were produced in smaller numbers. Dominik Boskamp, Holger Materlik, Franziska May and Dominik Steinkühler prepared this case under the supervision of Professor Lutz Kaufmann and Alex Michel to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Copyright © 2005 by WHU, Version 2005-06 – 01 No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of the supervising author. We continuously want to improve our case development process and ask you to share your experience with us. For feedback please contact Lutz Kaufmann at [email protected] At the end of 2002. SIG Pack. and within just three years the division had been able to double its operating profit.a. and consumer goods. fitment and labeling equipment. juice. Most of the time. HR and legal were also administered by the Holding. and decided to focus on packaging technology. Through the acquisition of PKL (“Pack. the SIG Group was composed of three major divisions. Average compared annual sales growth since 1990 had been 9% p. soups. as well as aseptic filling machines. Asia. SIG Combibloc was by far the most important division. in 1975 PKL had made its international breakthrough by introducing “combibloc aseptic”. and stretch-blow molding machines for PET bottles. In 1944 the first packaging machine in the non-food area was introduced for washing powder. the SIG Combibloc activities were managed by a central Holding in Switzerland which also managed the three central functions IT. Germany. R&D / Filler Production and allCap systems (see Appendix F). The second division. manufactured packaging systems and machines for fast-moving goods like food. America) which independently managed the packaging and service activities. In 2000 SIG went through a redefinition of the group’s strategy. UK. Therefore. provided integrated lines for the beverage industry for cans as well as plastic and glass bottles including filling machines. and contributing most of the company’s profits (see Appendix E for a group income statement). in 1989. On the other hand to a certain extent they presented the means to achieve the desired level of customer retention for the sale of carton packages in the years after the installation of the filling line. An overview of the products and services of the Beverage division is shown in Appendix B. was the heir of the former PKL business. The business model of SIG Combibloc envisaged the provisioning (sales / leasing) of filling lines to the customers.700 employees and worldwide production in 2002 amounted to more than 10 billion carton sleeves. The subsequent divestment of its rail vehicle and arms business thus irrevocably ended the “railroad era” with which SIG’s history had once started. and to react more quickly to various customer demands. Financing. An overview of SIG Combicloc’s sites and the sales per region can be found in Appendices C and D. An overview of Combibloc’s products is shown in Appendix A. SIG Combibloc. Controlling. the business of SIG Combibloc was much less cyclical than the classic engineering sector because it did not depend -2- . In 2002. The business activities were grouped in five regional business units (Western Europe. SCM had been established as a central function in 2002. SIG entered the field of liquid packaging for milk. 3. SIG Combibloc had approx.und Klebstoffwerke Linnich”). The first. SIG was constantly expanding its businesses by setting up subsidiary companies in foreign countries in order to achieve greater proximity to the local markets. and produced aseptic packaging for food and beverage products (as described above). SIG commenced the production of packaging machines. and later the exclusive supply of carton sleeves for their production. Several years earlier. and sauces. downstream equipment. accounting for over 50% of total Group revenue. the prices charged for the machines hardly covered their production and assembly costs.SIG – Supply Chain Innovations In order to offset the economic downswings of the train manufacturing and small arms businesses in 1906. The third division. Especially its mid-term progress was remarkable. spouts and corresponding application machinery. a leak-proof folding carton packaging system for aseptic food packaging. In 2002 SIG Combibloc had just laid the foundation stone for a new packaging plant in China to expand the global reach. SIG Beverages. which initially focused on the packaging of chocolate and soup cubes. Eastern Europe. While Tetra Pak was clearly dominating in the segment of dairy products. The overall market size for packaging solutions in the segments in which SIG was active (including SIG Beverages and SIG Pack) was estimated to be around 11-12 bn EUR. While Tetra Pak filling machines were fed by a role of uncut packaging material. market growth especially in Eastern Europe and China increased consumer demand for aseptically packaged goods. the players in the market already endued a strong installed base of customers equipped with a filling machine. Tetra Laval with its Tetra Pak held about 85% of the world market and SIG Combibloc covered the remaining share. The entry barriers into the market for aseptic carton packaging could be considered very high due to the stringent quality requirements of customers. and the complex technology of aseptic filling. Beverage cartons accounted for about 50% of those packaging solutions. and this share was likely to increase even further in the future due to its cost advantage versus other containers and its logistical robustness of the beverage carton. On the other hand. Moreover. and large economies of scale. An example of this advantage was the decision of Germany’s Federal Ministry of Environment in 2002 to amend packaging legislations allowing beverage cartons to remain deposit-free. soups. Sidel. In the segment of aseptic carton packaging. caused many customers of SIG to exercise considerable caution. which necessitated company know-how in the packaging segment as well as in the engineering segment. and KHS focused on engineering of filling liner for bottles (glass. too capital intensive for small local players. Supply Chain Management at SIG The CEO of SIG did not only foster the concentration of the SIG Group on packaging technology but also strived to strengthen SIG’s supply chain processes. Furthermore. there was also a fundamental difference between Tetra Pak and SIG Combibloc with respect to the filling technology deployed. apart from the absolute size. KHS and Elopak. Market Overview The instable macroeconomic and political environment in 2002 due to the aftermath of the terrorist attacks on September 11. and were not active in the carton business or in the sale of other packaging materials. the business model of installing filling lines and building up cardboard plants was very capital intensive. SIG Combibloc had a stronger relative position in the aseptic packaging of fruit juice. and to strengthen the group’s worldwide -3- . Peter Lose was hired in 2001 as Head of Corporate Supply Chain Management at the holding to initiate additional measures to realize supply-side synergies across the then established divisions and business units. Krones. and sauces. which was privately held. Sidel. dominated the market. which were continuously needed by customers in order to run their operations. Other important players in the beverage packaging industry besides SIG were Krones. where the cutting and creasing was done during the filling process. which were then filled at the customer plant. and the threat of a potential conflict of the USA with Iraq. and postpone investments in new systems. In addition. ice tea. SIG Combibloc delivered pre-cut and creased packages. thus making it hard for new entrants to gain a foothold in the market. The Swedish Tetra Laval Group. which created network effects.SIG – Supply Chain Innovations on one-time projects of expensive machinery or systems. However. Instead the profits were made by the subsequent sale of aseptic packaging materials. plastics) and cans. So far. Upon entering. and therefore the available information was marginal at most. Kampos. Peter Lose set up and successively implemented a corporate supply chain balanced scorecard (BSC) in order to align the measures with corporate and business strategies and to provide direction for the numerous strategic initiatives. Before they entered. Despite these impressive results. Supply Chain Management had not been the top priority. more professional supplier management. the increased outsourcing of noncore materials and services. supply and demand planning processes were completely different in a machinery (project) business when compared to the processes in the sleeves and spouts (mass production) business. he was given a welcome and they drove through the plant since the first thing on the agenda was a detailed plant tour guided by Mr. Kampos walked him around the huge factory building employing over 300 people.3 million in savings had been realized in 2001. purchasing grouped to finance). were -4- . For example. When he sat down to form his team and to identify the key persons he became aware that there was no stringent SCM responsibility in the regional organisation. When Mr.g. The PE granulate came from huge overhead funnels. sales. seven days a week. were the main input for the beverage cartons they were producing here. wearing the obligatory SIG-cap (after all. Together with the local purchasing and supply chain managers. Plant Manager Mr. a strong division-specific supply chain management was vital. These initiatives included the implementation of a business warehouse for the consolidation of the business units’ purchasing and supplier data. Thus. running three shifts. He decided to speak with his team starting with the plant manager first to get closer to business. Streng saw where the huge carton rolls being fed into the line in the very beginning. order processing grouped to Sales. to name a few. and training of SIG employees in supply chain-relevant topics. The list of persons that he had been recommended to contact regarding SCM across the regional organizations was composed of colleagues in production planning. his first task was to familiarize himself with the processes in place. Gregor Kampos. He was astonished when he was even recommended to talk to an external IT consultant to gather information about the process flow. they were producing products that were in direct contact with foodstuffs). Kampos explained that these rolls.SIG – Supply Chain Innovations commodity team organization. weighting more than 2 tons. He decided to start interviewing his team and those who he regarded as the key personnel in the supply chain process. Through corporate initiatives. about EUR 14. Combibloc). He strongly felt that there should be a SCM competence center to consolidate the essential knowledge that was currently vastly distributed even to outside of SIG Combibloc. As they walked along the line. the first thing Mr. SIG Combibloc Supply Chain When Theodore Streng started dealing with the challenges in the Supply Chain Management in spring 2002. Streng saw how in the first two steps Aluminum foil and several Polyethylene (PE) layers were added. it was obvious that many important supply chain issues had to be dealt with on a divisional or even business unit level (e.g. and every 14 minutes they would seamlessly connect the next. This assortment even varied among the different regional organizations. building up group suppliers. Streng arrived from the Swiss headquarters. finance and logistics. working 24 hours a day. Kampos had been working in the production of SIG Combibloc in Germany for over 15 years. and to learn as much about the Supply Chain Management of SIG Combibloc as possible since time was critical. The SCM functions were grouped with other functions (e. all the adjustments that had to be made for the different customers. Some requested a different carton and aluminum thickness. one for each color present in the design. -5- . i. Most of this were pre-printed rolls or the cut cartons before they were folded and sealed together. Appendix G provides an illustration of the composition of an aseptic carton as produced by SIG Combibloc. He felt that within the specific Supply Chain Management process they had to put efforts into the logistics processes as a whole. Even his intransfer inventory was largely determined by the production planner who planned the production order and utilization of the lines in the plant. Mr. Appendix H illustrates the production process of carton sleeves and filling process. they would not achieve any major cost reductions. etc. Streng asked about the amount and the disposition of raw material and finished goods he was surprised to get to know that the plant managers monitored the inventory levels to benchmark against other plants but did not have any influence on their disposition. Mr. Each design had a set of print cylinders.SIG – Supply Chain Innovations first melted and then applied in a liquid stream to the carton from both sides. Kampos explained that the different colors were applied to the material in individual printing steps. When Mr. These cylinders were a unique set that had to be produced by a specialist to engrave the shapes into the chrome surface. but the truth was with the high number of small orders they received. and forces from the inside. Streng had some other issues on the agenda as well. Kampos noted that it often took more than six weeks for a new design to start production because the cylinders were not delivered earlier. In the final production step. He showed him all the little steps in the production process. Streng with an excellent impression. Kampos. And then the production planners gave him regular production plans where the many orders consisted only of single roll lot sizes. Kampos regarded set-up times as substantial. purchasing. he had to store it. ensuring that the carton could withstand both forces from the outside. On the top of his list was the point of inventory management. all the machines. corroding effects of the contained ingredients. the carton was folded and sealed together to become the sleeve that was the final product to be delivered to their customers. finally resulting in the design the customer had ordered. since the variety of sizes and shapes that the customers requested was significant. He explained that with the inputs from planning. the rolls of the thus prepared carton received its print. printing. like physical impact. as they were often taking more than thirty minutes to change from one design to the next. Of course the main changes in the production set-up were comprised of the printing cylinder changes and the set-ups for the creasing and cutting machines. Before leaving the plant.e. the sleeves were packed into cartons and stacked on pallets. The whole place had left Mr. If purchasing ordered supply. The actual production sometimes took less time than the set-up! In the past they had undertaken numerous improvement measures to decrease set-up time. The warehouses at the plant were also part of the responsibility of Mr. In the next hall. or different characteristics of the PE layer. and thereby also include warehousing into the consideration. and he had to leave the finished pallets in the warehouse until the sales people directed to ship them. The noise coming out of the next room showed Streng that this had to be the place where the rolls were creased and cut into their final shape. Nevertheless. and sales. Kampos surely knew what he was talking about. their own scope of possible actions in this field was more or less equal to zero. and Mr. before the final cylinders could be produced and sometimes the customer demanded additional reprocessing. Streng thought about the next team member to meet. Streng asked about the procurement of the printing cylinders. Mr. his situation was quite simple: He felt that in many cases next to price negotiations. Purchasing Manager Coming home to Neuhausen. and foodstuff etc. he pointed out that most of his work went into suppliers of the three main resources. These negotiations were rather difficult. As Mr. And in comparison to other industries. The Aluminum market. according to the shortterm call-offs. He scheduled a meeting with one of the Purchasing Managers to discuss the sourcing processes in place at SIG Combibloc. Anyway. and they mostly supplied much bigger volumes to other industries. several times a day they were supplying SIG Combibloc’s plants with carton. When Mr. where they stored all carton for the region. The next week. in recent years he had managed to get a system in place where at least the carton was supplied to production sites in Germany on “Just In Time” basis. and PE. Lead times still aggregated to as much as two months and appropriate levels of aluminum stock had to be kept at each production site. SIG Combibloc would then order proof prints from the cylinder manufacturers. carton. However. The number of key suppliers was relative small. the situation for aluminum was still unsatisfactory. it did not look much better. SIG Combibloc did not buy significant volumes at all. Streng asked about the lead time of printing cylinder deliveries Mr. he met Mr. Molger who told him about his work. a clear answer became complicated to find because the process largely varied on a case-bycase basis. The customers only defined the design specifications. duration of the contract. Molger just negotiated about price. The carton suppliers were the Scandinavian carton giants. he put a lot of efforts on securing safe supply and beneficial supply modalities. His main responsibility heading the purchasing for production material was to agree on framework agreements with the suppliers. SIG Combibloc would factually buy the carton only in the moment that the trucks physically reached their incoming warehouse in the plant (consignment stock). was huge. When Mr. In order to achieve this. the volumes Molger was negotiating on were more than insignificant. Despite SIG Combibloc only had one production slot per month. the suppliers operated a local warehouse.SIG – Supply Chain Innovations Andreas Molger. And with PE the situation was no different. and supplied only by few big players. Compared to these. books). Molger informed him that there was no constant monitoring in place. like to printing companies (newspapers. as with most raw metals. magazines. quality. On the aluminum side. as lead times fluctuated due to various factors such as correction -6- . Main suppliers were chemical and oil processing companies and their daily throughput rather targeted the industrial mass market where SIG Combibloc’s demand was not significant. one by SIG Combibloc and one by the customer. etc. what was he supposed to do? He could only bundle all the volume to achieve quantity effects but apart from this his options were rather limited. Then. And in principle. which had to be specified by the local operations depending on their specific needs. Whereas PE was supplied daily and stored in silos to allow for constant input into the production. Usually these included multiple deliveries during the year. Some of the manufacturers already used a faster technology for these prints (IRIS proof) that allowed for shortening the process while others still had to manufacture test cylinders first. namely aluminum. This could significantly prolong the whole process as the proof prints needed to go through two rounds of approval. Molger took every chance to explain. including the monthly supply for SIG Combibloc. David Kühlstein. one of the regional Production Planners. And this meant that in most cases (It was not completely clear to Mr. An additional layer of this problem was the inability of their current SAP software system to distinguish between planned and actual lead times and therefore they could not completely track their delivery performance. April. There was not much room. But these only lead to problems. Kühlstein. Streng (see Appendix I). Mr. Production Planner Especially after the talks with Mr. and old ones getting cancelled or rescheduled to an earlier or later point of time. Streng whether all cases were concerned) the Friday deadline was a real deadline. Kühlstein explained. they had made random samples recently which he would make available to Mr. For him the most important thing was to get all the orders that had been released until that Friday. which he could get from the orders. Of course. Kühlstein explained. This was a highly complex problem. with an enormous amount of variables Kühlstein was controlling. Kampos. In this context. forecasts had been on average 41% inaccurate (see Appendix J). And as Mr. Thus. Kühlstein told Streng. as the orders could only be released for a delivery within a certain week. he fixed an appointment with Ms. no matter what happened. The standard lead time was three weeks. responsible for the production planning of that plant. When the product would be produced exactly was not a key factor. Christa April. He followed a strict weekly routine in order to keep processes at their optimum. In his office. for normal orders this meant that an order could be processed 15 days later. April -7- . And of course this was a critical game. who was the Key Account Manager for one of SIG Combibloc’s main customers. For this reason. produced within the next week. production planning also used the monthly forecasts provided by Sales to plan material and capacities. Kühlstein explained his work to Mr. In many cases this was very difficult to accept for those responsible for the production as frequent set ups were not necessarily optimal from a pure production point of view. In the past 12 months. the market. Therefore. but in case of emergency he would make it possible to deliver within just three days. as he had to get all the orders done that the sales colleagues had placed. How was he supposed to run “his” lines at 100% utilization while maintaining the flexibility to change any lot at any point of time? All this made his work unpredictable and tiresome. he had to make clear cuts and sometimes make a stand against sales or production.SIG – Supply Chain Innovations loops. meaning no changes in the production schedules in the next 7 days were possible. a major German-based producer of juices and other beverages. new orders coming in. Theodore Streng was very keen on meeting the next team colleague. Key Account Manager Following his talks with the Production Planner. In general. the Key Account Managers and the Sales Administration which managed the order intake were not easy to satisfy. as he emphasized strongly. if it arrived on a Friday afternoon and was in the next week scheduled for the following Friday to be produced. Due to their customer focus they had changes. But for Kühlstein it was impossible to avoid. he flew to one of the plants again to meet with Mr. as they were producing 24 hours 7 days a week. Kühlstein was readily explaining. Theodore Streng returned to headquarters. each Wednesday he had to define and on Friday he had to fix an exact production schedule. Streng. where he decided for the following week which product for which customer they would produce at which line. and every hour of down time was foregone revenue. His next step was clear: He had to get more information from the downstream side of the supply chain. Mr. Ms. SIG – Supply Chain Innovations had been responsible for this customer for the last 5 years. The management had identified Coca Cola as the lead customer as they did not only provide a strong brand name for future projects but were also one of the few large customers that already had a corporate planning system in place. the pressure on Ms. Naturally forecasts were inaccurate. and chances that the customer would actually stop buying were rather marginal. she said. April came from the retailers and discounters. the retailers had an extremely strong position. Aldi. Not even her client knew what they had to produce in the following weeks. If this sometimes meant that the Planning department had to change their schedule. but if that made her customers go bankrupt. she also had to react as quickly as possible so that her client could continue his business. her last forecasts had an accuracy of almost 95%. it is important to understand the German retail industry (see Appendix K). These discounters procured huge volumes. and often made up 70 or 80% of the total business of the food producers. If the suppliers could not deliver in time. which would cause him to place an even higher order with SIG Combibloc.Coca Cola Project On Theodore Streng’s quest to identify leads on how to modify the established system he had a closer look on the results of a recent pilot project with Coca Cola. business was sometimes terminated immediately. Even though SIG Combibloc had a quite strong position in the market. which she thought was more than sufficient (see Appendix M). of course. and by today were supplying three plants. The colleagues in Production Planning just did not understand this element of her job. Had Coca Cola until now just been the producer of soft drinks in his mind. and Mr. April’s business negotiations had. Streng was hoping to get some new insights from her perspective. This situation explained much of the nature that Ms. he learned that the popular Cappy Juice brand belonged to Coca Cola. Talking a bit more about details. Due to the unstable demand and low market powers of her customer (see Appendix L). April how tough and mean his own clients were. Pilot . Her client often spent hours telling Ms. Of course that was nice. In recent years. In contrast to other -8- . discount supermarkets like Lidl. April explained how business with the client was characterized by his difficulties in the market and the seasonal demand for beverages. right? But she often had the feeling that the production people did not even bother to try to understand this. that was a modest price to pay. she was to support her clients to do their business as well as possible. how they had started to supply only one of his production facilities with SIG Combibloc filling machines and the corresponding sleeves. her client just passed it along the chain. and Ms. too. and in full warehouses not only at their customer. April had heard from her colleagues that some producers actually wanted SIG Combibloc to guarantee large safety stocks in order to absolutely avoid stock-outs. April emphasized. Ms. They just wanted big lot sizes. The SIG Combibloc customer would suddenly be faced with a huge order from one of his retail clients. And in any way. with rising opportunities for more business in the future. bringing the producer in a situation where his existence was seriously endangered. so how was she supposed to know. The client looked for safety buffers. or Plus had grown immensely and led to a consolidation unheard of before. April said. resulting in highest demand uncertainty. Ms. More than all. Flexibility and delivered speed was a key factor for her customers. but also with SIG Combibloc. On that basis. Ms. but in the end they were merely educated guesses anyway. She started off by showing him how business with her client had steadily grown in the last years. and she would continue to fight for that. SIG Combibloc would not benefit either. and full capacity utilization. On the other hand he was aware that SIG Combibloc’s supplier management processes could be streamlined and the origin for the bullwhip effect was on the customer side. and work back towards the supplier on the base of a CPFR system and a newly designed production trigger mechanism. Weekly orders were processed manually and to make it even worse. After the project had been running for some time its successes were staggering: the major improvements in the production cycle planning (automation) translated into much higher capacity utilization. inside of SIG Combibloc every batch order needed to be split up into individual orders for sleeves and spouts on which basis each line of businesses compiled production schedules and delivery schemes. The underlying newly created IT system was called “e-Sig”. but seamlessly on the basis of Coca Cola’s current stock levels. In the new system. The pilot system had to be modified for roll-out to other customers and the rest of the organization was still following the old rules and he wondered how he could initiate a transformation process within the organization on a large scale? Benchmark Report When Theodore Streng got appointed to lead SIG Combibloc’s SCM. early definition of specifications and rules as well as an efficient project management. the whole process would not be triggered by Coca Cola’s order. the implementation of collaborative forecasting and replenishment (CPFR). the joint strategy merely consisted of batch processes.e. Theodore Streng was impressed by the results that had been achieved and at the same time was surprised that the project was initiated by SIG Combibloc itself who in this context was the supplier and not the customer. Theodore Streng thought that there was still a long way to go for additional improvements and this solution was so far treated as a stand alone project. reduction of joint throughput times. IT sophistication reached as far as using telephones and fax machines. it was the natural step to start on this side of the supply chain. Hence. In a workshop. reduced safety stocks and shortened lead times. Coca Cola had benefit by the reduced lead times and by driving down safety stock of packaging material and spouts by as much as 50% and at the same time achieved an even better service level (i. These data allowed the e-SIG tool to generate production proposals for SIG Combibloc sales that would align the whole supply chain to the anticipated demand of Coca Cola. Coca Cola had established a sophisticated medium and long term planning tool due to their strong brand recognition and their global standards.SIG – Supply Chain Innovations juice producers. less stock outs). It was clear to them that the quality of the packaging material was one of the key strengths of SIG -9- . which employed powerful middleware to connect all corporate legacy systems and enable smooth information flow. Although this project seemed to be a major success. he discussed with his team about the competitors and their respective technologies. This additional transparency allowed SIG Combibloc to trigger actions way ahead of the time of the former order placement of Coca Cola. Coca Cola and SIG Combibloc developed a joint strategy and joint goals among which scrapping of all manual process steps. minimization of the bullwhip effect and the reduction of inventory at Coca Cola (safety stock) by as much as 40% without increasing the likelihood of stock outs. establishment of a joint IT basis. At the time of project initiation. 6 weeks production planning and 52 weeks forecast. Critical success factors were the close collaboration. Top management strongly supported the Coca Cola case. there was no turning back. . SIG Combibloc and Tetra Pak placed very similar. Theodore Streng read over the key aspects of his presentation again. It became clear that the key to success was a completely redesigned SCM strategy on the basis of the Coca Cola pilot project. The results of this benchmark study spoke a clear language and basically revealed three major points: Over the range of criteria. they referred to a recent benchmark study on customer satisfaction of SIG Combibloc vis-à-vis Tetra Pak (see Appendix N). With the integrated CPFR system SIG Combibloc had an excellent basis to work closer with the cylinder suppliers to develop and improve printing designs and deliver additional value for the customer. These two criteria were the speed of implementation of a new printing design and the time period from order to delivery. What did they value with the competitors that SIG Combibloc could not deliver to that extent? In order to find that out. He knew that this project would be the most complex challenge that he and his team ever faced and it would take months if not years to fully transform the company and implement this strategy of which he knew was the major success factor. Theodore Streng thought back to his interviews with the team and to what he had just learned about the key success factors and the effects of the Coca Cola pilot project.SIG – Supply Chain Innovations Combibloc. But was it really worth the effort? His team knocked on his door to join him for the executive committee meeting.10 - . but most of the large ones had filling machines of Tetra Pak as well. but the changes for the internal organization of SIG Combibloc would be extreme. This new e-SIG system allowed SIG Combibloc to initiate actions when Coca Cola was not even thinking about placing an order and thereby dramatically reduced lead time for the customer. From that point on. In most areas the performance of both SIG Combibloc and Tetra Pak was already very good and left little room for improvements. Strengths and weaknesses were very much aligned. should the e-SIG model not only be a stand alone project but the general mode of operations. The scope of their mission would grow to not only convince their colleagues but also to get SIG Combibloc’s customers and suppliers to work on this new strategy together. After some intensive weeks of preparation with the team. Just two criteria left room for improvement for both and revealed SIG Combibloc’s perceived performance to be much weaker than Tetra Pak’s and hence allowed for differentiation. Customers valued this. 11 - .Coating Molding x Can CanMaking SIG Corpoplast SIG Simonazzi SIG Alfa SIG Moldtec / SIG Ryka SIG Manzini / Comaco SIG Cantec Source: SIG Intern .SIG – Supply Chain Innovations APPENDIX Appendix A: SIG Combibloc Overview Product Range Packages Fitments Filling machines Applicators Source: SIG Combibloc Intern Appendix B: SIG Beverages Complete lines Product Processing Sterilizing Glass Depalletizing Rinsing Filling Capping Labelling Inspecting Palletizing PET MoldMaking Blow. Units 2001 SIG Combibloc North America 5% SIG Combibloc Asia 16% SIG Combibloc Eastern Europe 18% SIG Combibloc Western Europe 61% Source: SIG Combibloc Intern .12 - .SIG – Supply Chain Innovations Appendix C: Overview SIG Combibloc Locations Worldwide Source: SIG Combibloc Intern Appendix D: Sales per region in Mio. SIG – Supply Chain Innovations Appendix E: Extract of SIG Group Income Statement 2001 FY 01 / mn EUR Net sales Operating Income Raw materials and supplies Personnel costs Other operating expenses Operational financial income from third parties EBITDA EBITA EBIT SIG Group SIG Combibloc 1589 854 1654 907 708 442 315 0 189 78 60 393 167 162 -2 187 103 103 SIG Pack SIG Beverages 284 332 298 345 109 115 63 -1 12 1 0 169 101 63 -2 14 6 -11 Other 142 136 58 53 29 0 -4 -12 -12 Corporate 0 18 0 6 26 1 -15 -15 -15 Eliminations -23 -50 -21 0 -28 4 -5 -5 -5 Source: SIG Annual Report 2001 Appendix F: SIG Combibloc Organizational Structure 2002 SIG Combibloc International AG Neuhausen. Switzerland SIG Combibloc Systems GmbH (Filler Production. Germany SIG Combibloc Weastern Europe (CBWE – Western Europe. GB SIG Combibloc Eastern Europe (CBEE – Eastern Europe) Saalfelden. South America) Linnich.13 - . Germany SIG allCap AG (Cap Systems) Neuhausen. Austria SIG Combibloc America (CBAM – NAFTA) Columbus. R&D) Neuss. Switzerland SIG IT GmbH (Information Technology) Linnich. Thailand Source: SIG Combibloc Intern . USA SIG Combibloc Asia (CBAS – Asia) Bangkok. Germany SIG Combibloc United Kingdom (CBUK – Geat Britain) Houghton-Le-Spring. SIG – Supply Chain Innovations Appendix G: Composition Aseptic Carton Board Polyethylene Aluminium 75% 21% 4% Polyethylene (liquid barrier) Aluminium (aroma and light protection) Polyethylene (liquid barrier) Board (carrier material) Polyethylene (liquid barrier) Only 28.14 - .5 g of packaging protect a content of 1 litre Source: SIG Combibloc Intern . 15 - .SIG – Supply Chain Innovations Appendix H: The Aseptic System Sleeve Production Coating Printing Laminating Creasing/ Cutting Longitudinal seam Shipment Paperboard PE AL PE PE Filling Process 1 2 3 4 5 6 7 8 9 10 11 12 Source: SIG Combibloc Intern . 000 45.000 AC 70.000 15.000 6.000 8.000 5.000 14.000 50.000 80.000 35.000 70.000 15.000 80.000 40.000 15.5 Liter Average FC 100.500 35.000 14.500 3.000 10.000 10.000 Inaccuracy 14% 0% 7% 14% 9% 12% 25% 20% 23% 0% 0% 0% FC 60.000 0 15.5 Liter Average 1 Liter 0.000 Inaccuracy 17% 100% 58% 25% 17% 21% 100% 233% 167% 0% 0% 0% FC 60.000 15.000 5.000 15.Aggregation of inaccuracies by calculating the average 41% Source: Invented figures imitating the actual trends at SIG Combibloc .000 50.000 10.000 5.000 5.000 5.000 15.000 5.000 3.000 Inaccuracy 0% 25% 13% 0% 50% 25% 57% 55% 56% 40% 40% 40% FC 100.000 15.000 15.000 AC 90.000 120.500 Inaccuracy 7% 25% 16% 33% 25% 29% 0% 20% 10% 14% 14% 14% FC 60.000 20.000 5.000 60.000 5.000 40.000 15.000 15.000 15.000 AC 70.000 50.000 15.000 30.000 17.000 10.000 80.000 30.000 20.000 15.000 15.000 AC 65.000 10.000 0 40.000 10.000 30.500 2.000 0 25.000 20.000 15.000 AC 60.000 Inaccuracy 33% 0% 17% 50% 25% 38% 25% 233% 129% 38% 38% 38% FC 50.000 10.000 45.000 25.000 13.000 40.000 5.000 0 50.000 15.000 50.000 AC 120.000 5.000 0 50.Inaccuracy as ratio FC/AC .000 50.000 Inaccuracy 17% 50% 33% 25% 0% 13% 45% 44% 45% 3% 50% 27% FC 80.000 27.000 20.000 8.000 5.000 0 50.000 75.000 50.000 4.000 5.000 5.000 20.000 30.000 AC 80.000 5.000 15.000 13.000 60.000 0 40.000 10.000 20.000 10.000 50.000 5.000 10.000 5.000 15.000 70.000 15.000 45.000 AC 100.000 20.000 20.000 Inaccuracy 14% 0% 7% 33% 0% 17% 25% 13% 19% 13% 13% 13% Inaccuracy Widget GmbH 25% Inaccuracy Felengi AG 25% Inaccuracy milky 73% Inaccuracy juicy 42% Jan 00 Feb 00 Mrz 00 Apr 00 Mai 00 Jun 00 Jul 00 Aug 00 Sep 00 Okt 00 Nov 00 Dez 00 Overall inaccuracy: .000 25.SIG – Supply Chain Innovations Appendix I: Lead Time (in days) Order # Initial order intake 2 2 1 2 3 2 2 1 2 3 Proof production 7 8 13 10 12 9 14 7 8 10 Correction loop SIG Customer Order processing 1 1 2 1 1 2 2 2 1 3 Cylinder Cylinder Cylinder Quality Carton production approval delivery assurance production 10 10 10 12 10 10 10 10 10 13 1 1 1 1 1 1 1 1 1 2 3 3 3 4 3 3 4 3 3 3 1 1 1 1 1 1 1 1 1 2 1 4 5 2 3 1 5 5 4 5 1 2 3 4 5 6 7 8 9 10 No No No No No Yes No No No Yes No Yes Yes No Yes Yes No Yes Yes Yes Carton Delivery to customer 7 9 2 2 13 9 3 5 16 24 Total lead time (including time for correction loops) 33 42 45 35 48 48 42 39 56 76 Source: Invented figures imitating the actual trends at SIG Combibloc Appendix J: Forecast Measurement David Kühlstein PLANT 1 Customer widget GmbH Felengi AG milky juicy Product 1 Liter 0.000 60.000 Inaccuracy 11% 20% 16% 50% 11% 31% 50% 38% 44% 33% 33% 33% FC 80.000 5.000 AC 75.000 Inaccuracy 14% 0% 7% 29% 9% 19% 57% 30% 44% 50% 50% 50% FC 80.000 80.000 15.000 15.000 15.000 35.000 35.000 20.000 20.000 AC 50.000 15.200 40.000 20.000 20.5 Liter Average 1 Liter 0.000 5.000 15.000 50.000 15.500 90.000 30.000 15.000 100.000 AC 60.500 17.000 15.000 0 60.000 5.000 15.000 5.500 Inaccuracy 100% 0% 50% 100% 0% 50% 43% 400% 221% 257% 43% 150% FC 40.000 4.AC: Actual sales .000 5.500 30.000 Inaccuracy 0% 50% 25% 71% 4% 38% 63% 75% 69% 33% 33% 33% FC 100.000 25.500 30.000 0 60.000 45.000 4.000 25.000 15.5 Liter Average 1 Liter 0.000 40.000 50.000 25.500 20.000 12.000 15.16 - .000 30.000 5.000 5.000 AC 70.000 5.000 5.000 15.000 15.000 25.000 5.000 10.000 5.000 15.FC: Forecast .000 Inaccuracy 8% 100% 54% 17% 0% 8% 50% 50% 50% 100% 100% 100% FC 80. 5 1.500 14.000 12.5 1.539 8.000 Q1/97 0 140.000 25.000 27.5 1.000 75.000 85.000 175.000 20.500 22. O: 1% Lekkerland-Tabaccoland German Schlecker Dohle Group German German Wal-Mart U.000 200.000 17.500 Q1/99 0 160.000 Q3/95 0 150.500 80.000 12.000 17.5 1.000 Q3/97 0 190.500 17.000 Q3/99 0 265.000 12.500 50.0 Widget Widget Fe lengi Fe lengi milky milky juicy juicy Source: Invented figures imitating the actual trends at SIG Combibloc .000 50.000 12.0 0.0 0.17 - .000 90.5 1.500 50.5 1. D: 45%.0 0.000 160.000 17.000 35.000 30.000 60.500 18.000 75.000 70.000 45.000 65.5 1.500 17.000 70.500 120.000 120.0 Widget Widget Fe lengi Fe lengi milky milky juicy juicy Q1/95 0 120.0 0.000 30.0 0.S. D: 51%. D: 40%.500 Q2/98 0 185.0 Widget Widget Fe lengi Fe lengi milky milky juicy juicy Product 0.0 0.0 0. O: 12% 69% 83% 81% 80% 62% 92% 20% 97% 84% H: 80%.000 30.000 97. CC:20%.000 35.958 1.442 19.000 60.000 25.000 35.500 90.500 130.000 70.000 Q4/96 0 157.000 18.000 105.500 95.884 14.000 12.000 95.000 15.500 135.000 35. CC: 42% O: 100% H: 2%.000 60.000 95. O: 20% D: 100% H: 46%.000 35.5 1. S: 39%.000 13.000 50.000 85.000 25.500 Product 0.622 25.000 17.500 Q1/96 0 135.000 32.000 13.000 110.000 15. 2.000 25.000 20.000 50.000 14.000 18.000 60. O: 98% H:82%.764 6.500 27. CC: 3% S: 20%.0 0. D: 16%.5 1.000 Q3/98 0 220.000 17.500 Q1/98 0 150.000 25.000 65.000 90.000 55.000 65.500 100.000 55.463 7.000 13.SIG – Supply Chain Innovations Appendix K: The Top Ranked Retail Stores in Germany (2002 in Mio €) Company Metro Group Rewe Group Edeka/AVA Group Aldi Group Schwarz Group Tengelmann Group SPAR Group Ownership German/Swiss German German German German German French Gross Sales Food Receipts 32.000 13.177 25.000 60.000 Q2/95 0 145.5 1.750 105.000 95.250 13.000 15.000 Q4/99 0 207.000 15.000 40.000 92.000 40.000 70.000 70.875 1.000 Q4/98 0 180.000 55.500 17.000 40.789 7.000 14.922 20.000 100.000 100.000 32.500 175.000 85.000 30.000 102.425 Percent from Food Turnover by Type H: 37%.000 35.000 Q4/95 0 140.438 50% H:100% H = Hypermarkets S = Supermarkets D = Discounter CC = Cash & Carry O = Other Source: German Retail Food Sector Report 2003 by Gain Report (all figures are in US) Appendix L: Quarterly Sales Data Product 0.150 12.000 Q3/96 0 170.000 Q2/96 0 155.200 2.000 35.022 28.5 1.000 75.000 35.500 92.000 14.000 28.170 5.000 25.635 20.000 Q4/97 0 165.000 50.500 32.000 75.0 0.000 40.000 65.5 1.000 80.000 22.035 2. O: 45% H:18%.629 5.000 20.000 Q2/97 0 170. S: 17%. O:43% 45% H: 6%. CC: 27%.000 20.000 14.000 Q2/99 0 205. 18 - .SIG – Introduction of Supply Chain Innovation Processes Appendix M: Forecast Measurement Christa April Source: Invented figures imitating the actual trends at SIG Combibloc . quality of print.SIG – Introduction of Supply Chain Innovation Processes Appendix N: Benchmark Report 2002: Results of the Customer Survey (Figures modified by weighted factor) • Quality of packaging material / filled packages (e. leakage rate) • Information about / transparency of status of delivery* • Supplier reliability / observance of delivery dates for packaging material (right quantity/right time) • In time delivery of shipping documents* Tetra Pak SIG Combibloc • Condition/quality of delivered packaging material* • Speed of implementation of a new printing design • Time period from order to delivery* 0% 20% 40% 60% 80% 100% % of answers: very good Source: SIG Combibloc Intern .19 - .g. stability of filled package.