Supply Excellence — Continuous Improvement, Nordic Style

Continuous Improvement, Nordic Style

May 9th, 2007 · by Tim Minahan · No Comments · Supply Management 2.0 Forum, best practices, supplier management, supply management

Yesterday we examined the foundations of UPM-Kymmene’s supply management transformation initiative. Launched in earnest in 2001, the ongoing effort is expected to deliver €300 million in supply cost savings. Much of that supply savings will come from waste reduction and continuous improvement projects.

Speaking to a sold out crowd at the Supply Management 2.0 Forum in Stockholm, UPM Global Sourcing Development Director Kari Tulisalo reported that his company has already identified more than 560 unique improvement ideas, which are expected to generate more than €500 million in savings over the next few years.

Improvement concepts range from vendor managed inventory to shifting lotting strategies and buying patterns to use of alternative materials. UPM generates improvement ideas based on deep supply market and process analysis — what Tulsalo calls, “reviewing the fact base” - enabling category managers to understand cost drivers and market and process innovations. Suppliers are encouraged to contribute their own cost reduction and improvement ideas through a structured electronic RFI process enabled by UPM’s e-sourcing platform.

Suggested ideas undergo a feasibility analysis, which includes an estimation of the resources and time frame required to implement the concept as well as the potential savings it could yield. Implementation plans are established in UPM’s supplier management system, with unique tasks assigned to both internal stakeholders and suppliers. The system tracks project milestones and alerts of delayed or at risk tasks.

While UPM’s supply management platform functions as the system of record for improvement plans and project status, the real work takes place offline. UPM has kicked off many of these improvement plans through more than 350 cross-functional team meetings and over 200 supplier workshops.

This continuous improvement initiative has been instrumental in helping UPM make supply management and strategic, collaborative, and enterprise-wide process.

“This is truly a cross-functional effort,” said Tulisalo. “We have more than 550 people from numerous functional groups responsible for improvement projects implementation steps. Even our customers are involved in some projects.”

UPM’s focus on continuous improvement and supplier development offers a foundation for stable supply and sustained success that go way beyond mere sourcing savings. In an increasingly global and unstable market, enterprises would be wise to embrace adopt similar approaches to assure both near-term savings and long-term success.

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