Südzucker Finds Sweet Spot in Supply Chain Optimization with IBM Solutions

IBM Software
Case Study
Solution Components
Südzucker Finds Sweet
Spot in Supply Chain
Optimization with IBM
Solutions
Highlights
Business Challenge
Südzucker needed to reorganize their
supply chain to respond to major sugar
market regulation changes. They also
needed to add flexibility in this structure
and the associated planning process to
succeed in the sugar market going
forward.
The Solution
The company employed a solution based
on IBM® ILOG® LogicNet Plus® XE to
help meet their goals for a cost-effective,
flexible supply chain.
The benefit
The final solution helped Südzucker
quickly estimate the effects of fluctuating
costs and customer demand on the
supply chain network, improve profitability
with optimal network configuration and
network utilization, and refine production
and distribution planning to optimize the
use of available capacity on an on-going
basis.
Südzucker is Europe’s leading supplier of sugar products and has an
annual revenue of approximately €7 billion. The sugar segment of
Südzucker operates 29 sugar factories and three refineries in 11
European countries and produces 5.4 million tons of sugar. The sugar
is converted into more than 2,000 different products that are
distributed to several thousand customers across Europe each year.
Business Challenge
When the European Union adopted a new market regulation for the
sugar industry in 2006, Südzucker was forced to re-evaluate their entire
supply chain network. On the one hand the company’s ability to export
sugar to world markets became very limited, on the other hand major
sugar deficit areas within the European Union were created. This led to
a much greater focus on sales and distribution. Südzucker also knew
this ruling would give them the ability to enter new sugar markets like
Greece, Italy, Spain and the United Kingdom. Their challenge was to
merge their national supply chain networks to create one integrated
and powerful European supply chain network. The company had
to determine how to modify their supply chain network by adding
new facilities to ensure excellent service but also minimize
transportation costs.
Since Südzucker’s plants make multiple types of products on multiple
production lines, the company’s challenge did not stop at distribution.
“In addition to determining the optimal network for minimizing
transportation costs to our new and existing markets, we also had to
respect the restrictions of production capabilities and capacities at each
existing manufacturing plant and warehouse facility,” said Christoph
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Case Study
Solution Components
“Our ultimate goal was to
create and maintain the
most cost-efficient and
flexible supply chain
network possible, while
continuing to ensure the
same level of superior
customer service … we
have met our goal with
our use of IBM ILOG
LogicNet Plus XE.”
— Christoph Bauer
GBZV Strategic Sales Development
Südzucker AG Mannheim/Ochsenfurt
Bauer, GBZV Strategic Sales Development for Südzucker. Südzucker’s
production and distribution problem became even more complex based
on the seasonality of harvesting and processing the perishable sugar
beets during September through January. Südzucker had to determine
the optimal production and distribution plan that minimized the cost of
logistics and maximized the utilization of conversion and packaging
facilities over the course of the entire year.
“In the past, the company had relied on a manual approach to supply
chain planning, but we knew we needed a more organized, powerful
and professional method for our design and optimization. Our goal was
to create and maintain the most flexible, cost-efficient European supply
chain network, while continuing to ensure the same level of superior
service to our customers.”
The Solution
Südzucker chose IBM ILOG LogicNet Plus XE solution, which is part
of IBM’s Smarter Commerce supply chain solutions. The IBM ILOG
LogicNet Plus XE solution helps organizations optimize their value
chains using powerful modeling capabilities to determine the best
supply chain options while ensuring the needs of the customer are at
the center of their operations.
IBM ILOG LogicNet Plus XE helps Südzucker analyze the
relationships among production, warehousing, transportation and
service requirements. The company can then calculate and fully
understand the trade-offs between different network configurations
against cost and service objectives. All optimized models can be viewed,
compared and exported to tables, graphics and the built-in configurable
report writer for quick and easy professional presentation and in-depth
analysis of all summary and detailed levels of the resultant optimal
network structure and all activities within.
“This software is powerful, yet intuitive and easy to use,” Bauer said.
“We are very pleased with the design and modeling capabilities
available to us and have found an incredible increase in the
transparency of our optimal production and distribution processes.”
The company’s supply chain network optimization process begins each
year during the sugar beet harvest when optimized amounts of refined
sugar production is determined as available for conversion and
packaging or distribution directly to industrial customers. This data is
delivered by another highly customized production solution developed
internally based on IBM ILOG’s CPLEX optimization engine, another
solution within the IBM Smarter Commerce Portfolio. This input is
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•
IBM ILOG LogicNet Plus XE
then combined with demand forecasts from their ERP system,
capabilities per factory, capacities per product and all associated
transportation costs to form the base IBM ILOG LogicNet Plus XE
model of their supply chain.
Once the base model is created and completed annually, Bauer and his
colleague Steffen Lukesch, Head of Business Process Development
Sales, run ad hoc updates in response to major fluctuations in demand
or transportation costs through the course of the year. Additional
what-if scenario analysis is also performed to support one-off capital
investment decisions. For example, LogicNet Plus XE helps them
understand the impact of adding or removing assets anywhere across
their current network. “We use the model for smaller projects too,”
Bauer said. “If the company decides to add a production line, we run
scenarios for different locations, look at logistical costs and recommend
the best capacity and location for it.”
Key Benefits
Transparency: Refine production and distribution planning
IBM ILOG LogicNet Plus XE provides Südzucker with full visibility
into the relationship between production and the supply chain network.
“Since we began using the software we have collected detailed
information on the production capabilities of all of our plants, down to
their production lines and product groups,” Lukesch said. “We have
generated detailed distance and cost matrices between all of our plants,
warehouses and customers. This gives us the ability to create and
analyze multiple optimization scenarios in a very short time. With the
built-in mapping and reporting functions we can clearly say, ‘Now we
really know our network!’”
Flexibility: Estimate effects on supply chain network
With IBM ILOG LogicNet Plus XE, Südzucker can manage business
growth and capital investments by determining where and when new
facilities are needed. “Now that the model is established, we can answer
questions that were difficult to answer before we implemented the
solution, such as ‘Where should we increase or decrease warehouse
space in Italy?’ or ‘Does it make sense from a logistics point of view to
add or remove a production line in the north of France or in the south
of Germany?’” Bauer said. “And, we can show the management team
detailed graphics and reports that estimate the effects these changes will
have on the entire supply chain.”
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Savings: Improve profitability with optimal network configuration
Südzucker estimates an approximate 10% reduction in supply chain
network costs as a result of the optimization provided by IBM ILOG
LogicNet Plus XE. “We have met our goal of identifying the most
cost-efficient supply chain network, thanks to this software,” Lukesch
concluded.
© Copyright IBM Corporation 2012
IBM Software Group
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Produced in the United States of America
July 2012
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