Change of organizational structure and replenishment processes for increased customer service and profitability

Abstract: This case study is based on Company XY's Paper division and aims to present a new organizational structure and best practices for the processes involved in replenishing. Furthermore, proposals for future actions to be executed by Company XY to increase the customer service and profitability will be proposed. The results of the study will be based on a thorough analysis done on the three mills' and eight sales offices' organizational structures and processes. The analysis has a supply chain management perspective with the aim of increasing the customer service and profitability of Company XY. Company XY is a world leader paper and board producing company with the Paper division having customers located worldwide and paper producing mills as well as board producing plants located in Europe. Company X and Company Y were two different companies that merged in 2005 which has led to there being three different virgin mills in the Company XY group. At the moment the three mills and eight sales offices all work in different ways and different systems which has led to sub-optimization of the resources available. To increase the customer service and profitability of the Paper division, which the mills and sales offices belong to, a project has started to increase agility, transparency and establish standardized processes. The study is of both a qualitative and quantitative character and is based on a literature study, observations, data and interviews conducted at Company XY. Processes regarding replenishing, information and forecasting at Company XY have been identified as areas where there is room for improvement. Problem areas of the organizational structure that Company XY have today have been identified. Company XY is recommended to adopt a hybrid virtual organizational structure to enable them to reach their goals of being agile, transparent and standardized. This structure will enable Company XY to utilize the knowledge of sales offices to be responsive while still having the central units macro view to enable visibility and therefore be able to divide the resources in a better manner than today. This structure, since it demands common practices, will make Company XY work according to standardized processes which in turn has the effect of reducing misalignment and duplication of work. It is concluded that a centralized unit will be responsible for generating standardized reports to be distributed to mill and sales offices before 2020. After the implementation of SAP this will no longer be part of the central unit's tasks since it will be done by the system, this will decrease the information sharing issues present today. Furthermore, it is concluded that this central unit will be responsible for the allocation distribution therefore preventing the sub optimization of allocation distributions. Moreover, it is suggested that all mills work with allocations to enable more reliable production cycles. Through standardizing the processes so that all the sales offices correct the forecasts on a weekly basis the forecast deviation average can be decreased to 2,45% from 4.98% therefore decreasing the wrongly produced products or non-produced products worth 23 239 042 € a year. It is recommended that the replenishing of service stocks should be done by the sales offices. Suggested effects will be stock out costs to be lowered by 26 686 € a year. By adopting the suggested structure and change of processes it is believed that Company XY can become more agile, transparent and standardized leading them to increase their profitability and customer service.