Making the coffee processing supply chain more flexible

Melitta optimises production, warehousing and logistics in real-time

SAP as the data storage system with an interface to highly flexible fine planning with scenario-based real-time simulation. Coffee manufacturer Melitta visualises and optimizes its resources and schedules along its supply chain with SAP and wayRTS.

Using real-time simulation, coffee-manufacturer Melitta has recently being making its whole supply chain more flexible - from planning, purchasing, roasting and grinding to packing and delivery. A central planning department uses the real-time software wayRTS to control the production of an ever wider range of products. The improved upstream and downstream organisation reduces fixed and process costs as well as capital tie-up in the warehouse.

In spite of the relatively low production depth, the procurement, production and packing processes for coffee are becoming ever more complicated. The market for the most heavily traded commodity (after oil) varies abruptly and without warning: bad weather puts harvest at risk and shipping, investors or intermediary dealers can affect availability and prices. At the same time, customers consistently ask for new mixed trays, display and product variants (coffee pads, capsules, bonus packs etc.), whilst the trend for bean-to-cup coffee machines is also raising demand for “classical” whole beans. In spite of this range of products customers require short delivery times and high flexibility. Melitta in Bremen needs a throughput period of only 12 days for this complexity. And to improve even further, the company is investing in greater flexibility, secure planning and inventories and even more reliable and efficient processes.

"Above all in planning, warehousing and logistics, we have used the wayRTS control software to tighten, bundle and network all of the processes so we have been able to mostly eliminate existing time losses from interface and data inconsistencies," comments Frank Westerhoff, Finance, controlling, IT and procurement director at Melitta Kaffee GmbH, summarising the success of the project. "We now have significantly better control of procurement, quantities, capacities and production. In addition, we also reduced the number of storage and shipment locations from three each to one and modernised our palettizing system. All of this improved dispatch, reduced costs and capital tie-up and increased inventory precision.

Optimised planning system in just six months

In order to achieve the main objective – better ability to plan inventories for raw coffee and packaging film - the Melitta management instigated the "cost leadership" project in spring 2008 and divided this up into 16 sub-projects over the following months. For the "Optimise planning process" sub-project, Melitta appointed consulting company Wassermann AG in December 2008 - using target processes, workshops and specifications.

The Munich-based consultants implemented the wayRTS(Real Time Simulation) planning and control software within six months and extended the functions for SAP MM and PP at Melitta in Bremen. During this time, the software solutions were provided to match the target concept, training was offered, the material number logic was converted to Unicode and superfluous systems were replaced by the new software environment.

The ideally matched interaction between wayRTS and SAP MM/PP provides production order control and scheduling. The raw coffee purchasing functions were moved from a stand-alone solution to integration with SAP MM and PP. The purchase and complex raw coffee ownership transfer, e.g. on the ship, were mapped in standard SAP processes. The requirements from quality assurance functions were also implemented in SAP and activated in good time for going live. In addition to the software for buying the raw coffee, it was also possible to switch off SAP WM.

Project objective: roast, grind and pack with real-time control

"The basis for planning our quantities are the expectations of the Sales Department as to what will be sold," comments Westerhoff, sketching out the reasons for the project. "But the time required to generate the forecasts used to be delayed up to capacity and production planning in Production. Then Excel interfaces that were subject to errors made the smooth planning of raw coffee procurement difficult for Purchasing. This resulted in inconsistent data that caused costly bottlenecks, reworking or cancellations."

In order to tighten such planning processes throughout, Melitta reorganised the IT and software as well as the responsibilities for planning and control. The responsibility for planning and scheduling, which had previously been distributed across the whole company, was now summarised into one central department. This central office has the authority to plan and control all of the production processes.

On the software side, the planning and control processes in production and logistics are supported by the real-time software wayRTS. On the one hand the RTS system integrates itself into the available, partially modernised IT structure. On the other - and this is the great advantage - wayRTS visualises all of the planning processes and order statuses, thus enabling the planning to work through various scenarios.

Work division between SAP and wayRTS

SAP updates or manages the basic and master data (orders, work plans, bills of materials, production orders, orders, order suggestions, inventory re-bookings etc.) and passes them on to wayRTS using an interface. There the production orders, quantity requirements, order suggestions etc. are opened, scheduled, modified and returned to SAP via the same interface. The order suggestions are then converted into orders in SAP. So SAP retains the "overall sovereignty" but is complemented by wayRTS, which offers the planners significantly more functions, transparency and speed. In addition, the consequences of planning decisions can be played through comprehensively before implementation via scenario techniques in wayRTS. The truly ideal decision can always be selected by the planner. "The combination of a transparent depiction, clear scenarios and planning agility improve the whole production, including inventory and capacity management," confirms Westerhoff.

Efficient slimming down using targeted outsourcing

For warehousing/logistics, Melitta reduced warehouses by two including dispatch points and the high-rack storage that was subject to a lot of repairs in order to bundle everything into a single storage location. The whole warehousing and shipment has been provided anyway by an external service provider - there is now a shuttle service between the external warehouse and the plant. The EDI interface required for this between the service provider and Melitta's specific SAP was described, mapped and implemented in technical data terms on SAP by Wassermann AG. In order to further reduce logistics costs, Melitta replaced the ageing palettizing system (4/8 layers) with modern technology for stacking 5/10 palettes. The new palletizing system was also connected to the SAP and wayRTS systems using a triangular interface produced by Wassermann.

Project success: roasting, grinding, packing with real-time planning

The success of the new system is demonstrated by significantly higher transparency for the production processes in the planning department. This was an essential requirement for acceptance of the new software and process changes by the employees.

The EDI connection with the warehouse service provider and integration of rolling sales plans also increase the efficiency and reaction speed in process control. "Whether transparency for open orders, stock shortfalls, scheduling production or planning packaging machines and roasting - with wayRTS we can respond in a flash," underscores Westerhoff.

Key lessons: discipline, good data quality and realism are essential

"Implementing such an integrated planning tool," according to advice from Westerhoff, "requires the necessary discipline of all those involved: without falling back into old behaviours or allowing avoidance solutions to creep in. Acceptance of the system by the employees stands and falls with the reliability of the data." As behaviours that have developed over many years cannot be changed immediately, a software launch and re-structuring this dimension requires thorough training and intensive communication. "Otherwise you overtax your team," clarifies Westerhoff. "If there is also external pressure from unforeseen requirement peaks, the employees can only master the bottlenecks with good support."

The internal IT team must therefore be of an adequate size to penetrate the internal processes and able to cope with such massive change. Above all Westerhoff recommends involving change managers at a very early stage: "If we had done that at the right time, the whole project would have run even more seamlessly. I therefore advise everyone not to struggle on with things that other people can deal with in a much better way. This affects both the (hard) IT side and the soft factors involved in modifying processes."