Heineken innovates with central planning tools

Heineken is mainly decentralized, but at the corporate level, there is a growing need for supply chain planning at the central level. The world’s second-largest brewer uses AIMMS’ software platform for this purpose. During Webinar Wednesday, Arjan van Diepen and Jasper Blaas explained how Heineken uses it to build new applications that exceed the capabilities of local planning tools. ‘This allows us to generate additional value that we are currently missing.’

By Marcel te Lindert

Heineken has 160 breweries worldwide, grouped into around 80 operating companies (opcos). Traditionally, each opco has operated relatively autonomously, but there is a growing need within Heineken to make better use of scale. ‘On the one hand, we are very decentralized. We want to be close to the market so that we get a good understanding of what consumers’ needs are. At the same time, we want to use our global network more efficiently through harmonization, standardization and sometimes centralization. Especially in the area of supply chain planning, we see many advantages in harmonization and standardization of working methods. The technology for this is now available,’ stated Arjan van Diepen, head of global strategic planning at Heineken.

45 different ERP systems

Harmonization and standardization are easier said than done. Heineken has 45 different ERP systems worldwide, all of which must eventually be replaced by SAP. ‘We want to keep that ERP system as lean as possible, and it only serves to support supply chain and finance,’ said Jasper Blaas, planning capability manager at Heineken. ‘Around it, we build business platforms: building blocks in which most functional activities occur. In the field of supply chain planning, we have been doing this for quite some time. We design standard templates for various planning tools, which we then implement opco by opco at local level.’

There is also a growing need within Heineken to add additional planning functionality. This will be housed in what Blaas calls digital products. ‘These are products that allow us to experiment and innovate, especially in areas where we can differentiate ourselves from the competition. There is growing pressure to centralize planning processes, but that is difficult because our planning tools are implemented at local level. New digital products can offer a solution. With these, we can generate additional value, which we are currently missing because we work with different tools.’

Tactical material planning

A large number of digital products are built on the AIMMS software platform. One example concerns tactical material planning, a topic that led to recurring discussions within Heineken. How did planners know for sure that they were allocating volumes correctly among suppliers? And what forecast should those suppliers then receive? ‘The breakthrough came when a trainee developed a new way of planning packaging materials,’ Blaas revealed. ‘In doing so, we no longer consider the bill of materials to be fixed. Instead, we use marketing information as input and keep the bill of materials variable.’

According to Blaas, if marketing comes up with the plan to modify the design of labels or boxes, planners can now calculate the best time to do that. In doing so, they look at marketing’s wishes, but also the delivery date of the modified designs, stock levels of existing packaging materials and suppliers’ production capacity. ‘Three years ago, we decided to deploy this planning method in several markets. We built an application based on the AIMMS platform that we can implement on top of existing ERP systems and planning tools. Ten opcos are now using it. Those are currently handling 1,500 design changes.’

Empty beer bottles

Heineken uses a similar solution to optimize the supply of empty beer bottles at a central level. The brewer receives bottles from multiple suppliers, with purchasing having agreed on the volumes each supplier is allocated. ‘In the short term, we obviously want to respond as well as possible to the current stock levels and production capacity of those suppliers, but in the long term, we want the volumes to be distributed in accordance with the agreements procurement has made,’ explained Blaas. ‘Previously, we used Excel for that. This new application saves us a lot of time. An additional advantage is that suppliers no longer have to call ten different planners from ten different opco’s, but have a central planner as their point of contact. He has the overview and knows what each opco needs.’

When Heineken closed several breweries in Europe three years ago, there was a renewed need to centralize certain planning issues. ‘The closure led to more flows, interaction, and dynamics between breweries. We could no longer agree as before for the whole year that France, for example, had to step in if Italy lacked capacity. To make better decisions in these kinds of situations, we need a tool that gives us insight at a central level into the capacity of all breweries and all flows between them. That allows us to use our network in Europe more efficiently.’

Strategic planning issues

Heineken uses AIMMS’ platform not only for tactical but also strategic planning. Based on the platform, the brewer has built applications for determining the optimal location of a new brewery, for example. Van Diepen: ‘If, as in a growth market like Mexico, we are short of production capacity, we can use this to calculate the best location and when the brewery should be operational. We use the application not only to determine the location, but also the new brewery’s configuration, capacity, and capabilities. We also analyse sensitivity. Is this still the best choice if costs suddenly increase or demand drops drastically?’

Van Diepen mentioned more applications, such as supplier or distribution network optimization. ‘We used to calculate perhaps once every three or five years whether our distribution network was still adequate and whether we needed to open or close warehouses somewhere. Now that volatility in the market is increasing, we are moving towards quarterly. Not that we decide to open or close warehouses every quarter, but it may make sense to supply certain customers from other warehouses.’

CO2 neutral in 2040

A relatively new topic is sustainability. Heineken aims to be completely carbon-neutral by 2040. Scope 1 and Scope 2 emissions should be reduced to zero by 2030. ‘Then it is relevant to know which breweries are part of our future network. Those are the breweries we need to make CO2 neutral,’ Van Diepen said. ‘We also take into account the availability of water. We have breweries in areas where that availability is under pressure. Is it then justifiable to expand the capacity of those breweries? And what if a brewery is shut down because of a water shortage? With AIMMS’ platform, we can analyse the impact on the supply chain and how to guard against water shortages.’