Mondi Shanduka Newsprint: Market leader in South African newsprint paper production

Mondi Shanduka Newsprint (MSN) is a joint venture between Mondi South Africa, a division of Anglo American PLC, and Shanduka Resources. MSN, a R1.1 billion company, produces some 220 000 metric tons of Newsprint quality paper per annum.

With a production plant in Merebank, Durban, and distribution facilities in Johannesburg and Cape Town, MSN is facing increasing pressure to minimise their operating cost base while improving customer service levels.

In 2003, Mondi initiated a project to evaluate and select an advanced supply chain planning tool to support its complex business requirements. A proof of concept project, together with Pebbletree Consulting, was established to evaluate the fit of SAP APO (Advanced Planning and Optimisation) for its planning operations.

The POC proved successful in demonstrating APO`s capability to plan Mondi`s complex requirements, including being able to promise realistic order fulfilment dates to customers using the GATP module. Following this, Mondi initiated a full APO project, implementing Demand Planning (DP), Supply Network Planning (SNP), Production Planning & Detailed Scheduling (PP/DS) and Global Available to Promise (GATP) modules.

Says Jacqui Manktelow, Project manager for Mondi: "Mondi Shanduka Newsprint is in the fortunate position of having a full order book and recognises the need to give customers reliable and credible delivery promises. Estimating these dates, sometimes months into the future, needs to take into consideration production capacity, speed and machine availability as well as distribution lead times. The planning involved is quite complex."

Mondi runs on a global SAP R/3 platform and has made significant investments in SAP`s new dimension applications, including BW, SRM and CRM. Its production planning capabilities had not been enhanced during this time of growth and the current systems had reached maximum effectiveness.

Mondi needed a system to provide the following business benefits to be successful:

* Improve forecasting accuracy
* Integrate forecasting with production planning
* Provide a tactical capacity supply plan
* Provide accurate sales order confirmation dates
* Provide visibility of sales orders within its production planning
* Creation of block plans to minimise unnecessary changeovers

Manktelow says: "We have a stable and established R3 system but the links between the various modules were not in place. The tools are now available to integrate and automate the planning process using mostly unspoken business rules to help solve some of the over demand situations that arise from time to time. We are also fortunate in that Pebbletree Consulting were well experienced in the paper industry and understood the processes well before the start of the proof of concept exercise conducted last year, speeding up development time."

The project, initiated in March 2004, included the implementation of the following SAP APO modules:

* Demand Planning
* Supply Network Planning
* Production Planning & Detailed Scheduling
* Global Available to Promise

The DP module went live in June 2004, and the production planning modules went live this month.

The Demand Planning included collaborative planning across all regions. APO is integrated to the current R/3 system provide an interface between volume forecasting and R/3 SD`s pricing strategies. Account managers have already begun realising benefits from the system, including:

* Better access to information
* Real-time reporting in a user-friendly format
* Alert monitoring

* Transparency between different levels of operation

Supply Network Planning uses the Capable-to-Match module to plan and prioritise customer demand for tactical planning. CTM also generates allocations which are referenced during sales order entry to confirm customer promise dates.

Production Planning & Detailed Scheduling (PPDS) is used to create a production schedule on the paper machines that create Jumbos for winding.

Umesh Sita, Project Manager and Team Leader from Pebbletree, says: "The project with MSN was based on a rapid implementation strategy in order to meet business milestones to go-live within the financial year. When we went live with Demand Planning, MSN already began seeing benefits in the business with account managers taking more responsibility for their forecasting than in the past. The production planning phase has facilitated new processes and concepts for production planning in areas that APO had not even affected yet just based on the enthusiasm and drive within the client to improve its business value."

Thanks to a strong partnership and shared vision between Mondi and Pebbletree, Mondi reached important benefits:

* Integration of demand planning and supply planning via a new sales and operations planning process
* Revised performance measurement targets based on forecast accuracies
* Real-time availability of stock information across the network to plan and re-plan deployment
* Tactical production planning per paper machine, integrated to machine scheduling
* Reduction in total cost of ownership (TCO) due to stabilisation of systems on a common SAP platform

Intangible benefits derived from this project included:

* Awareness of supply chain management principles among key role-players
* Increased communication between planning, sales, production and finance
* Better management and quality of information within the integrated system

During this month, MSN is working on stabilising its business processes. With support from Pebbletree and SAP, it has managed to minimise disruptions to the business and is already implementing modifications to improve the solution.

Sita says: "MSN is now on the road to long-term value realisation in its planning process. Initiatives like this one should never be viewed as a `magic solution` suddenly changing the way planning is done and providing value. MSN realises this and has made driving future value a key performance measure of its planning team. With support from senior management, I am confident that they will continue to be the leaders in South African newsprint paper production."

(Written in co-operation with Mondi Shanduka Newsprint.)