Established with support from Lotte Industries in 1965, Nongshim is a premier food company in South Korea. They are known for their popular ramen brands such as Shin Ramen, Neoguri, and Chapagetti, as well as snacks and beverages. In addition to their core snack business, Nongshim has expanded to the beverage market with offerings such as mineral water and Welch juice. They are also actively expanding their processed food offerings such as bread and ham. Nongshim has solidified its position as a global company by exporting its products to 80 countries worldwide, including the US, Asia, and Europe.
Project Background & Goals
Nongshim is working towards a major transformation with the goal of becoming "Toyota in the food industry." They are focusing on improving sales, production, purchasing, and logistics through management innovation. The main issue with their current management plan is that sales activities are focused solely on increasing total sales, and there is a lack of collaboration and clear lead management policies with business partners and cooperating companies. This has led to excess inventory, prolonged product distribution times, and difficulty in accurately tracking distribution inventory.
In addition, production plans are frequently changed which leads to unstable supply and demand of materials in terms of delivery time and quality. Logistics management is also a challenge, with insufficient logistics planning and long transportation lead times. Management of comparison between plans and actual results is lacking and distribution costs for each product are not managed promptly and rationally. This leads to frequent loading delays and a high product shortage rate due to transportation delays.
In terms of purchasing management, information management of purchasing standards is inadequate and information sharing with suppliers is incorrect. Standardization and sharing of materials is low, and QCD (Quality, Cost, Delivery) management of purchases is insufficient. This leads to excessive unnecessary materials, frequent delays in the arrival of materials, and shortages of materials. As a result, the ratio of material costs to manufacturing costs is relatively high, which is a significant burden for the company.
Return on Investments
The SCM solution project for agricultural cores aimed to improve replenishment and transportation plans by analyzing demand plans and actual demand, as well as production plans and material inventory at the factory through cooperation between the head office and factory. T³Demand module was used for short-term and medium- to long-term demand forecasting, and T³SupplyNet module was implemented for transportation, factory allocation, and medium- to long-term production plans. The inventory management system, packaging process, employee capabilities, and main material restrictions were also taken into consideration. T³Schedule module was used to manage weekly and daily production plans and semi-finished production plans, with production capacity by production line and employee capabilities being evaluated and optimized.
At Nongshim, reducing distribution lead time and stock shortages were key business metrics. To achieve this, Nongshim used the real-time replenishment planning process provided by the APS system, which allowed for multiple product deliveries per day and ensured sufficient stock availability at each customer location. This eventually led to near 0% stock outs at most key customer sites.