Broad initiative around production and supply chain efficiency for Ahlstrom

Challenge.

Ahlstrom is a high performance fiber-based materials company, partnering with leading businesses around the world to help them stay ahead of competition. Ahlstrom’s products are used in a large variety of everyday applications, such as filters, medical gowns and drapes, diagnostics, wall coverings, flooring and food packaging.

Ahlstrom has 34 manufacturing plants, 31 sales offices and 3.800 employees in 28 countries on six continents (continuing operations). Net sales were approximately 1 BEUR in 2012 (continuing operations). Ahlstrom has been listed on the NASDAQ OMX Helsinki since 2006.

Ahlstrom’s gearing ratio was close to 100% in the beginning of 2009, compared to the target level of 50–80%. Group wide working capital project, SLIM100, was launched. Top-down target was to improve Ahlstrom’s cash flow through improved working capital, an ambitious target of 100 MEUR in 2 years was set. Capacent was selected to bring in our working capital methodology and support the program in order to reach the target.

What we did.

Capacent’s role was to drive the project, conduct required analyses, increase awareness in the organization, facilitate workshops, provide monitoring and other tools and to ensure that project would not lose momentum. The commitment to the projects was terrific throughout the organization.

Approximately 25 local sub-projects were initiated and central activities were managed separately. Targets were set for each sub-project and actions planned based on a detailed current state analysis and cross-functional workshops. The method was fact based, disciplined and number driven. During the local implementation a strong focus was on intensive follow-up, project finalization and closing.

Group wide actions included learning-sharing, task-force based initiatives, guidelines and policies. A lot of effort was directed on progress follow-up through the program office and the Steering Group, thus ensuring improvement across all units and working capital elements. Top management commitment and performance management were two important parts for reaching the ambitious target, working capital was included in incentive programs at all relevant levels in the organization.

The key to success was in optimizing the total value chain, not only parts of it. For example, with suppliers and customers focus was on seeking win-win solutions to optimize inventories, payment times and prices. With inventories, a lot of effort was focused on removing internal inventory inefficiencies, improving processes and the decision making process.

Results.

The target was to release 100 MEUR and increase capital efficiency by 40%. However, the outcome far exceeded the targets! Actual improvement was approximately 50% increase in capital efficiency leading to 150 MEUR Working Capital release by the end of 2010. The gearing ratio on September 30, 2010 was 47.7%.

The most significant aspect is that the results are sustainable: In the end of 2012, the level of working capital by sales in Ahlstrom was even lower than in the end of 2010. Ahlstrom continued operative management of working capital – each project closing included a plan for going forward, working capital part is of KPI’s set, and further optimization is brought through integrated demand-supply chain planning and management.

Do you want to know more?

Please contact Edvard Björkenheim
Telephone: +46 76 001 5801
E-mail: edvard.bjorkenheim@capacent.se