Significant Profit Improvement in a Challenging Market

Norrmejerier is the largest food company in northern Sweden and is owned by 275 dairy farmers. Its products include milk, yogurt, and cheese, with well-known brands such as Norrlogiskt, Fjällfil, Vedum, and Västerbottensost. The company was established in 1971 and primarily serves the Swedish market.

The past few years have been characterized by declining profitability, with 2023 being particularly tumultuous due to significant market challenges following high inflation and consumers' focus on low-price products. At the same time, the company's owners have struggled with continued high costs and rising interest rates, while the compensation to dairy farmers had to be reduced due to decreased consumption and demands for price reductions. The declining volumes have resulted in decreased cost efficiency within the supply chain, as costs have not been reduced at the same rate as the volume. This has led to increased cost per unit and reduced product margins.

Knowit's mission was to develop a clear plan and improvement structure for the key areas within supply chain/operations. Norrmejerier also received help in assessing potentials and drafting prioritized improvement proposals with broken-down activities where responsibilities were clarified within each area. The project was carried out in close cooperation with Norrmejerier, including interviews with key individuals and workshops for early anchoring in the organization.

Based on a detailed cost breakdown, a KPI model was developed for continuous follow-up against set goals for various sub-areas within the organization. This clarified and simplified the structure for reporting and communication within the supply chain.

Knowit also conducted a preliminary study to examine the dairy structure, assessing the effects and consequences of potentially closing the Luleå dairy factory and concentrating all production in Umeå. The work began with dimensioning incoming volumes and assessing future sales developments for various products. This served as input for capacity requirements and necessary adjustments in Umeå and to assess the investment needs. Other important parts of the project included calculating the logistical consequences and impact on transportation costs for both incoming deliveries and customer distribution.

The preliminary study concluded with a recommendation to the board to shut down the Luleå dairy factory. The change showed clear synergies and cost savings. Additionally, it reduces future investment needs and maintenance costs associated with operating two facilities.

Based on Knowit's preliminary study recommendation, Norrmejerier's board decided in August 2023 to close the Luleå dairy factory, and detailed work and preparations for implementation are now underway.

The project was carried out during 2023, and for the first time in several years, Norrmejerier reported a positive result in the same year. The work Knowit has done is part of Norrmejerier's key initiatives moving forward to increase the company's efficiency and profitability.

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