Below is an excerpt from a recent nomination for an SAP Innovation Award from Louisiana-Pacific Corporation.
Louisiana-Pacific Corporation (LP) has been a pioneering force in engineered wood siding and value-added oriented strand board solutions since 1972. Headquartered in Nashville, Tennessee, LP has earned a reputation for providing world-class products, including its flagship siding product LP® SmartSide® Trim & Siding.
LP’s expertise spans various sectors, catering to new residential construction and the intricate demands of repair and remodel projects. However, the company is about more than just innovation. It is also committed to conscientious environmental stewardship and optimizing natural resources. LP’s workforce of 4,100 employees and network of 22 mills across the United States, Canada, Chile, and Brazil all play a vital role in fulfilling that mission.
Moreover, the entire business is undergoing an evolution – a strategic shift from a commodity-focused business to becoming a specialty-centric brand. The foundation of LP’s success lies in maintaining a healthy balance sheet and a capital allocation strategy focused on shareholders to help ensure mutual growth and prosperity.
Challenge
LP’s supply chain strategy is sharply focused on meeting customer demands while optimizing the cost to serve and minimizing lead times. Achieving this supply chain goal in the mill products industry poses significant challenges. For instance, LP ships more than 1,000 rail cars and trucks of finished products weekly. The challenge lies in fulfilling these orders punctually, meeting specifications, and helping ensure satisfaction without any customer disappointment.
Additional Challenges included:
- Supply chain disruptions causing delivery delays and increased costs, impacting customers’ timelines and budgets
- Pricing fluctuations, economic factors, and raw material shortages of essential construction materials – such as lumber, steel, and cement – driving up costs and posing sourcing challenges
- Increasing pressure to adopt sustainable building practices and meet stringent environmental regulations, including energy- efficient designs, waste reduction, and eco-friendly materials
- Noncompliance with complex, ever-evolving regulatory requirements at the local, state, and federal levels, leading to costly delays and penalties
- Need to strengthen understanding of and skills in supply chain concepts as an organization to help ensure its supply chain strategy can support future growth
- Inefficient and complex purchase and sales order management, challenging the management of delayed and escalated orders and keeping up with sales spikes
- Disjointed systems and tools, impeding cross-team visibility and creating duplicate work
Solution
SAP Business Technology Platform (SAP BTP) is integrated with LP’s execution system, drawing daily data to optimize cost to serve and meet sales order demand. After an order fulfillment associate creates an order, the system efficiently channels the order back into SAP BTP and optimizes it in a batch for highest profitability. The system then prompts planners to address any unallocated orders with immediate access to data on warehouse inventory, cost of fulfillment, and the production capacity of each mill.
Outcome
By using advanced algorithms, LP is optimizing its cost to serve and ability to meet customer demands. The planners are empowered to make decisions of highest profitability for exceptions that the machine is not able to allocate. Planners can also engage in more-informed decision-making to optimize allocations, maximize efficiency across production and transportation processes, scale production faster during sales peaks, and help ensure precise order fulfillment and resource utilization.
Benefits
The company is seeing benefits from multiple areas of the business including:
- 1.7% Increase in profit for the siding division after optimizing the sales order process
- 60% Faster order-entry time overall
- Greater visibility of profitability at a tactical level, empowering resources to make decisions with analysis by customer, mill, and region
- More streamlined sourcing and exception management processes
- Accelerated delivery times, enhancing the customer experience
- Smoother communication with mills, including better collaboration with clearer priorities at a tactical level
- Decrease in lingering exception orders
- Faster resolution of offline customer priorities and allocations through centralization
- Some competing software providers quoted as much as US$2 million in subscription fees to deliver the same solution.
- The effort enabled the company to maintain a clean core, easing and expediting its migration to SAP S/4HANA Cloud Private Edition.
- Migrating to the cloud helps eliminate hosting overhead.
- Business processes are more comprehensive and controlled.
- Major production disruptions are managed with greater ease and speed.
To read the full story click here. To hear about what other paper, packaging or mill products companies are doing to transform their business with SAP click here.
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