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Norske Skog Improves Global Profitability Using Operations Research

Author

Listed:
  • Graeme Everett

    (Norske Skog Tasman, Kawerau, New Zealand)

  • Andy Philpott

    (Department of Engineering Science, University of Auckland, Auckland, New Zealand)

  • Kjetil Vatn

    (Norske Skog, 1326 Lysaker, Norway)

  • Rune Gjessing

    (Norske Skog, 1326 Lysaker, Norway)

Abstract

Many businesses are currently uncertain of how the economic recession will affect demand for their services and products. For global papermaker Norske Skog, this is a familiar situation. Over the past decade, the company has experienced declining demand for its products as electronic media have replaced newsprint publications. As it struggles to survive, the company has been forced to make some difficult decisions, including closing paper production lines and entire mills. Operations research (OR) models have become a vital part of Norske Skog's decision-making process, helping the company to significantly reduce costs and enabling senior managers to make difficult choices with confidence that their solutions are the best possible. The tactical use of OR models has provided solutions that enable Norske Skog to save US$8 million and US$10 million annually in Australasia and Europe, respectively. In 2008, the Norske Skog Board used a model to make a strategic decision to close two paper mills and a paper machine, saving the company US$100 million annually, compared with the status quo. These savings are equivalent to 3 percent of the company's revenue.

Suggested Citation

  • Graeme Everett & Andy Philpott & Kjetil Vatn & Rune Gjessing, 2010. "Norske Skog Improves Global Profitability Using Operations Research," Interfaces, INFORMS, vol. 40(1), pages 58-70, February.
    • Handle: RePEc:inm:orinte:v:40:y:2010:i:1:p:58-70
    DOI: 10.1287/inte.1090.0471
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    References listed on IDEAS

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    1. Arthur M. Geoffrion & Richard F. Powers, 1995. "Twenty Years of Strategic Distribution System Design: An Evolutionary Perspective," Interfaces, INFORMS, vol. 25(5), pages 105-127, October.
    2. Andrew Philpott & Graeme Everett, 2001. "Supply Chain Optimisation in the Paper Industry," Annals of Operations Research, Springer, vol. 108(1), pages 225-237, November.
    3. Bruce C. Arntzen & Gerald G. Brown & Terry P. Harrison & Linda L. Trafton, 1995. "Global Supply Chain Management at Digital Equipment Corporation," Interfaces, INFORMS, vol. 25(1), pages 69-93, February.
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    Cited by:

    1. Kaan Katircioglu & Robert Gooby & Mary Helander & Youssef Drissi & Pawan Chowdhary & Matt Johnson & Takashi Yonezawa, 2014. "Supply Chain Scenario Modeler: A Holistic Executive Decision Support Solution," Interfaces, INFORMS, vol. 44(1), pages 85-104, February.

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