Fortum Recycling & Waste – Pioneering circular economy solutions

Fortum Recycling & Waste has a proud history of solving the most difficult environmental challenges. The origins of the company date back to the 1980s and the pioneering waste management company Ekokem, which Fortum acquired in 2016, forming a new business unit.

Six years and several acquisitions later, Fortum Recycling & Waste employs over 1,000 people in the Nordics and beyond. Fortum knew effective sales and operations planning (S&OP) would be critical to successfully integrating the acquisitions and securing the unit’s future performance.

Material recycling – a market full of opportunity

The increase in world population and growing demand for consumer goods require innovative circular thinking. Fortum R&W believes that waste has value and should be recycled and reused wherever possible and economically viable. And with a growing number of critical production materials becoming scarce – for example, cobalt and lithium – recycling these materials are becoming increasingly important – and profitable.

Fortum’s takeover of state-owned Ekokem had given the Finnish energy producer an immediate foothold in the waste and recycling business, including incineration facilities in Sweden, Denmark, and Finland. Since then, Fortum R&W has continued to invest in the fast-growing recycling segment, adding a series of acquisitions.

A new planning system

With so many smaller businesses to integrate, all with their unique legacy systems and processes, Fortum R&W had a challenge on its hands.

One of the most important areas to address when streamlining a new organization is S&OP. The team at R&W knew this, and everybody was keen to get to work. Hans Holm, Senior Manager of Operational Excellence at Fortum R&W, explains how an early initiative almost ended up costing them.

“To support the S&OP process, we knew we had to improve our sales forecasting and planning of our treatment facilities. About three years ago, we nearly moved forward with a planning solution that was much too advanced for us. Fortunately, we realized this before it was too late and pulled the plug on the project. We were simply not mature enough from an IT and process perspective. We had to define our new business processes and common data structures first.”

The team put the planning system on hold and started documenting as-is and to-be planning processes. In the meantime, the business had to make do with Excel for forecasting and S&OP. “It wasn’t ideal, but it was better than risking a failed project,” says Hans.

However, the project delay also brought some positives. It allowed Fortum R&W enough time to progress with a parallel project – a new business platform, including a company-wide ERP and a data warehouse. By the time the team had finished mapping the processes, the new central data warehouse was already in place, simplifying the implementation of a new planning system.

“This time, we did it by the book. We went through formal vendor evaluations and signed with Optimity in October 2021”.

“We were simply not mature enough from an IT and process perspective. We had to define our new business processes and common data structures first.”
Hans Holm,
Senior Manager Operational Excellence, Fortum R&W

Why Optimity?

Hans believes you can learn a great deal about potential vendors by meeting their representatives. “We immediately got a good impression of Optimity. They clearly understood our business and what makes our supply chain unique. The very nature of the materials we’re dealing with brings a lot of complexity. We also make money both from receiving waste and selling recycled materials, not just from selling finished goods. The Optimity consultants presented a solution that made sense to us, and we could see it working in our business.”

The recycling and waste industry is heavily regulated, and track and trace procedures are central to operations. Hans explains, “The ability to classify and assign attributes to different types of waste was critical to us. Optimity is excellent in this area. We’ve been able to model all our product attributes and hierarchies. For example, we use Supply Plan Groups (SPGs), where different types of waste are grouped according to their contents and requirements regarding handling, storage, and treatment. We have four levels in our hierarchy and forecast at the lowest.”

Hans was also impressed with how easy the system was to use. “Everyone liked the user interface. It’s easy to navigate and find the information you’re after. On the demand planning side, the ability to make forecast adjustments at any level and have the system propagate it – top-down, bottom-up, or middle-out was important. This saves time and guarantees data consistency. It’s especially valuable to our sales managers. For example, they can adjust an entire customer segment with a single click.”

Fortum also liked Optimity’s modular approach. It meant they could start small and expand the solution at their own pace. “Although our vision was to implement a complete S&OP solution, we wanted to take a step-by-step approach to reduce risk. Demand planning was the obvious place to begin as it’s the starting point for the entire S&OP process”, says Hans.

“The Optimity consultants presented a solution that made sense to us, and we could see it working in our business.”
Hans Holm,
Senior Manager Operational Excellence, Fortum R&W

Change management…and the importance of keeping it simple

Hans is a seasoned project manager and knows the importance of involving all levels of the organization. “Our senior management is 100% committed to the project. They know how crucial effective S&OP is to our business.”

The project management role is split between Hans, representing the business, and Roope Seppala, from IT partner Sofigate, on the IT side. Meanwhile, the core project team comprises people from all three countries, and the same is true for the stakeholder reference group.

Hans recalls how Kalle Saarimaa, VP of Fortum R&W and project sponsor, offered some good advice at the start of the project. “He told us to keep it simple and to focus on change management. This is how you will succeed. Luckily, this mindset is shared by the guys from Optimity”.

“Our project sponsor told us to keep it simple and to focus on change management. This is how you will succeed. Luckily, this mindset is shared by Optimity.”
Hans Holm,
Senior Manager Operational Excellence, Fortum R&W

Close cooperation with sales

Hans has worked closely with the sales team to ensure the forecast is always up to date. “We want them to continually update the demand plan with the latest information, not just focus on the monthly forecast run. This is important in case we need to change the production plan. However, the sales reps must still submit their forecasts on a specific day each month, with sales managers getting an additional five days to review and sign off on the numbers. Optimity handles the complete workflow, which makes the process manageable”, says Hans.

To simplify the process for the sales reps and managers, Fortum uses ABC-classification of its customers. “We have over 40 sales representatives, each responsible for five or six A-customers, plus a larger number of B- and C-customers. We generate a rolling 18-month statistical forecast in Optimity at the start of every month. The sales representatives then adjust the numbers for their A-customers based on any information they have. For B- and C-customers, they use the statistical forecast as far as possible, with any adjustments made by their
sales manager“, says Hans.

Change doesn’t happen overnight, and Hans categorizes the sales reps and managers into three groups based on their attitudes toward the new forecasting process – The first group is the sales reps doing it because they must. Group two consists of those starting to see how this might help them. The third group is the reps who fully embrace the new solution and are looking to take maximum advantage of it.

“We’re continuously working with the sales team to ensure everyone understands what’s expected from them and how the solution adds value to them individually and the business. Crucially, we’re out of Excel, which means less manual work and more time for value-added activities”, says Hans.

“It’s a massive help during our S&OP cycle – and for the first time, we can measure our progress. I’m very pleased with the results so far.”
Hans Holm,
Senior Manager Operational Excellence, Fortum R&W

The project

Fortum R&W went live with Optimity’s Demand Forecaster in Sweden just before the summer of 2022, adding Finland a few months later. Denmark will follow as soon as the core business platform is up and running.

With everybody on the same system, working from one set of data, Fortum now has much better visibility of demand. “It’s a massive help during our S&OP cycle – and for the first time, we can measure our progress. I’m very pleased with the results so far”, says Hans.

Hans also mentions the strong relationship his team has developed with Optimity. “Working with Tomas, Rasmus, and Josephine at Optimity has been brilliant. They understand our business, and they are experts in supply chain planning. If we have an issue, they’re quick to respond and always come up with a solution.”

Due to the pandemic, the project has been conducted almost entirely via MS Teams. “It’s worked much better than I anticipated. Everything has gone smoothly, even though I’m the only one from Fortum who has met the Optimity guys in person.”

“However, we will meet up with the entire team to celebrate shortly. I think it’s important to celebrate your achievements, and this project is definitely one of them.”

About Fortum Recycling & Waste

Fortum Recycling & Waste supports customers by conserving natural resources and promoting a circular economy. The company works in close partnership with its customers to build smart and sustainable solutions for the efficient circulation of valuable materials and the removal of harmful substances from the material cycle. Fortum Recycling & Waste is a division of Fortum OY.