Founded in 1951, Tetra Pak was born from a single innovation. The first of its kind: a tetrahedron-shaped aseptic food packaging carton from which founder, Ruben Rausing, derived the company name. This design would give birth to an entire range of Tetra Pak products that would entirely transform the food packaging industry. Over the next 60+ years, Tetra Pak would grow substantially from a family run business to a multinational corporation with more than 24,000 employees in over 160 countries worldwide.
Being veterans in their field, it’s no surprise that Tetra Pak understands how to adapt to an ever-shifting business landscape. This means knowing how to fully seize development opportunities in order to continue embracing the innovative spirit the company was founded on.
The first signs of Tetra Pak’s digital integration appeared in the 1990s, with their implementation of Total Productive Maintenance (TPM): a project centred around the reduction and elimination of waste via in-depth data analysis. This innovative method of ensuring production efficiency has earned them more than 110 TPM awards in total, including the first-ever Global Leaders award from the Japan Institute of Plant Maintenance.
Johan Nilsson, VP Industry 4.0 Solutions & Digital Services at Tetra Pak, described the challenges they face:
"We all know too little about this topic and are limited by our imagination. We need curious leaders to lead our digital transformation."
And this lack of knowledge and experience with embracing modern digital solutions is something that extends to the food and beverage industry as a whole. Nitin Chaudhary, Director of Strategy and Planning at Tetra Pak, expressed his feelings on the matter:
"We believe that food and beverage is yet to fully pick up and benefit from Industry 4.0. But that will have to change, and it will have to change now because a lot of food and beverage producers are facing a new reality."
The new reality Nitin spoke of is an increasingly competitive market of production optimisation with a focus on e-commerce. On top of this, Tetra Pak’s now-expired patents gave way to competitors taking advantage and supplying their own packaging products that were compatible with Tetra Pak’s. Others supplied entire variations on Tetra Pak designs, with unique production systems to match. Adapting to this fierce climate meant Tetra Pak had to assess their priorities and create a detailed plan to guide them through the changes that would ensure their continued market leadership.
Initiating an Industry 4.0 Transformation
Tetra Pak established three initial goals in order to maintain clarity and easily measure their digital progress:
First, they would harness the immense amount of potential data from throughout their supply chain to ensure an unparalleled level of quality compared to their competition.
Second, they would overhaul how they approached service contracts with customers. This would mean shifting the basis from individual services (billing per technician hour or for spare parts) to the successful outcomes being pursued by those services (e.g. increasing the Operational Equipment Efficiency of a filling line).
Lastly, they would seek to entirely reinvent the package they offered to customers. Spurred by the omnichannel distribution models offered by competitors, Tetra Pak would seek to enhance manufacturers’ marketing intelligence as well as their overall customer experience.
Once these priorities had been decided, the leadership team at Tetra Pak needed a plan to execute these changes and take the business in the desired digital direction. In 2017, Vice President of Strategic Planning Erik Winberg would lead their all-new Digital Transformation Program. Erik had the following to say regarding the program and digitalisation:
"Digitalisation is central to our strategy and to our value proposition. We needed to make a step-change in the quality and performance of the products we deliver. We launched a strategic study in 2016 to ask ‘What can IT do for the business?’ We found that we were lacking a mobile workforce and advanced analytics. Our data treatment was really just financial analysis."
These realisations would help to drive Tetra Pak fully into the world of Industry 4.0, embracing the nine key developmental components outlined by Nitin Chaudhary:
"Industry 4.0 is based on nine foundation technologies. Big data analytics and artificial intelligence; advanced robotics and augmented reality – tools such as hololens; system integration and industrial IoTs; simulation, additive manufacturing [3D printing] and cybersecurity."
These tools offered effective solutions to the identified problems and more, providing they could be properly implemented into the Tetra Pak supply chain.
As part of the Digital Transformation Program, a Digital Program Office was established in order to maintain consistency when identifying potential projects and only moving forward with those that ensured coherence between all of their current digital initiatives. Any duplication or loss of sync would prove detrimental, and any projects that were not realistically achievable would be a waste of resources. As Industry 4.0 offered such radical adjustments to what was previously believed as best practice, it was important that Tetra Pak had as accurate an aim as possible and effectively eliminated any doubt of success.
The design to separate the Digital Program Office from any existing IT organisation within Tetra Pak was due to an SAP rollout that took 14 years to complete. While this was an extremely successful development, it led to the perception that Tetra Pak struggled when it came to implementing new IT solutions:
"We had an SAP-first approach, where we would not consider other solutions if SAP offered a similar capability."
If any changes were to be made to existing approaches, they had to gain approval from experts placed centrally in the Tetra Pak organisation. While effectively rigorous and thorough, these tight guidelines narrowed the scope of new possibilities. Erik explains how something needed to be done to allow his teams to break out from the stagnant “we know best” mindset:
"Our own IT organisation didn’t have the competencies to inform our technology partner selection. They didn’t step forward, hence the train left without them."
Erik’s desire to delve beyond past solutions and discover a new best-in-class is what led Tetra Pak into a partnership with Microsoft. Together they could design and implement the solutions that would facilitate the radical change they sought.
As well as aiming to coordinate efforts, the Digital Program Office also took primary accountability for Tetra Pak’s digital endeavours. The Data Science Center of Excellence (CoE) was created within the Digital Program Office to ensure that new digital undertakings were not only coordinated but performed optimally. The CoE would work to identify and source all data required for Tetra Pak’s selected projects: training and deploying scientists in order to develop the necessary advanced analytical tools they needed to thrive. According to Erik, the CoE was a critical component in laying the foundations for what would follow.
With the Digital Program Office now established, it occurred to Erik that more pre-existing boundaries had to be broken down if Tetra Pak was to make the best decisions possible. In a coordinated effort, Erik and his leadership team spoke to the vast network of Tetra Pak base employees in order to gather local input and forge a democratic, collaborative process. Employees from all levels of the company had their input valued and could contribute towards activities such as Xamarin “hackathons”, in which participants would brainstorm ideas for new mobile apps that could benefit Tetra Pak. Throughout these efforts, the Digital Program Office would assess each employee’s skills and could become aware of any points of resistance or difficulty when it was time to roll out Industry 4.0 tools and changes.
Furthering these collaborative efforts, Design Sprints were organised to invite outside experts, CoE scientists, coding and UX personnel and users from affected businesses to come together at the Digital Program Office and work in intensive workshops to discuss the best-practice approaches for particular digital solutions. This way, all angles and opinions could be taken into account to ensure end-to-end successful integration. Through several weeks more work, the Design Sprint workshops would define every aspect of their respective digital projects, troubleshooting and refining well into the prototype stages. Peter Prem, VP Integrated Supply Chain, explained why this collaborative process was essential:
"Our family spirit of dealing with employees with a warm heart and cool head helps to garner support for the various digitalisation/transformation initiatives - as does clear commitment from the top, from the CEO and every member of the executive team and every level down. Historically, we have been good at change management - set the agenda for the change, build a guiding team, find quick wins, and don’t let up. Now we needed to approach the whole change agenda in two frames - agile and flexible to explore and discover, and then systematic to deploy widely and make it stick."
From these intensive workshops, three core digital capabilities were finalised. These would be used to shape all efforts going forward, taking over from the three initial goals as a means to execute realistic Industry 4.0 solutions on a global scale. These three capabilities were:
- Connected Workforce and Smart Factory
With 55 factories producing packaging materials, and tens of thousands of maintenance and repair tasks at customer locations, fresh digital approaches were necessary to ensure efficient communication and problem-solving throughout. Tetra Pak could now empower individuals with access to information and services via mobile and wearable technology. They could also equip their factories with newly-invested sensors to gather immense amounts of data. Per Dmitry Smolin, Director of the Smart and Connected Factory Program shared the following:
"We record, on a daily basis, one billion data points from all of our machines. For example, a laminator has 400 sensors which are constantly recording information. The different information sits in different systems in our factories, so it is not really connected and we are using maybe 1% of the information in our analyses."
Tetra Pak knew that collecting and leveraging this data in a way that serviced customers was the way to go. Data such as hours operated, temperature, pressure, speed, and more were taken from Tetra Pak factories as well as machines on customer premises. However, in the pursuit of their smart manufacturing vision, they would require information separate from these machines such as ambient temperature and air pressure in the environments. All of this would work towards the pre-established goal of offering outcome-based contracts. Johan Nilsson explained that a key challenge in creating this level of connectivity came from requiring equipment not supplied by Tetra Pak alone. If required, even a competitor’s product may be utilised in the pursuit of true connectivity.
- Advanced Analytics
As a direct response to shortcomings expressed by Erik, Tetra Pak would work to collect and interpret data more than ever in an effort to identify and predict patterns. One way this was utilised was through data gathered throughout customer production installations. Tetra Pak’s team of technicians could anticipate breakdowns or failures before they occurred thus preventing them entirely.
Another improvement made was in the consistency of their packaging
quality. The material folds that formed their containers had a long-standing issue with poor structural integrity. Using newly acquired machine learning and image recognition tools, Tetra Pak could pinpoint exactly what was happening within production lines and then fine-tune their machinery and manufacturing environments to ensure consistent quality.
- Connected Solutions
Tetra Pak would use new digital capabilities to modify new products and retrofit existing ones. A key example of this is printing QR codes on packaging to provide easily accessible product information for customers, such as ingredient lists and product traceability. Peter explained how Tetra Pak allowed their packaging not only to serve as a container but as a digital information channel:
"The ability for packaging to take on new capability by being uniquely identifiable, by providing a more direct communication channel with the consumer, by enabling further expansion of ecommerce, and by gathering deeper actionable insights into consumer behaviour translates into the need for an end-to-end “smart and connected” supply chain."
The Future of a Digitally Enabled Enterprise
Despite working tirelessly to innovate within their industry, Tetra Pak shows no sign of slowing down. Erik explained why:
Digital transformation is about catching up with technology, but it’s also about the speed of change, working in a more agile way and changing the way we work, changing the solutions we deliver and ultimately changing how we are perceived by the customer.
This notion of changing customer perception means emphasising supply chain visibility and extending outside of Tetra Pak’s internal processes for partnering with external companies. As Peter explained:
"80% of the data needed to run an effective global supply chain resides with partners."
However, this effort to reach out has posed as many challenges as it has opportunities: In June 2017, A.P MøllerMærsk was the target of the Petya cyberattack which led to some customers cutting ties with Tetra Pak due to cybersecurity fears.
Following Tetra Pak’s success in using data to predict manufacturing faults, they believed they could utilise this data further throughout the now entirely connected supply chain. These predictive analytics would allow for more efficient repairs, higher product quality, and perhaps the introduction of data cognition within their factories: the ability for machines to make automatic cognitive decisions based on existing data.
This automation would come as a result of implementing a supply chain control tower which built on their existing advanced planning system. This control tower would handle plans for stock and demand and internal production plans, whilst gathering and integrating stock and production data from their external customers and vendors. This digital adaptation would allow Tetra Pak to make more informed and precise decisions on all fronts.
With Tetra Pak’s factories and systems becoming more connected every day, Dmitry Smolin had the following to say regarding their future:
"We’ll be able to connect information not only between the different systems within one factory, but also between factories, making our global converting base into truly one global factory. With the help of this data, we will be able to analyse issues we could not do before. We actually estimate that when we connect all the factories together, we will get access to 10 billion data points - ten times more than what we have today - and we will be able to analyse 100% of those in the future."
To express Tetra Pak’s attitude towards digitalisation and overall change, Johan said:
"The culture at Tetra Pak is very much that you can do things, but of course you then also have to show results."
But underlined this statement with a powerful reminder of how digitalisation and innovation are made real:
"You have to dream big, you have to start small, but most importantly you have to start."
Richard Markoff and Ralf W. Seifert, Tetra Pak: A Digitally Enabled Supply Chain as a Competitive Advantage, IMD 960, IMD Lausanne, 2018.