How Horizon Organic is Optimizing Its Supply Chain Network with AIMMS SC Navigator

About the company

Horizon Organic is North America’s largest organic milk supplier, with its products available in supermarkets and grocery stores nationwide. Horizon Organic works with more than 350 family farmers across the United States to produce a portfolio of organic dairy products consisting of milk, creamers and whiteners, yogurt, cheese, and butter.

The Problem

Horizon Organic underwent a significant transformation following its separation from Danone. Upon separation, the company faced several challenges:

1. Network Optimization: The company needed to design its own independent supply chain while still fulfilling contractual obligations with Danone. This included determining which locations (plants, warehouses, and co-manufacturers) should remain in the network and which should be exited over the next few years.
2. Tactical Planning: In addition to addressing strategic questions, Horizon Organic had to account for the seasonal nature of both supply and demand. This required a thorough understanding of how their business should optimally evolve over various time buckets to meet fluctuating demands while maintaining operational efficiency.
3. Milk Supply Constraints: Horizon Organic had to balance its production capabilities with fluctuating milk supplies, a task made more difficult by the need to optimize costs while ensuring reliable service to customers across the U.S.
4. Customer Footprint Analysis: The company wanted to weigh and identify optimal warehouse locations through scenario modeling to better serve its customer base, particularly in the Southeast, where they lacked manufacturing facilities.
5. Cost Pressures: Rising hauling costs, particularly in the East, were driving up production expenses. The company needed a comprehensive solution to understand how these costs impacted their network, and which strategies would offer the best financial and operational outcomes.

The Solution

Horizon Organic turned to AIMMS for its network design needs. AIMMS SC Navigator allowed them to model their entire supply chain, run various scenarios, and optimize their network design for both strategic and tactical planning.

Some of the key benefits and features used include:

1. Center of Gravity: This feature was crucial for determining optimal warehouse locations to service their customer base while minimizing transportation costs. It helped identify areas, such as the Florida region, where Horizon Organic needed a stronger distribution presence.
2. Scenario Planning: Horizon Organic used the scenario modeling capabilities of AIMMS to simulate multiple supply chain configurations, including the number and location of warehouses and production facilities. This allowed them to evaluate the trade-offs of different network designs.
3. Tactical Planning: SC Navigator’s Tactical Planning module enabled Horizon Organic to model a more detailed planning horizon. This capability provided deeper insights into how seasonality and stock buildup impact their supply chain, allowing the company to manage inventory and production schedules more effectively across different time periods. Additionally, they were able to test various production footprint capabilities and measure the implications of a single versus dual sourced product approach.
4. Constraints Management: The flexibility of SC Navigator allowed Horizon Organic to easily relax or enforce various constraints, such as milk supply levels and customer demand, which is critical in times of fluctuating milk supply.

“Implementing AIMMS SC Navigator has been a game-changer for us. With the tool’s flexibility, we can adapt quickly to changing conditions, ensuring that we continue to serve our customers effectively while driving down costs. The decision to exit less efficient locations based on SC Navigator’s data-driven analysis has already projected savings.”
– Ryan Obee, Senior Manager Network Optimization at Horizon Organic

The Results

The use of SC Navigator has already led to significant advancements in Horizon Organic’s supply chain:

1. Decision to Exit Plants: One of the early wins was the decision to exit an Eastern warehouse location, which was identified to be a high-cost location for milk procurement. In addition to reducing their warehouse footprint from six to five locations, they also recognized the need to expand the capacity of another site. This decision alone is projected to save Horizon Organic millions over the next two years.
2. Optimized Network Design: The company identified more cost-effective warehouse and production locations, expanding operations in Indiana and planning the closure of less efficient sites. This has streamlined their distribution and reduced transportation costs.
3. Strategic Focus: The insights gained from SC Navigator have helped Horizon Organic’s team to shift focus toward reducing milk hauling costs in the East and improving operational efficiencies.
4. Improved Tactical Network Planning: SC Navigator allowed Horizon Organic to optimize their network over multiple periods, helping them understand how their supply chain should dynamically evolve. By using the application, they were able to determine how much to produce and stock each month, minimizing costs while continuing to meet customer demand.
5. Enhanced Stakeholder Communication: The detailed modeling, scenario outputs, and end-to-end reports generated by SC Navigator enabled Horizon Organic to effectively communicate their supply chain strategies to stakeholders, ensuring alignment on key decisions.

Looking Ahead – Long-Term Planning & Sustainability

Horizon Organic plans to further leverage SC Navigator to model long-term strategic projects, including optimizing their network for the next 1-5 years and exploring sustainability initiatives. The company is also working to quantify the CO2 impact of various supply chain configurations, which will guide decisions around environmental sustainability alongside financial performance.

Conclusion

Horizon Organic’s journey with SC Navigator has been a success, delivering significant operational improvements and cost savings. The solution has empowered them to make data-driven decisions both on the strategic and tactical level, ensuring that their supply chain remains agile and optimized as they continue to grow and adapt to a rapidly changing market.

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