Absolut Efficiency

DESPITE BEING TUCKED AWAY in the tiny Swedish coastal town of Åhus (pop. 10,000), V&S Absolut Spirits exports like a global giant. The spirits manufacturer has recently introduced its seventh vodka flavor, Raspberri, celebrated the production of its billionth bottle of Absolut vodka, and launched a new vodka brand, Level. In the course of the company’s 25-year history, the Absolut manufacturing plant has doubled in size, staff has quadrupled, and the production cycle has increased 20 times.

“By international standards our facility is relatively small, but we do enable a very large turnover” says Krister Asplund, VP of manufacturing at Absolut. According to Asplund, this scale of turnover has been possible due to the company’s continuous, flow-driven manufacturing process. “We are doing everything on a just-in-time-basis,” he explains. “Everything leaves the manufacturing plant the same day it enters.”

TIMELY FASHION The company adopted its just-in-time philosophy in the mid-’80s, when it was hitting a growth spurt but space constraints prevented it from building an on-site warehouse. “We told [our suppliers] we wanted to continue to expand, but that we couldn’t find the space for storing the goods we bought from them,” recalls Asplund.

The just-in-time process means that the plant receives exactly what will be produced that day. The bottle supply is controlled by the hour, and bottles are delivered in bulk throughout the day. The bottles arrive predestined for a specific flavor — a bottle with blue print for the original Absolut vodka, a bottle with an orange detail for Absolut Mandrin, and so on. In addition to seven different flavors, the manufacturing team also juggles ten bottle sizes and a multitude of government warning labels. Case blanks, which arrive at the plant as flat cardboard sheets, are delivered at the plant two to four times per day. Bottle caps, which don’t consume much space, arrive less frequently, sometimes only once per week.

Eight line crews work in two shifts in the bottling area of the facility. Two bottling lines process long runs with few changes per day, and two lines specialize in quick turnovers, processing up to 10 different SKUs or batches per day.

Today, it seems that the company’s lack of a warehouse has become a conscious choice. “Originally we didn’t have a warehouse due to lack of space,” says Asplund. “But over time, we found that just-in-time gave us many advantages. We had no old stock just sitting and getting too old, for example. And because we had a constant flow, we had low inventory costs, as well as a quick system that enabled us to locate quality control issues with incoming material.”

BLITHE SPIRITS Annually, 100,000 tons of winter wheat — 20% of all the crop grown in the agriculturally rich region around Åhus — is delivered at V&S Absolut’s distillery, 10 miles from the manufacturing plant. Here, the wheat goes through an initial fermentation that produces what Asplund calls “a raw vodka.” This liquid is then transported in bulk to the manufacturing facility, where it enters a continuous distillation phase, a purification technique originated in 1879. The result, a 96%-by-volume vodka, gets mixed with local spring water to its final 40%-by-volume concentration. Next, the vodka is quality controlled, and if it is to remain unflavored, it gets pumped to one of the bottling lines from which bottles are topped off with a slurping sound.

Out of the 450,000 to 600,000 filled bottles that leave the facility on a daily basis, only 2% stay in Sweden. The rest is exported, primarily to the United States, which makes up 60% of Absolut’s market. In 2002, 40.4 million liters of vodka were shipped to the U.S.

Customers are divided into three categories. The first consists of large markets, such as the U.S., where the key is to produce large orders on a regular basis. Then there are the multiple markets that order standard products, such as the 750 ml bottle for EU countries or the standard-sized duty-free travel bottle. The third category is made up of smaller markets, such as the Canary Islands, that request a few cases of every SKU. These orders are a challenge to produce within a short time frame, because they tend to interrupt the overall production schedule.

An empty bottle entering the manufacturing plant leaves as an inspected, washed, filled, labeled, and sealed bottle of Absolut vodka four hours later. It takes 45 seconds to load trailers with 8,000 finished bottles, and it takes 45 seconds to unload them in an external stockroom in the local harbor district. There the finished product is stored for a maximum of three weeks before it is shipped to larger ports in Germany and the Netherlands from which larger ships transport it to more than 125 countries.

Margareta Mildsommar has covered retail IT technology in the U.S. and abroad. She can be reached by e-mail at msommar@yahoo.com.

Factory to Farm

In the daytime, a constant stream of trailers delivers locally harvested winter wheat to the Absolut distillery. As early as the 19th century, farmers discovered that the starch-rich wheat crop was a perfect resource for vodka manufacturing. In addition, the fiber- and protein-rich leftover product, called wet stillage, was easily recycled as cattle feed.

V&S Absolut Spirits has done its share to continue nurturing this traditional symbiosis. “We work very hard to maintain a balance with surrounding farmers,” says Krister Asplund, VP of manufacturing at Absolut. “Today, the wet stillage is picked up by local farmers for cattle feed or shipped out directly by us. We have also built a drying facility by our distillery plant, which makes it possible for us to produce dry animal fodder.”
MM

V&S ABSOLUT SPIRITS

Parent company: V&S Group
U.S. distributor: Future Brands
2003 sales: $685 million
2003 U.S. exports: 40.4 million liters
2003 export worldwide: 72.5 million liters
SKUs: 300
Flavors: 7
Daily production: 500,000-600,000 bottles of Absolut vodka
Employees: 250 in the manufacturing plant in Åhus and 100 in the Stockholm-based marketing department
Main suppliers: Rexam supplies bottles; Smurfit supplies case blanks

Systems

Absolut uses Baan as its overall system; an application called PipeChain is used to collaborate with suppliers. PipeChain supports vendor-managed inventory and uses the Internet to communicate needs for production material to suppliers. Access to real-time information about demand, stock levels, and products in transit allows suppliers to replenish and deliver the right products in the right quantities and at the right time.

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.