Researchers on award shortlist for saving paper company millions

Helping a global company to reduce costs and increase earnings in a declining market has gained researchers from The University of Auckland’s Faculty of Engineering a finalist’s spot in an international competition.

Norske Skog, one of the world’s largest paper producers, called on the University’s Department of Engineering Science to streamline its manufacturing and supply chain costs using operations research. The model Professor Andy Philpott helped Norske Skog to develop saved the company more than (US)$200 million over 11 years.

The Institute for Operations Research and the Management Sciences (INFORMS) this week announced Norske Skog as one of six finalists for the 2009 Franz Edelman Award for Achievement in Operations Research and the Management Sciences. The other finalists, selected from 200 companies, were IBM, HP, Marriott International, CSX Transportation and Zara.

“This is another great achievement for the Department of Engineering Science and once again demonstrates the value of operations research. In a market where newsprint demand is in decline, Norske Skog was able to increase its profitability using the operations research models developed by our team,” Professor Philpott says.

Operations research is the scientific approach to solving management and operational decision problems. It uses advanced mathematical techniques often embedded in computer models to help companies make optimal decisions about its organisational structure, the allocation of resources, and production and logistics. The Engineering Science Department has a long history of successfully applying these techniques in airlines, ambulance scheduling, electricity generation and distribution, America’s Cup yachting, and telecommunications.

The model called PIVOT (Paper Industry Value Optimization Tool) used by Norske Skog was developed by Professor Philpott, Graeme Everett, an Engineering Science graduate and employee at the company’s Tasman paper mill, and Kjetil Vatn from the company’s Oslo office. The team will travel to Phoenix, Arizona, in April for the competition final presentations after which the overall winner will be announced.

PIVOT helped Norske Skog to better allocate raw materials to mills, and products to customers, across its global operations. When it needed to downsize, the model was used to best reallocate paper to other mills and recoup the optimal salvage value from its plants.

It is only the second time New Zealanders have been shortlisted for the award - both projects arising from research in the Department of Engineering Science. In 2000 software developed by Professor David Ryan and collaborators to optimise crew scheduling at Air New Zealand was named as a finalist.

The Franz Edelman competition, now in its 38th year, recognises outstanding examples of operations research-based projects that transform companies, entire industries, and people’s lives.