Henkel
Henkel
July 2020
This case was prepared by Professor Joan Jané and Rafael Ruiz, MBA 2020. July 2020.
IESE cases are designed to promote class discussion rather than to illustrate effective or ineffective management of a given
situation.
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P-1186-E Henkel: A Digital Transformation Journey
Just as there is an ongoing trend towards Time-Sensitive Networking (TSN) for established
(wired) Industrial Ethernet solutions, 5G is likely to become the standard wireless technology
of choice, as it may for the first time enable direct and seamless wireless communication
from the field level to the cloud. Our facilities operate with a mix of wired and wireless
technologies, but we are adopting new equipment to transform our business that will not
work with wires.
Holbach listened carefully. He knew that the impact of this new technology on industrial
processes and supply chain would be significant.
Weber continued:
On the other hand, beyond the production environment, our supply chain is getting more
complex and I believe we could test the Blockchain technology to enable a more transparent,
efficient and agile end-to-end digital supply chain. Blockchain can act as a common ledger for
various parties involved in the supply chain. Using blockchain technology will allow faster and
more accurate tracking of products and transportation details, permit the ownership of goods
in transit to change hands throughout the supply chain lifecycle, and facilitate the use of ‘smart
contracts’, which can enable more automation in the execution of financial transactions that
are coupled with the physical flow of goods. Smart contracts in a supply chain can integrate
commercial transactions and agreements automatically and transparently. They also reduce
the need for intermediaries by enforcing the obligations of all parties in a contract without the
added expense of an intermediary.
All this paves the way for the company’s I4R journey to significantly improve the flexibility,
versatility, usability and efficiency of future smart factories and supply chains. Connectivity,
transparency and visibility are key components of Industry 4.0 and will support ongoing
developments by providing powerful and pervasive connectivity among machines, people
and objects.
Holbach was thinking of the complexity of ensuring that all supply chain players provide data for
visibility and control. He could see how blockchain could help overcome those obstacles.
“But,” replied Weber,
we should not forget the core engine of the supply chain management excellence: supply and
demand planning. Supply chain planning tools and processes are radically changing with
artificial intelligence. Over time, we have been enhancing our planning capabilities based on
SAP and Oracle platforms together with other smart tools in demand sensing for predictive
analytics. We have followed a hybrid approach, with some tools coming from advanced and
small third party providers and others being developed internally.
New players in the market are approaching us with Integrated Demand Management
solutions that are not just helping organizations forecast demand better but also helping
them sense, analyze, plan and shape it to optimize sales & margin performance. Those
companies look at planning very differently, and they take seasonality, promotional activities,
media spent, economics and many other elements into consideration through AI. We need
agility to handle different channels, customer and product variations while assessing risk and
opportunities with the support of advanced collaboration, planning and execution tools.
Our digital enabled supply chain can create a game-changing value for Henkel by using
innovative technologies beyond where we are today.
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Henkel: A Digital Transformation Journey P-1186-E
Henkel’s strategic framework (see Exhibit 3) embraced six focus areas to drive performance and
deliver on their aspiration of purposeful growth, both short and long term.
The operating models and the digital supply chain strategy improved the gross profit margin of
Laundry and Home Care and strengthened the Henkel brand’s positioning in mature and
emerging markets.
Through advanced fourth industrial revolution (4IR) technologies and end-to-end supply chain
connectivity we reduce processing costs and re-invest in innovations and marketing initiatives.
Bruno Piacenza, Executive Vice President, Laundry and Home Care
Our digital supply chain is customer centric. Digital initiatives transform and impact all the jobs
in the value chain: end-to-end planning and delivery, procurement, suppliers, manufacturing,
engineering, safety, health, environment, customer service, sales. People get access to data
that was hidden in legacy systems before and that unlocks significant incremental value.
Dirk Holbach, Corporate Senior Vice President Supply Chain, Laundry & Home Care
Henkel Laundry & Home Care’s digital backbone was empowered by the 5th generation cloud
computing (the so-called Henkel Data Foundation [see Exhibit 4]), a highly integrated data
management, processing and analytics platform based on fully elastic cloud technologies. This
platform processed millions of data assets from along the entire Henkel value chain, BI systems,
IoT, consumer facing apps and external data. It had become the place to be for almost all data-
and AI-driven use cases and business models at Henkel. It enabled such exemplary cases as:
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P-1186-E Henkel: A Digital Transformation Journey
1 https://www.weforum.org/our-impact/advanced-manufacturing-factories-light-the-way-as-learning-beacons.
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Henkel: A Digital Transformation Journey P-1186-E
This was thanks to the systematic approach taken in recent years, a state-of-the-art Laundry &
Home Care digital factory in Düsseldorf, Germany, and the efforts of many colleagues driving
the digital transformation over almost a decade.
The project was supposed to last 12 months, but stretched to two years. The initial idea was to
build an open system, which meant providing information not only to the management team,
but also to the workforce in the plants. The goal was to let teams use the tool to improve energy
consumption efficiency by providing access to information such as energy consumption per
meter and the main energy consumers (assets) in the factory.
This transparency in energy consumption allowed Henkel to identify patterns such as the energy
consumption of each plant when not producing, plants with the highest energy consumption
and in-depth analysis of the root cause of consumption. After identifying patterns, the team
could take action.
This was the start of the digital data backbone. A scalable global platform was installed with all the
factories and warehouses connected in real time. Eight years later, there were more than 3,500
sensors to measure sustainability data on individual process levels. (See Exhibit 5)
The final IT solution selected was based on Wonderware2 technology, which was later acquired by
Schneider Electric. Wonderware was chosen mainly because it had local teams of consolidators
supporting the plants during implementation, aggregating the information centrally across plants
and providing customized solutions. This implementation approach increased the speed of global
deployment and eliminated the need for people to travel to the plants.
The network very quickly delivered tangible financial returns, in addition to sustainability
benefits. Without realizing it, the team had created a significant digital asset, which it would
leverage during the following years through manifold applications. The project work, as well as
the ramp up, was steered by the global engineering team.
The lean manufacturing team created a tool internally called “best operating practices”
(see Exhibit 6), which consisted of checklists explaining how to optimize energy consumption,
water consumption and waste generation. This tool helped to leverage the newly acquired
visibility of consumption data broken down on key assets in all relevant production processes.
2 Wonderware HMI (Human Machine Interface) software enables operational excellence across industries, providing deep
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P-1186-E Henkel: A Digital Transformation Journey
The number of devices was quickly increased to more than 70 in pursuit of a fast global rollout
(within 12-18 months) to maximize business benefits. In addition, the vision was to control 100%
of all products leaving the factories in terms of aesthetics, and drive continuous improvement
based on large data sets. The second level of meter granularity was designed in 2016 and the
number of connected devices climbed to more than 2000.
In addition to the labels, Henkel also determined the quality of a bottle’s contents by measuring
the single components. Ingredients were mixed in tanks holding up to eighty tons to check if the
dose of each ingredient in each bottle was correct. A quality control technology, called a
AquaSpec3 analyzer, was used to inspect a sample extracted from the box and compare it with
a perfect example product. MIRA was initially installed in two pilot factories (Düsseldorf and
Lomazzo). At first, it seemed to be a promising innovation, but it turned out to be expensive and
the process for getting the information from the sample took too long. Consequently, the pilot
factories were not able to generate sufficient return on investment, and Henkel decided not to
roll out the technology for its original purpose, but instead to use it to verify the quality of raw
materials prior to production.
The digital backbone was helpful for trying out new technologies at early stages, evaluating
results and making quick adoption decisions. The international engineering resources
coordinated these types of projects. They searched for new applications in order to increase the
OEE (Overall Equipment Effectiveness), which meant reducing the number of production lines
while producing the same amount of products. As a result, they identified a more complex
application, an online efficiency system, also based on Wonderware technology. The goal was
to measure the OEE (see Exhibit 8) of Henkel’s filling lines. The first pilot began in late 2015 in
Lomazzo, Italy. After some initial hiccups, the system was working well by 2016 and the rollout
to all filling lines in the European plants was completed in 2017, followed by Asia-Pacific, Latin
America and the US in 2018, and Middle East Africa in 2019, reaching more than 250 fully
equipped and connected lines by 2020.
3 The AquaSpec® analyzer is a high-performance spectrometers for rapid, non-destructive analysis of chemical and pharmaceutical
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Henkel: A Digital Transformation Journey P-1186-E
Recognizing the increasing complexity and number of digital activities in the supply chain, a
separate group for Digital Transformation was created in 2016. This group reported directly to
the CSVP Supply Chain connected to the plant engineering teams, together with the first regional
hubs (Spain and Singapore) working on data analytics. Other hubs were created in Amsterdam,
Stamford (US) and Dubai (UAE).
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P-1186-E Henkel: A Digital Transformation Journey
In 2017, the company established a global network of on-site experts (SPOCS – single point of
contact) following a bottom-up/top-down approach (i.e. good ideas were leveraged if they fit
with the global frame of the technology areas). The SPOC was a combined role in the factory,
eager to carry out the company’s digital transformation. They coordinated digital projects in the
factories and participated in a new monthly meeting called “Digital SPOCS,” where digital
initiatives were reviewed by the headquarters and factories. By 2020, there were more than
50 experts and the number was steadily growing.
In 2018, Henkel chose FourKites4 as the single global provider for Track & Trace. They signed a
short-term contract, since technology changed quickly and new solution providers regularly
appeared on the market (See Exhibit 9).
The FourKites system used predictive ETA (Estimated time of arrival) to identify trucks’ locations
and, based on factors such as traffic and weather conditions, estimate possible delays so that
customers could be proactively contacted by Henkel’s operations teams to mitigate rejections
and returns. FourKites worked with three different sources of information to connect with
carriers: telematics, GPS and mobile. Since carriers were connected to the FourKites application,
there were real-time status updates through FourKites system, which was integrated with
Henkel’s Transportation Management System (TMS5) and SAP platforms.
After full roll-out in the US during 2018, the track and trace implementation was being carried out
in phases in Europe. By the end of 2019, The Netherlands, Belgium and Italy had almost been
completed. The challenge for 2020 was to increase the coverage of FourKites to other EU countries
and extend its adoption by carriers.
It is fundamental to provide training to our internal logistics and customer service operations
teams to not only use FourKites but also mainly to improve decisions and proactively engage
to better serve customers in the delivery experience. Our next goal is to go further, provide
the client with access to our track and trace system, but that is going to be another change
management chapter for our organization and customers.
Francisco García, Head of International Planning and Logistics
4FourKites optimizes global supply chains for industry-leading brands. It combines powerful machine learning with the
world’s largest data network to provide real-time visibility and data-driven insights.
5 A Transportation Management System (TMS) is a logistics platform that uses technology to help businesses plan, execute,
and optimize the physical movement of goods, both incoming and outgoing, and making sure the shipment is compliant,
proper documentation is available. This kind of system is often part of a larger supply chain management (SCM) system.
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Henkel: A Digital Transformation Journey P-1186-E
Since not every initiative could be launched, the team employed a standardized “go/no-go”
process to select one initiative at a time. First, a framework was defined from the top based on
the technological areas being considered. Ideas were generated both centrally and decentrally
and leveraged via the SPOC network. A small central “committee” was formed involving the
global stakeholders in the supply chain, which met regularly to review bottom-up initiatives.
This systematic approach identified the optimal initiatives for development during the
company’s digital transformation journey. Corporate governance defined the direction, aligning
all actions with the business lines, establishing the goals of each initiative and tracking results.
A business case was built for each application. Business cases needed at least one of two
elements: a specific ROI and a specific target that was easy to track (time reduction, materials,
etc.) or long-term value being of strategic interest.
Some initiatives fell into the “no-go” category. For instance, an in-line “chemical fingerprinting”
project became a no-go after the extended pilot project; 3D Printing (in the early stages) and
the use of Google glasses were also rejected. Google glasses implementation for maintenance
purposes was difficult, since people did not like to wear them. The team found different, easier
and smarter solutions for maintenance. It was important to learn from the no-go projects. At the
same time, it was thought that future technological developments might allow Henkel to
implement past no-go concepts, and thus “parked” ideas were revisited regularly. One example
was 3D-printing, which was eventually implemented successfully.
6 KNIME® Analytics Platform is an open solution for data-driven innovation, helping clients to discover the potential hidden
in their data, mine for fresh insights, or predict new futures. It is fast to deploy, easy to scale and intuitive to learn.
7 Tableau is a powerful and fastest growing data visualization tool used in the Business Intelligence Industry. It helps in
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P-1186-E Henkel: A Digital Transformation Journey
With one standard data lake and one analytics platform, Wolfgang Weber’s global digital team
started to perform data analytics in different domains. The first step was descriptive analytics,
including diagnostics and root cause analysis. The next phase was to move into predictive
analytics with applications to optimize service levels, inventory levels and demand forecasting.
Since Henkel had been in a mature market for years, it had reached a limit in terms of forecasting
accuracy with current technologies. Henkel therefore decided to launch a pilot project with the
goal of improving forecasting accuracy by leveraging both big data and real-time information on
one hand, and machine learning algorithms on the other hand.
After deep research in 2017, we selected E2Open9 supply chain software for our demand
sensing. The tool picks our forecast, retailers POS, inventories, distribution center inventories
and economic indicators and gives as an output and enriched forecast. The next 14-day
forecast at SKU level is very good, short-term predictions are very accurate. It is a machine
learning (autoML) forecasting engine tool with two years of data history considering seasonal
patterns, cyclicity and external market data.
Tarun Rana, International Digital Transformation Lead
Henkel’s consumer goods businesses carried out a 3-month pilot project with the new
technology in its Spanish business, starting in September 2018 and going live in January 2019.
In 2019, they scaled up this solution in key markets in Europe and North America, achieving a
forecast improvement over 20% at SKU level. The company continues the global rollout of this
demand sensing technology in 2020, with the goal of decreasing working capital by almost 10%.
In 2019, the Düsseldorf plant wanted to launch a pilot project centered on predictive
maintenance. The Global Digital Team contacted a Dutch start-up with a predictive maintenance
tool recording data traffic between the engines and the PLCs behind them. Together with the
Düsseldorf engineering team, they trained the machine-learning tool for three months and then
switched into a monitoring mode to measure results. The tool could anticipate the time an
engine would break with an accuracy of more than 91%. Thus, predictive maintenance
contributed to improving the factory’s OEE. While the global digital team supported the design,
validation and implementation of the initiative, the initiative itself was a bottom-up proposal
from the plant.
For the first time in 2019, we installed learning algorithms that allow us to go beyond
“visualization” and “diagnose”: we “predict” future demands and we “prescribe” users actions
such as delivery pattern optimization.
Tarun Rana, International Digital Transformation Lead
In parallel with the predictive analytics pilots, Henkel also developed prescriptive analytics in
several key areas of supply chain management and planning. Henkel began using big data
prescriptive analytics for negotiation strategies with key customers (channel partners and
retailers) around new promotions, new product launches, joint cost reduction programs, joint
logistics efficiency initiatives, and the design of integrated distribution networks with customers.
Prescriptive analytics insights emerge from a tool called “cost to serve,” which was a six-month
internal development at Henkel. The tool went live in 2019 for 17 countries and was used by
customer operations and logistics teams in the regions.
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Henkel: A Digital Transformation Journey P-1186-E
Amazon is not a traditional retailer; they are a new player in laundry detergent, and they don’t
want to order Henkel in full pallets. However, they order very frequently during the week at
very low quantities. Logistics costs are tremendous to handle due to low pallet loads, mostly
LTL, with multi-drop shipments from multi-distribution centers. Right now, we are working
together with Amazon’s supply chain team using our machine learning algorithms to negotiate
an efficient joint distribution network, fulfillment center locations, logistics conditions, product
price and discounts holistically.
Tarun Rana, International Digital Transformation Lead
Digital Talent
The expansion of the digital backbone also represented a challenge for HR, as the company’s
shift to digitalization demanded entirely new skills. A combination of upskilling of current profiles
in Henkel and bringing in new profiles from outside was required. Initially, the HR department
focused on the engineering team in order to create a global digital group with the required
specialization for its new tasks. The department began training some engineers within the
company who had an affinity for IT-related topics and technologies. At the same time, it started
to look for new profiles from outside the firm, which triggered a key problem.
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P-1186-E Henkel: A Digital Transformation Journey
We were used to looking at engineer CVs that showed a linear development, meaning school,
university, a master’s degree and preferably a PhD in production technology, automation or
robotics. Now, we focus on identifying IT and digital know-how instead of chemical or process
or mechanical engineering.
Armin Heck, Head of HR Business Unit Laundry and Home Care
Now we look for people with knowledge in three pillars: supply chain, data analytics and
visualization.
Jorden Rasquin, International Planning and Logistics
At the same time, the company started creating new digital profiles itself. At the Düsseldorf plant
in Germany, the company began developing “digital engineers;” trained in chemical engineering
but also IT experts. Universities were still generating “silo” engineers, specialized in either
chemical engineering or IT; they did not prepare the types of engineers needed by Henkel, who
got around this by hiring silo engineers and giving them specific training to become digital
engineers with the skills to run specific pilots in digitalization, automation and robotics.
Digital Upskilling
In 2017, Henkel started building up systematic online tutorials with a concrete focus on digital
backbone applications and analytics for employees. These developed into an extensive library of
online training sessions, which became the origin of the digital upskilling initiative. In March 2019,
Henkel launched the global digital upskilling initiative for its 53,000 employees worldwide.
After performing anonymous employee online self-assessments, Henkel evaluated digital skills
on general knowledge in a playful way, as well as expert levels, targeted to specific job roles for
both management and frontline competencies. The results helped Henkel understand how
digitally savvy employees were and what kind of tailored training recommendations were
required.
Together with the Innovation Hub, Henkel created maize.PLUS10, an innovative online learning
experience designed to help professionals develop an innovation-driven mindset. The
personalized assessment and learning embraced new technologies, consumer trends, new ways
of working, and other relevant business topics.
For the experts, Henkel teamed up with Accenture and developed a digital capability framework
for each “job family” (e.g. Marketing, Sales, IT or HR), which would serve as a future-oriented
industry standard.
The specific training sessions on digital skills and knowledge were offered on a new learning
platform launched to support all employees on their digital learning journey. This was developed
together with Cornerstone11, a leader in cloud-based Talent Management software. Employees
benefitted from an intuitive platform, which offered engaging learning experiences and
personalized content. It encouraged constant upskilling and learning on-demand, while responding
to the users’ individual needs.
10Maize.PLUS is an e-learning platform dedicated to teaching digital transformation to over 50,000 employees from
companies all over the world.
11 Cornerstone OnDemand, Inc. is a cloud-based learning, talent management and talent experience software provider.
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Henkel: A Digital Transformation Journey P-1186-E
In this transformation process, our people are key. We want to ensure that they have the digital
skills and knowledge that is needed – now and in the future. Driving such a change is a challenge,
as we have a highly diverse global team of over 50,000 individuals with many different
backgrounds and job profiles. This change will not happen overnight but is a journey that will last
three to five years.
Sylvie Nicol, Corporate Senior Vice President Global Human Resources
As part of a 2020 plan, Henkel aims to go further and provide all operators with access to the
different learning tools.
Vision 2020+
Dirk Holbach was reviewing the future vision of the digital supply chain transformation journey.
Definitively, this journey should contribute to achieving mid-term business and supply chain goals:
reducing manufacturing and distribution costs by a double-digit MEUR p.a., reducing inventory by
more than 20%, improving customer satisfaction via increased and differentiated service levels as
well as on-time delivery, and improving throughput time and line efficiency by up to 30%.
My organization had built a very good digital foundation but I wonder how to accelerate the
digital transformation even further. I believe we can leverage the network of the 4IR lighthouses
and therefore adopt faster a digital enabled supply chain. Change management is key, especially
the ‘human factor’ which is usually the element that defines speed.
Dirk Holbach, Corporate Senior Vice President Supply Chain, Laundry & Home Care
The business unit’s plants now had access to more information, and plants were moving towards
empowering employees so they could make decisions faster based on available data. In other
words, the company was moving decision power to where the information was, for instance,
onto employees’ laptops and mobile devices.
Thinking ahead, Holbach realized that the company had to focus on attracting digital talent,
especially younger generations who were keen on joining highly digital businesses rather than
big corporates. In order to change that perception, Henkel had to communicate proactively and
share its digital projects with universities and the digital community.
He believed that the company could only achieve supply chain competitiveness with digital
innovation from production to end-to-end supply chain. Innovation starts with people who can
make digital transformation and technology adoption a successful process. Investments in
training the entire workforce are necessary to ensure new capabilities of the user. A connected
workforce can only happen when new applications are user centric developed.After a few
seconds of silence, Weber asked Holbach again:
Dirk, what are your thoughts around 5G, blockchain and AI-enabled supply demand planning
solutions? In those domains, we have received proposals from innovative startups and some
other more mature companies willing to work with us. We should determine priorities of
investment and what type of partners we should work with in these domains.
Holbach was not just thinking of these opportunities, but also of everything they might be leaving
behind along the way. He did not want to miss opportunities in the digital transformation journey but
at the same time, he wanted to ensure digital adoption was increasing in speed and effectiveness.
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P-1186-E Henkel: A Digital Transformation Journey
We enjoy a high degree of automation and have invested heavily in robotics during previous
years however, I believes there is still room for improvement towards touchless factories.
In spite of automation people will be always required in factories but with a more high value
contribution. Actually, the recent COVID-19 crisis enabled the development of new digital
automation solutions to control social distancing inside factories. He was convinced that
more automation opportunities in material handling and production environments could be
developed.
Another priority I have is the expansion of the end-to-end modeling of the supply chain, in
other words developing a digital twin of their supply chain. So far we have built so many data
models but now we aim to improve such a real time representation of our supply chain in
two aspects: data density and frequency. Bottom line a digital twin of the end-to-end supply
chain will enhance faster and better decisions which are required more than ever in the post-
COVID scenario.
Concisely, the adoption of new technologies is critical to move forward our digital
transformation journey but I wonder what I can do with new technologies if I am not
successful in the change management of my organization and having my entire workforce
prepared. I am afraid I cannot overload my organization with too many changes at the same
time; there is a risk something gets broken down. I strongly believe I have to be very selective
in my decisions with a limited number of initiatives per year. It is key how we explain, deploy
and digest.
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Henkel: A Digital Transformation Journey P-1186-E
Exhibit 1
Henkel’s First Branded Product, the Bleaching Soda
Exhibit 2
Henkel's Current Product Portfolio
Industrial Business Consumer Business
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P-1186-E Henkel: A Digital Transformation Journey
Exhibit 3
Henkel's Strategic Framework
Exhibit 4
IT Infrastructure
Business
Intelligence Sets
Enterprise Data
Warehouse Unstructured
data processing
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Henkel: A Digital Transformation Journey P-1186-E
Exhibit 5
Evolution of the Number of Sustainability Meters
3,500
3.500
3,000
3.000
2,500
2.500
2,000
2.000
1,500
1.500
1,000
1.000
500
500
00
2012
2012 2013
2013 2014
2014 2015 2016 2017 2018 2019 2000
2020
Exhibit 6
Best Operating Practices – Sustainability Example
ENERGY 5%
# Scope Description Status ABC Due Date One Pager Comment
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P-1186-E Henkel: A Digital Transformation Journey
Exhibit 7
Multimedia content
https://youtu.be/8z15EledMkQ
Exhibit 8
OEE Improvement in Terms of Energy Savings
Introduction
Online
L Energy KPI [kWh/t]
Energy
Metering
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Henkel: A Digital Transformation Journey P-1186-E
Exhibit 9
Real-Time Track & Trace of Customer Shipments
Plants DC Customer
Exhibit 10
Horizontal + Vertical Approach
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P-1186-E Henkel: A Digital Transformation Journey
Exhibit 11
Henkel Data Foundation Structure
Exhibit 12
Line Efficiency Report Example
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Henkel: A Digital Transformation Journey P-1186-E
Exhibit 13
DigiGym Area Setup (Stationary Example)
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