IES857

July 2020

Henkel: A Digital Transformation Journey

Joan Jané
Rafael Ruiz

Competing With a Digitally Enabled Supply Chain

In his Amsterdam office, Dirk Holbach was having a one-to-one discussion with Wolfgang Weber
to assess new technological opportunities for Henkel’s digitally enabled supply chain. He had
just received the latest ideas from their teams on 5G, blockchain and AI-enabled supply demand
planning.
Dr. Dirk Holbach was the corporate senior vice president of supply chain at Henkel Laundry &
Home Care and had been the initiator, mastermind and sponsor of the digital transformation
journey since it began in 2011. Wolfgang Weber was the global head of digital supply chain
transformation, reporting to Holbach.
Wolfgang Weber was summarizing the situation to Holbach:
Since we started our industrial digitalization we have rapidly increased the number of devices
connected in plants, with an exponential growth of data transmitted in real time. We will
soon have a scalability challenge to guarantee the capacity, speed and security of our
communications. I mean ultra-reliable, high-speed, low-latency, power-efficient and high-
density wireless connectivity.
5G’s strong focus is on machine-type communication and the Internet of Things, extending
far beyond mobile broadband with ever-increasing data rates or proprietary networks as we
currently use in our premises. In particular, 5G supports communication with unprecedented
reliability and very low latencies, as well as massive IoT connectivity.
It has the potential to provide (wireless) connectivity for a wide range of different use cases
and applications in the industry thanks to the concept of 5G slicing, which allows the creation
of virtual sub-networks tailored to serve multiple use cases. In the long-term, it may actually
lead to convergence of the many different communication technologies that are in use today,
thus significantly reducing the number of relevant industrial connectivity solutions.

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

The Henkel Story

In 1876, Fritz Henkel and two partners founded the company Henkel & Cie in Aachen and
marketed the first product, a universal detergent based on silicate. Contrary to all similar
products, which at that time were sold loose, this heavy-duty detergent was marketed in handy
packets (see Exhibit 1).
In the years that followed, this German family of entrepreneurs and thousands of their
employees built Henkel into a global company organized into three business units: Laundry &
Home Care, Adhesives Technologies and Beauty Care (see Exhibit 2).
By the time Holbach and Weber were speaking, Henkel’s agenda reflected its commitment to
sustainably continue Henkel’s long-term success. Carsten Knobel, CEO of Henkel, explained:
As a first step, we have defined the aspiration for our company: to win the 20s through purposeful
growth. This aspiration goes well beyond financials:
 We aim to outgrow our markets through superior customer and consumer value.
 We will differentiate ourselves through positive impact on society and the planet as
leaders in sustainability.
 And we want to enable our people to grow with a sense of belonging.
Carsten Knobel, CEO

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. Digitally integrated next generation end-to-end demand sensing

Data Foundation enabled end-to-end real-time synchronous planning. Customer
demands with big data such as point of sales, social media and economic indicators,
which were identified and translated to create a real-time e2e supply plan, taking into
account real-time machine data within the entire SC network.
2. Digital twin of sustainability on machine-granularity
Real-time sustainability actions. Connected and benchmarked each of the >30 factories
and technology in energy, water and waste. Every employee accessed real-time data and
benchmarks and is empowered to reduce CO2 footprint.
3. Digital e2e dispatching and tracking
Right-time delivery to customers. Data Foundation predicted and communicated ETA
deviations to customers based on real-time production output, warehouse throughput,
real-time GPS signals, traffic and weather, closing the end-to-end synchronous loop.
4. Digitally enabled real time global overall equipment effectiveness (OEE) platform
Access to data and insights at all levels revolutionized. Each operator on the shop floor had
access to real-time efficiency and loss analysis of their own manufacturing line, as well as
its benchmark against >250 lines around the globe to find improvement potential.
5. Seamlessly connected digitally-steered lights-out warehouse
Data Foundation enabled touch and seamless supply. It operated a 200,000-pallet-
warehouse in full automatic mode, including in-/outbound, as well as synchronization
with manufacturing and OEE performance.
The transformation of Digital into a customer & consumer value creator was a strategic priority
for the company, so Henkel implemented a range of targeted initiatives to further deepen
relationships with customers and consumers worldwide, strengthen its leading brands and
technologies, develop exciting innovations and services, and capture new sources of growth.

The Digital Transformation Program

While Weber shared his ideas for the future, Holbach mentally reviewed the history of the entire
Henkel digital transformation journey since its inception and the lessons learned over the years.
Overall it was a success story, but there had been roadblocks and surprises along the way.
Only very recently, the World Economic Forum had recognized Henkel as a frontrunner of the
4th industrial revolution1. In January 2020, Henkel became a member of the WEF’s “Global
Lighthouse Network” with other leaders of advanced manufacturers, ranked 1 out of 14 end-to-
end lighthouses globally, and 1 out of 2 end-to-end lighthouses in the Fast Moving Consumer
Goods industry on global level.

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.

Building the Foundation – the First Digital Data Backbone

Back in 2011, the Laundry Supply Chain division of Henkel was pioneering the ISO 50.001 “Energy
Management” certification process achieved in 2012 for all the 28 global production sites at that
point in time. Thanks to the certification process and in line with the Henkel CEO’s sustainability
goals, the supply chain leadership team had the vision to start measuring and benchmarking its
main energy consumption entities globally and in real time.
Since we cannot improve what we don’t measure, we decided to implementa project for real-
time control of energy and water consumption.
Dirk Holbach, Corporate Senior Vice President Supply Chain, Laundry & Home Care

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

operational insights as the basis of real-time performance management.

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 P-1186-E Henkel: A Digital Transformation Journey

The Expansion of the Digital Backbone

Aware of the value of the digital backbone, the team was gradually able to enhance the digital
backbone functionality to product & process quality during 2013. After some years of
experimentation with high-speed image-processing devices supervising the labeling process,
the goal was set to meet 100% quality level of labelled detergent bottles for global volumes of
more than 2 billion bottles manufactured per year. To achieve this, the decision was made in
2014 to roll the technology out globally, and at the same time connect devices and process
capability data to the digital backbone. The technology was tested in high-speed production
lines to check if it worked as expected. After a successful pilot validation, that technology was
included in the digital backbone. Every product bottle is real-time checked whether it has the
right label correctly positioned, whether that label is wrinkled, and so on. The technology helps
fine-tune and adjust machine parameters to get the perfect quality result. (See Exhibit 7).
Wolfgang Weber, Global Head of Digital Supply Chain Transformation

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

samples, be they liquid or solid.

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 Henkel: A Digital Transformation Journey P-1186-E

The Digital Supply Chain: Expanding the Digital Backbone Further

In 2016, Henkel reshaped its thoughts around digital in supply chain. The team defined five key
technology areas it believed had significant business benefits for its concrete Fast Moving
Consumer Goods (FMCG) business – the strategic frame for all upcoming activities:
1. Sensorics
2. Robotics
3. Analytics
4. Visualization
5. End-to-end application and data integration
Stefan Kozielski, plant manager at the Düsseldorf facility in Germany, reflected:
We faced a rapid expansion of our pilots’ scale-up trials, and rolled-out applications during
the following years. However, the digital transformation was leveraging the legacy systems
and not building an on-top extra platform.
In the meantime, total meters connected to the digital backbone had increased to more than
3,500, while the online OEE system was rolled out globally to more than 250 complex filling lines.
The company added formula fingerprinting capabilities in 2016, leveraging machine-learning
algorithms and real-time enzyme measuring in 2018. It also standardized its machine-to-
machine language with suppliers to PackML, leading to the first fully connected filling lines
supporting future self-optimizing systems.
By 2017, the company had carried out its first trials with drones and latest generation
Automated Guided Vehicles (AGV’s). While there was some doubt about the benefits of drones,
AGVs were adopted by several sites and proved to be very efficient.
AGV usage was expected to improve with the introduction of 5G technology, allowing a
centralized guidance algorithm instead of a separate AGV implementation approach. During
a period of time, factory workers had to cope with a combination of manual and automated
guided vehicles, so training and adaptation to the new technologies became a priority.
In 2018, the Holthausen plant moved further into Industry 4.0 by launching a pilot project in
collaboration with the in-house Heidelberg 3D printing competence center. It allowed the plant
to replace more than 20 complex and expensive spare parts with others produced by a 3D
printer. Some of the parts were so expensive that the adoption of 3D printing technology
delivered a savings of 200,000€. The 3D printing journey was just starting at Henkel.
I use a Top 10 list of principles to manage the plant. The first one is communication and training.
We must take away fear and engage people in the use of new technologies. Engagement is one
of the major success factors in my plant.
Stefan Kozielski, Plant Director Holthausen

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

Pilot, Learn and Scale Up

Throughout Henkel’s digital transformation journey, it had developed a unique “vertical/
horizontal/global” approach (Exhibit 10). It was vertical in the sense of testing concretely defined
applications focusing on a defined area, with specific benefits (i.e. label quality control); horizontal
in terms of adopting the applications to other areas and integrating continuously more of the data
across the value chain; and global in terms of scaling up to multiple plants. A 2-3 step scale-up
methodology was used:
1. Pilot in 1-3 sites (3-6 months)
2. Go/No-go decision based on a clear business case
3. Scale-up globally (12-18 months)

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

I think we succeeded with this methodology because it is a smart combination of a top-down

and bottom-up approach, involving the key users and stakeholders early in the solution
design process. That process is steered “application by application” through a focused and
compact central team creating every day tangible user value. We had one global framework,
one simple process leveraging our entire global organization.
Dirk Holbach, Corporate Senior Vice President Supply Chain, Laundry & Home Care

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.

Big Data and Cloud-based Analytics Platforms

In 2017, Henkel started to unify all its information in a data lake, called the “Henkel Data
Foundation.” (See Exhibit 11).
Initially run on lab server based analytics platform Cloudera-Knime6, Henkel decided to move to
a Microsoft Azure cloud in 2019 environment and the company’s single source of truth (SSOT)
data platform. The central information technology group piloted different technologies with
different companies before selecting Azure cloud. All system applications, such as SAP, Oracle
TMS and all data coming from factory sensors, were connected to the data lake.
By mid-2017, leveraging Tableau7 and PowerBI8, Henkel built team capabilities and developed
reports in the area of supply and demand planning, as well as logistics (see Exhibit 12). This
platform grew between 2018 and 2020, to more than 2,500 users and 20,000 single report
access requests by more than 450 different users per day on a global scale.

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

simplifying raw data into the very easily understandable format.

8 Microsoft Power BI is a business intelligence platform that provides nontechnical business users with tools for

aggregating, analysing, visualizing and sharing data.

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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.

9 E2open is a business-to-business provider of cloud-based, on-demand software for supply chain.

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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

Preparing the Workforce for the Digital Transformation

The Connected Workforce
Initially, the digital backbone was used by a small number of people in the factories, such as
plant managers, some controllers and cluster managers. However, it was quickly extended to a
broader workforce, including shift leaders and sales managers, in order to oversee the efficiency
of the filling lines.
New daily operating procedures on the shop floor started with a 20-minute morning meeting,
which included the production manager, production engineer, head electrician, an internal
logistics specialist and four sales managers. During this meeting, the biggest production line
issues from the last three shifts, gathered in the digital backbone, were checked. Lean
manufacturing and continuous process quality improvement mechanisms were implemented
thanks to data coming from the digital backbone. Managers looked at the OEE number for one
of the production lines and then probed deeper into the different machines in the production
line to identify the biggest problem. After picking up the biggest production bottleneck of the
last 24 hours, they drilled down into a root cause analysis, prioritization of causes and resolution.
Today, more than 250 complex filling lines are connected with machine data so that users can
visualize, analyze, track and benchmark data in real time from any place in the world. In 2020,
Henkel has launched two initiatives: “Digital gyms,” (see Exhibit 13) focused on upskilling the
frontline workers, and a fully integrated “Connected worker app platform” that piloted in 2020
and was rolled out 2021.

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

Source: Henkel. (n.d.). History. Home. https://www.henkel.com/company/milestones-and-achievements/history.

Exhibit 2
Henkel's Current Product Portfolio
Industrial Business Consumer Business

Adhesive Tecnologies Beauty Care Laundry & Home Care

Source: Stock Picks, Stock Market Investing | Seeking Alpha. https://seekingalpha.com/article/4187919-henkel-

conservatively-financed-consumer-company-adhesives-business-attached.

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 P-1186-E Henkel: A Digital Transformation Journey

Exhibit 3
Henkel's Strategic Framework

WINNING COMPETITIVE FUTURE-READY

PORTFOLIO EDGE OPERATING
MODELS
INNOVATION
SUSTAINABILITY
DIGITAL

COLLABORATIVE CULTURE & EMPOWERED PEOPLE

Source: Henkel. (n.d.). Strategic framework. Home. https://www.henkel.com/company/strategy.

Exhibit 4
IT Infrastructure

Business Intelligence Big Data Analytics Data-driven

Reporting Dashboards Applications

Data Delivery Zone

Business
Intelligence Sets

Enterprise Data
Warehouse Unstructured
data processing

Data Landing Zone

Structured data Unstructured data (internal & external)

Source: Document provided by the company.

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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

Source: Document provided by the company.

Exhibit 6
Best Operating Practices – Sustainability Example

ENERGY 5%
# Scope Description Status ABC Due Date One Pager Comment

1 Production Is the pres s ure in compres s ed air s upply s ys tem No B modified

reduced to the minimum limit?
2 General Are the motion detectors ins talled for s witch of In Progress
illumination ON & OFF in the areas where
pers onnel is pres ent rarely?
3 General Are the LED lamps ins talled for internal and Yes
external illumination?
4 General Are all electric motors over 10 kW which can be In Progress
us ed with variable load equipped with
frequency converters ?
5 General Are the pumps for circulation of liquid materials In Progress modified
des igned according to needed capacity?
6 General Are all ins talled pumps have high efficiency (not In Progress
les s than 54%)?
7 General Are thermal pumps us ed for water heating? Yes
8 General Are inverters ins talled where it is pos s ible? No
9 General Are roof areas with trans lucent plates Yes modified
10 General equipped?
Are frequent checks of leakages in compres s ed In Progress modified
air piping performed?

Source: Document provided by the company.

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 P-1186-E Henkel: A Digital Transformation Journey

Exhibit 7

Multimedia content

https://youtu.be/8z15EledMkQ

Source: YouTube, 2020. Intravis Henkel. YouTube.com. Accessed May 2020.

Source: Document provided by the company.

Exhibit 8
OEE Improvement in Terms of Energy Savings

Energy savings per year

Introduction
Online
L Energy KPI [kWh/t]

Energy
Metering

Base Improvement Increment via Digital

Source: Document provided by the company.

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 Henkel: A Digital Transformation Journey P-1186-E

Exhibit 9
Real-Time Track & Trace of Customer Shipments

Plants DC Customer

Source: Document provided by the company.

Exhibit 10
Horizontal + Vertical Approach

Transparency & Visibility

Digital Backbone: End-to-End Analytics

Supplier Plant Distribution Customer

Center

Sensorics Analytics Robotics Visualization

IT Architecture & Systems

Agile Transformation Culture

Source: Document provided by the company.

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 P-1186-E Henkel: A Digital Transformation Journey

Exhibit 11
Henkel Data Foundation Structure

Virtual Infrastructure Front End Physical Infrastructure

Source: Document provided by the company.

Exhibit 12
Line Efficiency Report Example

Source: Document provided by the company.

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 Henkel: A Digital Transformation Journey P-1186-E

Exhibit 13
DigiGym Area Setup (Stationary Example)

Source: Document provided by the company.

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