Norske Skog Improves Global Profitability Using Operations Research

Many businesses are currently uncertain of how the economic recession will affect demand for their services and products. For global papermaker Norske Skog, this is a familiar situation. Over the past decade, the company has experienced declining demand for its products as electronic media have replaced newsprint publications. As it struggles to survive, the company has been forced to make some difficult decisions, including closing paper production lines and entire mills. Operations research (OR) models have become a vital part of Norske Skog's decision-making process, helping the company to significantly reduce costs and enabling senior managers to make difficult choices with confidence that their solutions are the best possible. The tactical use of OR models has provided solutions that enable Norske Skog to save US$8 million and US$10 million annually in Australasia and Europe, respectively. In 2008, the Norske Skog Board used a model to make a strategic decision to close two paper mills and a paper machine, saving the company US$100 million annually, compared with the status quo. These savings are equivalent to 3 percent of the company's revenue.