As such products have a high ratio of volume compared to value, storage requires large and expensive warehouse capacity, either at the manufacturers site or at the customer site. Therefore, buffer stock is limited to a few days of production only, which certainly increases the risk of supply chain disruptions in case of any production problems. At the same time production machines are of such a nature, that serious damages cannot be repaired within short times.
The impact on the business interruption risk could be substantial and maintaining uninterrupted, reliable production is therefore of vital importance for Essity.
Tissue plant expansion in Kostheim, Germany
Essity initiated a large project valued at more than 100 million euro, to extend an existing plant. The project, planned to run over 2-3 years, included the installation of production equipment, including one large tissue paper machine, alongside warehouses and various modifications to the plant’s infrastructure. Altogether this project accounted for a substantial share of the company’s turnover and had to assure the competitiveness of Essity in the local market.
Such complex projects involve multiple parties, both external and internal, all providing specific fields of expertise, ranging from production, building construction, fire protection to insurance just to name a few.
Early support and ongoing collaboration
The project team was supported early in the project by the local Risk Engineer from the nearby German Branch Office of If P&C Insurance. This support is a part of an ongoing collaboration between Essity Group Risk Management and If, If being one of Essitys chosen risk management service providers. The risk engineers supported Essity in delivering the new facility in a safe and efficient way.
If's Risk Engineers assessed the possibility of property damage, and especially the business interruption risks. This resulted in several recommendations to be implemented during the construction phase and final start-up of production. Such work is done in several phases, with an increasing level of detail, to ensure reliable operations.
Local presence to the construction site proved to have a positive impact allowing If to meet the project team whenever needed. Knowledge of Essity’s business, awareness of expectations from Essity Group Risk Management and local legal jurisdiction has been a prerequisite for effective consultation regarding risk control.
The basis for all consultation has been the Essity corporate loss prevention standards, established technical standards, as well as key capabilities and know-how from If’s Risk Engineers, accumulated over decades of focused work in this respect, as the pulp & paper represents one of If’s core client industries.
Uncovering potential risks
Generally, in any major project, overall assessment of the risks is important. Essity introduced a concept with tools and processes for an overall risk assessment for some years ago to ensure that all types of risk are assessed in the project. The chosen risk management providers are a central part of this assessment with their expertise on industrial loss prevention, and with a holistic, business interruption perspective.
Rather than just installing production equipment, Essity as an organisation realizes the importance to also consider other aspects, for example relating to infrastructure, to make sure nothing is missed.
According to the initial project plan, two new main transformers were to be located close to the existing main power plant. When consulted, If’s Risk Engineers assessed the overall risk situation, revealing the potential business interruption risk, in case of a fire at any location in this area being not acceptable.
It became evident that the output of the entire new production facility is dependent upon these transformers. Should anything go wrong with the transformers, the business interruption risk would be substantial.
As soon as the issue was uncovered, all parties joined in working together to find a solution, making use of all the competence and expertise in the team. The resources required to mitigate the business interruption risk to an acceptable level was efficiently activated by the team effort.