Norske Skog

A Norwegian newsprint manufacturer is using "operations research" to figure out what to close and whom to fire — while making labor unions like it, reports Stephen Baker in BusinessWeek (5/11/09). The manufacturer, Norske Skog, "the world’s second largest newsprint manufacturer, has turned shrinking into a science." It has created a "detail model of its global operations" that enables it "to identify what to eliminate right down to individual machines."

The methodology, "operations research" actually dates back to the 1940s, when it was used to "fine-tune logistics." Now, the approach "is reaching into new fields, including corporate strategy." This is quite a switch from the way Norske Skog did things "just four years ago." Back then, it used a simpler method to cut some 380 jobs, which was "a public-relations nightmare" because it "was viewed as arbitrary."

This time, when it cut 300 jobs, labor unions "found nothing to complain about," according to Kare Liera, an employee representative. "They were able to convince us that the numbers were correct." The new model also "picked out money-losing operations in plants that appeared to be well-run," such as "a manufacturing line in Korea that was selling recycled stock from the U.S. at a loss." Unfortunately, despite the surgical strikes at inefficiencies, the company "is still struggling in a declining industry."