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28.09.2022
HEINEKEN:
BUILDING THE CONNECTED BREWERY
Researcher Dr. Richard Markoff and Professor Ralf W. Seifert prepared this case as
a basis for class discussion rather than to illustrate either effective or ineffective
handling of a business situation.
Copyright © 2022 by IMD – International Institute for Management Development, Lausanne, Switzerland
(www.imd.org). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form
or by any means without the prior written permission of IMD.
This document is authorized for use only in Prof. Pieter Nagel's MAIB Sept 23- Term 2 Syd Operations Mgmt at S P Jain School of Global Management - Dubai from Jan 2024
to Jul 2024.
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HEINEKEN: BUILDING THE CONNECTED BREWERY
Heineken, one the world’s largest brewing companies, had a successful track record in
continuously improving the efficiency and agility of its brewery network. The Total
Productive Management (TPM) program driving this was a source of pride for the
company and its chief supply chain officer (CSCO). At the same time, it represented both
a challenge and an opportunity. The company had long been curious about the potential
for digitalizing the supply chain to propel the best-performing breweries to even higher
performance levels, and this provided the natural entry point for the company’s supply
chain people to create a digital transformation program. Heineken could continue or even
accelerate its efficiency efforts by leveraging digital technologies.
Starting by bringing in digital natives from outside and identifying key internal
stakeholders ready to innovate, Heineken began a process of initial digital pilots in which
those that were willing could experiment, fail fast, build on successes and build a digital
culture that was receptive for greater change.
Using breakthrough experiments and use cases, and by prioritizing financial return, the
company overcame internal resistance, found its way to a model that did not require
standardization and allowed for local innovation and ownership. Heineken successfully built
a digital community that operates like a tech company as much as a brewing company.
COMPANY BACKGROUND
Heineken was founded in 1864 in Amsterdam Gerard Adriaan Heineken, who started
with a single brewery. He began brewing beer under the brand name Heineken starting
in 1873. The company grew steadily, adding a second brewery in 1874.
Throughout the 20th century, Heineken grew through exports and acquisitions that
allowed the company to expand both its brand portfolio and its geographic reach. By
2020, Heineken was, by revenue, the second largest brewer in the world after AB Inbev. 1
Heineken’s brand portfolio contained many popular beers, including international brands
such as Amstel, Sol, Tiger and Desperados (see Exhibit 1) and a panoply of specialty
and local beers. Overall, it listed more than 300 different beer brands available in over
190 different countries. On its own, the Heineken label was one of the most popular
beers in the world. 2 Heineken also owned 40% of the brewer of the Chinese Snow beer
brand, the world’s top-selling beer. 3
The company was organized into 4 geographic territories which were subdivided into
markets. There were 140 Heineken-owned breweries in more than 65 countries and 5
1 https://beerconnoisseur.com/blogs/7-largest-and-most-successful-beer-companies-around-
world
2 https://www.businessinsider.com/most-popular-beers-in-the-world-2018-9?IR=T
3 https://koryogroup.com/blog/snow-beer-the-best-selling-beer-in-the-world-you-ve-never-heard-of
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continents. The firm was structured through some 70 “operating companies,” which had
the freedom to be entrepreneurial in developing local markets.
The company brewed 220 million hectoliters of beer in 2020, the equivalent of over 66
billion standard-sized bottles. The Heineken brand represents about 19% of total
production volume.
In 2020 the company employed over 84,000 people, earned €19.7 billion in revenues
and enjoyed a 12.3% operating margin. Heineken was a leader in sustainability, reducing
its carbon footprint from production by 51% and its water consumption by 33% from 2008
to 2020.
The company is publicly traded in Amsterdam, and the Heineken family retained a
controlling stake. 4
LAUNCHING A DIGITAL SUPPLY CHAIN
From challenge to opportunity

In 2017, Marc Gross, Heineken’s Chief Supply Chain Officer at the time, found himself
facing a welcome challenge. The company had spent years developing and
implementing Total Productive Management (TPM), a rigorous approach to eradicating
losses in beer production.
TPM had been the supply chain function’s signature initiative. By bringing TPM to
maturity across all of its sites, Heineken could boast of continuously improving Overall
Equipment Effectiveness (OEE, a widely used efficiency measure), higher quality and
overall improvements in many performance indicators, like energy & water consumption.
However, among the company’s front-running breweries, improvements were beginning

to plateau. It appeared that while Heineken had yet to reap most of the benefits that TPM
could offer in many of its breweries, it also needed a new initiative. If the company were
to maintain the momentum and progress that they had worked so hard to achieve, then
the supply chain leadership team would have to identify the next step in Heineken’s
journey towards performance excellence.
That next step was the potential of a Heineken digital supply chain.
4 https://www.marketscreener.com/quote/stock/HEINEKEN-HOLDING-N-V-6407/company/
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“Don’t get ready, get started”

The Heineken structure was a decentralized one, in which the various markets had
leeway to explore and experiment, and individuals were encouraged to take risks and
not fear failure. This entrepreneurial spirit led the supply chain leadership team to take
bold, rapid steps rather than spend too much time studying and examining the digital
possibilities.
This gave rise to the motto that launched Heineken’s digital supply chain initiative: “Don’t
get ready, get started.”
At the outset, a knowledge gap needed to be addressed. The logical step would have
been to reach out to IT to draw on its expertise. However, IT was focusing on large
system implementations, including enterprise resource planning (ERP) and was not
ready to support local experiments in the area of operational technology (OT).
Wiggert Deelen, Heineken’s European supply chain director at the time, described the
conversation with IT:
Supply Chain had always maintained the Operational Technology domain

in the breweries. The two functions were collaborating on the big
implementations, but lines were clearly drawn between IT and OT. For
sure we did not always comply with company standards, keeping some
operating systems that were out of support running while addressing
security concerns by separating them from the network. We were also
working with vendors that were not familiar for our IT colleagues. While we
wanted to talk about digital and industry 4.0, discussions centred around
pre-conditions and were taking time. We wanted to get going.
Without IT to take the lead, another approach was needed. The decision was taken to
lead the digitalization program from within the supply chain but with a fresh perspective,
by bringing in digital natives. A bold step was taken by hiring David Pavlovic to be the
director of Heineken’s global digital supply chain transformation.
David had been cofounder of a startup that focused on transformation, building and
maintaining digital solutions for its clients. While David had some basic knowledge of
supply chains, he was not an expert on the subject, nor was he an IT specialist. He was
a passionate advocate for the possibilities of digital technology, with a focus on business
value and users’ needs and perceptions.
A people-centric digital transformation

The digital transformation began as a one-man show – just a director with no staff to help
get things going. But David quickly found a like-minded partner in Wiggert Deelen, his
colleague on the supply chain leadership team. Wiggert was eager to see what digital
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capabilities could offer his supply chain. He was ready to offer the breweries under his
aegis as testing grounds.
Both David and Wiggert shared a vision of a digital transformation that would be bottom-
up, not just from markets towards the center, but from people and breweries upwards
towards management.
As Wiggert noted:
We decided to focus on our people on the shop floor. Their work was getting
more and more complicated. New machines, new products, larger areas to
cover. Their access to data and technology was at the same time very
limited. Performance was reported monthly at the level of site-to-site
benchmarkable aggregation. The shop floor wanted to know what happened
and why at sub-component level for the previous 24 hrs. Consequently they
weren’t able to find the time to identify losses and improve performance.
This brought us to our theme: The Connected Worker.
David phrased his own vision as follows:
My belief has always been that one must bring the business to the
technology, not the other way around. To succeed, people must overcome
their fear and discomfort to be ready and have the right mindset to become
receptive for change.
One of the first steps they took was to make a video showing how things could be if
Heineken were to commit to a digital transformation. Focusing on the benefits for
employees on the shop floor, it served as a constructive inspiration.
David and Wiggert introduced the video at a conference of Wiggert’s European supply
chain heads and used the buzz to springboard to a digital supply chain summit, where
the pair shared their vision and strategy. They asked each participant to nominate one
digital supply champion from every European operating company.
This created a community where reactions to capabilities and potential partner startups
could be tested. This in turn helped the community feel that their voices were important,
and allowed the program to understand what digital capabilities would be most readily
accepted.
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Simplicity and scalability
A coalition of the willing

This new community of local digital champions became a “coalition of the willing,” ready
to test and experiment with the digital capabilities and startups that the group had
prioritized.
Through his personal sponsorship, the CSCO provided a budget to fuel these
experiments. The operating companies had the chance to lead and explore exciting, self-
selected digital tools for free. Their people and labor-hours were effectively paired with
the resources and expertise of the corporate center.
This bottom-up and people-centric innovation approach lasted for almost two years, and
the community of local digital champions grew to include nearly 2,000 people in over 50
operating companies around the globe. Training was provided to help participants select
which processes to experiment, develop use cases, build local governance and
technology, and assess data maturity.
Connecting everybody and everything

This approach created a strong digital community, user buy-in and a digital library of
experiments, some successful and others less so. However, what they had in common
was that they were all small and not all easy to scale. The limitations of the approach
were becoming clear, and it was the moment to look for simplicity and scalability.
As David noted:
We had become too big. Too many experiments, too many directions. We
needed to narrow the focus. We needed help to structure it all and develop
business cases.
That help would come from a consultancy firm, one that had catalogued over three
hundred discrete supply chain digitalization use cases for consideration and, more
importantly, had calculated the potential return on investment (ROI) for these cases. In
this way, the digital transformation could secure funds to scale and deploy the chosen
solutions with an ROI that came from an objective, neutral third party.
The central digital transformation team, along with the operating companies’ digital
champions, worked with the consultancy firm and pared the initial general manufacturing
catalogue of 335 digital supply chain use cases down to a short list of 57. They they
whittled that down to a final list of 32 cases applicable to beer production at Heineken
that covered five different areas of the brewing process (see Exhibit 2).
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Building on the experience from the digital experiments, data provided by the community
and the consultancy firm’s ROI models, the team found that the final list of 32 cases
could potentially lower conversion costs by 10%.
The development and adoption of this list was a monumental achievement, the fruit of
two years of efforts. As Wiggert recalled:
That week was a major turning point in Heineken manufacturing history.

We still talk about it and the list remains central to our implementation
program.
Solutions built for the shop floor

The first use case developed from the final list was, fittingly, a condition monitoring
system (CMS). A CMS tracks and displays the status of a production line: running,
stopped, in setup, undergoing maintenance, etc. When deployed to their fullest extent,
CMSs can keep track of the reasons why a line is not running and for how long. This
makes them powerful tools to identify root causes of inefficiencies and improve OEE,
which was the starting point of Heineken’s digital supply chain journey.
Rather than use an off-the-shelf CMS, Heineken decided to build its own and hired a
software engineering firm as they weren’t satisfied with the functional fit, nor with the
implementation effort that the available solutions would require. A combined team of
experts from Heineken and the software firm spent a week in a performance-award-
winning brewery in Poland, where they developing a bespoke CMS into an initial minimum
viable product (MVP), teasing out the needs of the local managers and operators. The
digital transformation team then went on to shape the CMS into a final product.
Once everyone began to see what sort of data they could extract, consolidate and analyze,
they began to imagine and formulate insights they could gain and the value that the CMS
could bring (see Exhibit 3). A virtuous cycle had begun, and within two months, OEE had
improved by 4%, making the vision to put TPM on steroids a reality. As Wiggert noted:
This was the big breakthrough. This was when everyone became a believer.
From there, the Polish brewery began to identify data from outside the context of the
production line, including brewing conditions such as fermentation, seeking deeper and
more subtle insights that could drive their Lean and Kaizen TPM efforts.
FROM EXPERIMENTATION TO VALUE AT SCALE

As Wiggert explained:
Pilots create belief, but value comes from scale.
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Following its success in Poland, Heineken needed a plan to scale up the solution to other
breweries and to create the winning conditions for developing and deploying the 32 use
cases.
To do this, the problem originally identified by IT would have to be addressed: the lack
of standardized tools and data in the huge Heineken brewery network. For any of the
use cases to succeed, the company needed a layer of reliable, controlled data that would
need to come from dozens of legacy systems, machines and sensors. On top of that,
each factory’s data source footprint would look different.
Rather than push each factory to standardize, the company approached the challenge
from another angle. They took the use cases as a starting point and set out to identify
for each brewery what data would be needed and where it could likely be found. Each
brewery – aware of its own industrial footprint – identified its data structure and source
and locally reproduced standardized use cases via the cloud.
The approach was both flexible and scalable, and many breweries built their data
connections in parallel. Every brewery created a locally developed data layer that
captured the necessary data from its own sensors and systems. These data layers could
then be connected to a standardized global data layer, where the use cases run.
The result was that use cases became universal and data sources were local (see Exhibit 4).
Operating like a tech company

The use-case-based approach created the opportunity for Heineken to act like a tech
company, developing use case solutions, building minimum viable products, piloting
them, failing fast and scaling the winners through the use case selection process.
Three plants – in Poland, Vietnam and Mexico – were chosen to be “lighthouse

breweries.” Having demonstrated a willingness and an aptitude to develop, pilot and test
use cases, they became the source of new use cases that would sit atop the varied data
from each participating plant (see Exhibit 5).
The lighthouse breweries did not have the final say as to the functionalities of each use
case. In a company as big as Heineken, it was inevitable that some operating companies
would prefer a local use case solution to the one developed with the lighthouse
breweries. Rather than seeing this as a point of friction, Heineken turned it into an
opportunity for empowerment and improvement. If a brewery felt that its solution was
superior to the one adapted from a lighthouse brewery use case, it was given the
opportunity to explain why it preferred its own solution. Organically, the entire digital
community would either push for change in the original solution or migrate the better
choice.
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The digital transformation office continued to expand, and consisted of global product
owners. It served as mediator and orchestrator, helping to prioritize use cases and
identify vendors. It brought the global community together to spotlight improvements,
share progress on use case development and training, and steer the breweries towards
harmonized use cases.
The costs were shared between the digital transformation office and the operating
companies. The center paid for development costs and capital expenditures, while each
operating company was responsible for licenses and activity-based costs. In this way,
Heineken could keep parallel development of similar use cases to a minimum and ensure
an overall coherent strategy to use case development, while lowering the cost burden of
smaller breweries seeking to benefit from the use cases.
Since the first successful use case, Heineken developed, among others, use cases on
quality reject analysis, continuous improvement tracking and water consumption, with
contributions not only from the lighthouse breweries, but other locations including
Belgium and Cambodia. These use cases are displayed in a “store” on an internal web
portal for local managers to implement according to their priorities.
The connected brewery is considered a success at Heineken. Careful tracking of the

value brought by each use case at each brewery has shown that it has exceeded
expectations. The company found that the 10% conversion cost savings that it predicted
when it identified the 32 use cases would be achieved once all have been deployed.
The benefits of the connected brewery went further than that, as Wiggert explained:
We track the happiness and engagement of the users in the breweries.

There is a noticeable correlation of engagement and happiness in
breweries where we have deployed digital tools and use cases as
compared to where we haven’t yet.
NEXT STEPS
Heineken continued to develop uses cases from the shortlist of 32, concentrating first on
descriptive analytics applications, while also exploring other, more advanced
capabilities.
With so much company-wide use case data available, the company is in the initial stages
of exploring machine learning and artificial intelligence to predict equipment failures
before they happen and continuously optimize process parameter settings.
Heineken also began using 3D printers to generate spare parts and custom designed
tooling from raw material on filament reels. This generated savings and was particularly
useful in remote areas or where there were long import routes, such as in parts of Africa.
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Finally, the IT teams also came around to the program, and invited Wiggert to present to
the global IT teams:
IT embarked on their Agile Transformation. They added digital product

development capabilities to their services. The product owner centric
organization that we had set up is now complemented by IT staff and
teams. Over time we became close allies. This allows us to accelerate the
development of use cases and work with more partners. We have a team
of teams now, which makes us much stronger.
An organization was put in place to propel a plan for development and roll-out of the
Connected Worker apps and Connected Brewery IoT platform across all Heineken
breweries, with a goal of reducing conversion costs by as much as 10% by 2025.
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Exhibit 1: A selection of Heineken brands
Source: Company information
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Exhibit 2: Heineken use case selection
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Exhibit 3: The Digital Supply Chain Community on Workplace
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14
Exhibit 4: The Heineken data layer and use cases
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15
Exhibit 5: The Heineken lighthouse approach
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HBP# IM1255

LAUNCHING A DIGITAL SUPPLY CHAIN

From challenge to opportunity

However, among the company’s front-running breweries, improvements were beginning

“Don’t get ready, get started”

Supply Chain had always maintained the Operational Technology domain

A people-centric digital transformation

David phrased his own vision as follows:

Simplicity and scalability

A coalition of the willing

Connecting everybody and everything

That week was a major turning point in Heineken manufacturing history.

Solutions built for the shop floor

FROM EXPERIMENTATION TO VALUE AT SCALE

Pilots create belief, but value comes from scale.

Operating like a tech company

Three plants – in Poland, Vietnam and Mexico – were chosen to be “lighthouse

The connected brewery is considered a success at Heineken. Careful tracking of the

We track the happiness and engagement of the users in the breweries.

IT embarked on their Agile Transformation. They added digital product

Exhibit 1: A selection of Heineken brands

Source: Company information

Exhibit 2: Heineken use case selection

Source: Company information

Exhibit 3: The Digital Supply Chain Community on Workplace

Source: Company information

Source: Company information

Source: Company information

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