China Mengniu – Twimbit DX 2021 Rank 6

Outcome

Key highlights

Introduction

China Mengniu Dairy began operations in 1999 in the Inner Mongolia Industrial Region, and in two decades, it grew to become one of the world’s largest dairy companies. The company did record -5.8% de-growth in its top line for the first half of 2020 on a Y-o-Y basis, but the group revenue on a comparable business basis increased by 9.4% Y-o-Y for the same term to RMB36.8 billion (USD5.6 billion). Mengniu believes digitising the supply chain management system is the crucial link to its digital transformation. It combines cloud computing, big data and other technologies to improve coordination along the entire dairy industrial chain and enable faster growth of the dairy industry and all upstream partners (e.g., Ranches.)

Transformation

“Behind this cup of milk, there is a whopping 170 megabytes of data, including dairy farm data, production data and logistics data. Industrial chain digitalisation allows Mengniu to milk to 90% of China’s households with the highest efficiency and quality.” – LU Minfang, CEO, Mengniu

Mengniu has continued its efforts to realise “Project 136” during the period, which aims to assist ranches in achieving cost reductions and enhancing efficiency. The vision includes enhancing operational capabilities by integrating upstream information, technology and resources through three platforms: “Digital Milk Source”, “Dairy Cattle Research Institute”, and “Aiyangniu”. The officially upgraded “Aiyangniu” platform, in particular, has opened up the entire industry. The platform aims to remove sales and purchase barriers across the whole dairy industry’s industrial chain, thereby increasing the transparency of material sourcing practices and providing a comprehensive, high limit, inexpensive and convenient supply chain financing solution for upstream and downstream customers.

Key digital initiatives include:

Digital Milk Source – Smart Farming management platform

This platform framework is a farm operation management solution using IoT devices, cloud computing, big data, artificial intelligence and other information technology.

Two pillars are the foundation of the firm’s platform development – dairy enterprises and ranches. It enables the horizontal interconnection of breeding management, health management, milk production management, feeding management, quality management, veterinary medicine management, and dairy enterprise management and operations.

Apart from these functions, the intelligent platform also facilitates the integration of dairy enterprises, dairy farms and government-industry coordination.

Impact: In 2019, as part of its Digital Milk Source project, Mengniu piloted six dairy farms, where the coordination platform provided the dairy farms with more comprehensive data support. The project also helped standardise the farm management process, refine daily operations and refined the cost per kilogram of milk, leading to a more competent dairy farm management and improved performance.

• 25% increase in operating service efficiency since the product launch.
• 40% improvement in management analysis efficiency.
• 18% improvement in dairy farm business efficiency.

Smart manufacturing

As a pilot demonstration enterprise and a fundamental support unit for the intelligent manufacturing of dairy products designated by the Ministry of Industry and Information Technology (MIIT) of China, Mengniu has established two new model factories of intelligent manufacturing and digitalisation in the dairy industry. These two factories, the Gaoke and Jinhua plants, passed the ministry’s acceptance inspection in February 2019. Mengniu received RMB45 million (USD 6.75 million) of state support funding to enable comprehensive applications of intelligent manufacturing digitalisation in the two smart factories.

Mengniu’s pilot digital factories have empowerment by integrating an automated operational technology (OT) data acquisition platform and the Manufacturing Execution Systems (MES). These digital functions enable sophisticated production, process automation, information digitalisation and management transparency.

The firm’s intelligent manufacturing project became one of the first recipients of the Intelligent Manufacturing Benchmark Enterprise title from MIIT, China, in October 2019. Mengniu was the only enterprise in the dairy industry to receive such a distinction alongside eight other companies, including AVIC Aircraft, Haier Group and CATL.

Since the system’s launch, which continuously digitalises manual reporting, the Jinhua plant’s electronic reporting rate has exceeded 33%.

Consumer insights

Mengniu and Alibaba signed a strategic cooperation agreement on 7 September 2017. On one end, this enabled both parties to respond better to the opportunities and challenges under new retail. Mengniu and Alibaba could also narrow in and stay close to consumers’ buying scenarios and behaviour via a series of in-depth cooperation, which helped the firms practice a consumer-centric concept.

In 2019, Mengniu continued to work closely with Alibaba to build a panoramic consumer insight system that leverages the big data system to promote retail and development (R&D). This system would better suit consumers’ needs and enable more accurate market placements.

Together, the companies also carried out a series of new retail innovation projects driven by data and technology to explore new buying scenarios that appeal to young consumers. These digital explorations on the consumer front have advanced continuous innovation for Mengnui in its business model, R&D and production processes, forming a virtuous interactive consumption cycle.

Mengniu is committed to building a consumer insight system for the dairy information age.

Key focus areas:

• Mengniu is building a group-wide unified consumer big data platform with its data interfaces, processes and technologies. The people-centric consumer insight system, which integrates data and implements a unified ID scheme, is currently under development. This system will help achieve consumer information integration, enable services based on labels on different dimensions such as the natural person, behaviour, preference, relationship and support marketing decisions.
• By establishing a closed-look operation system with a digitally-enabled marketing decision-making feature, Mengniu can accumulate high-value data and achieve a virtuous close-loop of data within its business.
• It has designed its overall consumer data acquisition standards based on the data acquisition techniques and concepts of the Alibaba data middle office. This move lays a solid foundation for unifying its consumer data system.

Smart Supply Chain

Through promoting intelligent supply chains and establishing data models and data insights, Mengniu has reshaped the new online+offline supply chain model and established a nationwide production network, making the traditional dairy industry lighter and thinner.

After enabling end-to-end coordination of products, information, funds and logistics along the entire supply chain, Mengniu and its pioneering digital transformation initiative have placed a complete industrial chain information platform. The said platform integrates breeding, planting, procurement, production, storage, sales, distribution and finally, the end market. In 2019, the smart supply chain examined and visualised over 100 indicators and, on this basis, achieved one-stop monitoring of supply chain operations. Simultaneously, the firm made breakthroughs in sales prediction, intelligent ordering, accurate scheduling and layout optimisation.

Key Outcomes:

• Completed five functional modules, including sales prediction, layout optimisation, accurate scheduling, intelligent ordering and large-screen display.
• Establishing a logistics optimisation model that integrates manual work and intelligent applications.
• Achieved optimal transportation and warehouse site selection based on big data analysis to increase logistics efficiency and boost regional sales.