Supply chain

Valio’s supply chain for products sold in Finland

Valio value chain

Milk production and processing raw milk into a range of products generates value added for multiple parties. The value chain depicts the diverse impacts of Valio’s business operations.

Valio value chain graph

Production input purchases by dairy farms

44% of its turnover to dairy farmer entrepreneurs

Raw milk is purchased from Finnish dairy farms run by owner entrepreneurs. Valio pays around 44% of its turnover to dairy farmer entrepreneurs. Valio dairy farmer entrepreneurs produce around 80% of Finland’s raw milk. Transport entrepreneurs trained by Valio collect the milk every other day. Milk quality is ensured by the farm operators and milk lorry drivers before pumping it into the lorry. Collection is operated by 85 transport companies.

Valio milk is GMO free and has the best taste in the world. Milk quality risk is mainly related to microbial drug residues, and due to multiple testing is in practice very low. In case of a fault, the milk is 100% traceable back to the farms. Top quality raw milk underpins Valio’s milk production chain and the product value added.



Other ingredients from Finland and globally from suppliers that have passed Valio’s approval procedures. Product packages from strategic partners, mainly from Finland. We are able to trace the ingredients and packaging we use.

In risk assessment we audit suppliers, act on any faults detected, and develop a process to ensure the responsibility of suppliers from risk-bearing countries (BCSI classification). Package risk mainly involves a cessation of the package supplier’s production, and is in practice very low. Valio purchased production inputs and services, mainly from Finland, to the value of 601 million euros. The share of domestic purchasing in Valio’s operations is around 90% excluding machinery and equipment.

Ingredients streering

Valio has 12 production plants in Finland, eight of which take in raw milk. Milk is forwarded in accordance with production planning to one of those nine plants.

The real-time reporting system in milk lorries provides information on e.g. milk volume, temperature, and the samples taken for dairy farms, milk reception and production plants.

Milk collection routes have been optimised and the lorries are on the move 21 hours a day. Value added manifests as milk forwarding efficiency, low milk wastage, and environmentally sound operations.

Valio uses e.g. berries, fruit, grain, flavourings, auxiliary substances, and additives as ingredients in its products. The only ingredients added to milk are vitamin D, and calcium to Valio Plus™ milk.

Production

The LGG® probiotic is manufactured in Finland and sold to licensee customers around the world. Product safety is ensured in production by compliance with the in-house control plan in accordance with HACCP principles and certified quality systems, and through extremely hygienic production processes. Product safety risk is absolutely minimal and mainly related to production contamination.

Each raw milk batch is tested for drug residues before being pumped into the dairy silo. Faultless and efficient production, energy-efficient plants and efficient treatment of wastewater also generate value added. Production risks relate to the manufacture of specific product categories being dedicated to a single location, and the ability and flexibility of capacity to meet changing consumer trends and the requirements set by new products.

Warehousing

Finished products are transferred to Valio warehouses located in Oulu, Jyväskylä, Riihimäki, Lappeenranta and Helsinki.

Customer sales



Valio Sales draws up agreements with customers, and handles product sales by telephone and through its own electronic ordering system, or via subsidiaries in Sweden, Denmark, the US, China and Russia. Valio Sales sells export products and organises logistics for all products delivered abroad.

Valio Sales generates a flow of orders and customers have often named it the best sales unit in Finland. Valio Sales generates value added for customers by increasing their turnover through its product category expertise.

Sales Planning delivers projections to Production on product manufacturing volumes.

Distribution

Valio implements its product distribution. Distribution services are subcontracted to nearly 200 transport companies and Valio optimises the transport routes.



Products are distributed from warehouses to customers in Finland on re-usable trays and in roller cages.

Valio’s direct distribution generates value added for customers through cost-efficiency and supply performance. Valio distribution generates value added for society through environmentally sound optimisation and the application of new technology.

Distribution risks comprise maintaining the cold chain and supply performance. Valio’s supply performance is better than 99%.

Industrial products are transported to customers as international freight.

Products bound for the US and China are shipped to the subsidiaries’ warehouses.

Products bound for Russia are transported for intermediate storage to Lappeenranta or directly to the distribution terminal in Moscow from where they are forwarded to customers.

Products bound for Sweden and Denmark are transported to the customers’ wholesale warehouses from where the customers handle distribution.

Valio accounts for around 26% of Finland’s food exports and 97% of the country’s dairy product exports.

Marketing

The Valio house brands and Valio’s corporate image comprise the company’s most valuable intellectual property. The Luottamus & Maine (Trust & Reputation) study indicates Valio has a strikingly good reputation and was rated 6th best of the Finnish companies surveyed. Valio products generate value added for consumers through their product features, and value added to benefit the Finnish economy.

Feedback

Valio Customer Services receives feedback from customers, and in addition informs them of any supply problems or product faults.

Customer feedback develops Valio operations. Valio Consumer Services delivered by telephone and online receives feedback from consumers, engages them in discussion, and responds to feedback. Feedback concerning the company’s operations is actively collected from various stakeholders. Product ideation and testing is conducted together with the personnel and consumers. Consumer feedback plays an important role in detecting any product faults.

Recycling

Beverage carton is collected alongside paperboard and both are delivered for use as a raw material at paperboard plants. Valio does not use plastics containing chlorine, so Valio’s plastic packages can be forwarded for energy fraction. Collection and recycling of plastic consumer packages will commence in Finland on 1 January 2016.