Supplier Integration Transportation & Logistics Council 40th Annual Conference Kraft Network Overview
2 Kraft Manufacturing and Distribution Locations
- Hot Dogs, Cold Cuts, Madison - Hot Dogs & Cold Cuts Cream cheese Deli Meats & Woodstock - Pickles Lunchables New Ulm Wausau - cheese Marshmallows & Cottage cheese Jell -O Lunchables Pudding, Sandwich & recipe caramels & sour cream Mason City Davenport Albany Jell -O Refrigerated Snacks cheese, Handi - Snacks Beaver - Cream cheese Spray cheese Dam Kendallville and RTE Jell -O Lowville Walton Campbell Dairy powder & cheese Lehigh Valley Avon Coffee, A1, Grey Poupon
Columbus Stockton San Leandro Aurora Coffee (Ground, GFIC & Soft Pods) Bethlehem - Coshocton - Bacon Dover Ontario Fresno - Planters
Suffolk Rochelle Planters RTE Shelf- Stable Pudding Tulare - Dairy powders Champaign NorcrossAMPDC Pourables & Fullerton Ft. Worth cheese Newberry Lunchables Kirksville Turkey, Cold Cuts & Ham & bacon Turkey Bacon Springfield - Cream cheese, Columbia Dinners Ft. Smith Hot dogs Garland Dry & oil Jacksonville - Coffee Houston roasted Coffee, peanuts & Tree Nuts RTD, PSD's , ,Meals , Sauces
3 Transportation is the largest component of logistics spend…
Scale • 500,000 Annual shipments • 6 Modes (truckload, (primarily temp controlled) intermodal, LTL, air, rail, • 3,800 ship to locations backhaul) • ~100 Carriers under contract • 5 Protection classes (dry, refer, protected, • Increasing utilization of conditioned, frozen) intermodal • 8,500 Lanes (origin, dest city/ST, prot, mode)
4 Transportation Supplier Relationship Management
5 Becoming “Shipper of Choice” is imperative to improving service, stabilizing costs, and insulating against capacity risk
Challenges 2012 – 2015 Actions Kraft focus on Price versus Cost 1. Become a Shipper of Choice • Remove Kraft-driven inefficiencies • Unload and Dwell Time reductions Perception of Reduce detention Kraft as short • Systems and processes that make it easy to do term focused shipper business with Kraft • Listen to our suppliers input
Perception of 2. Partner with Core Carriers Kraft as an • Largest carrier for Kraft today does only 6% of inefficient shipper volume • Assign lane ownership • Volume commitments Perception of • Leverage dedicated long term transportation Kraft as slow relationships paying shipper (versus industry average)
Shipper of Choice is led by Transportation Operations but the responsibility is shared across the supply chain
6 Strategy Summary Shipper Of Choice to insulate Kraft from market conditions
Become again the “Shipper Of Choice” to ensure capacity at the best cost possible, while reinforcing strategic long term relationships with preferred carriers.
TO Strategic Partner Total Cost Predictable Cost <100 Carriers Long Term Agreement Stable Network Terra Forecast Best In Class Service Level
7 The Transportation and Procurement strategy will evolve the “Gemstone Transformation”
2010-2011: 2010-2011: Volume Concentration via Change refrigerated to dry. Mega-Bids. Inter-Modal conversion. 2012-2014: 2012-2014: Carrier Base Optimization To increase volume leverage Reef to Dry conversion Carrier accountability Inter-Modal for customer 2009-2010: shipments Guaranteed capacity Category RFP’s to ensure Best Price 2011: 2012-2014: Use of L6S as enabler for JPI. Best Price evaluation 2012-2014: (use tools like Chainalytics) Targeted Bids as required Productivity/Innovation Best Cost of Operation Gain sharing Go-to-market Strategies 2011: Launched Carrier Advisory Board to booster strategic 2012-2014: relationships Long Term contracts 8 Lane / Location Ownership Supplier Relationship Management (SRM) Carrier Segmentation is the foundation for strategic relationships SRM Carrier Segmentation recommendation is to include 96 carriers to support Kraft’s network
Category # Carriers Preferred 23 Valued/Transactional 73 Exclude 56 Total 152
SRM selection criteria focused on service and cost: • Kraft Service Level (All Modes/Excludes Dedicated) 40% • Cost to do Business 20% • Kraft Customer Rank 10% • Service Offerings 10% • Maximum Revenue Growth Target 10% • Financial Strength 5% • Value Added Capabilities 5%
9 SRM Event Bid conditions support the Shipper of Choice strategy, while supporting overall Kraft’s Service and Cost goals
• Term – Multi year – Potential renewal based on service and cost • Service Level Expectations – >90% / 100% tender acceptance – >95% / 96% on time delivery to appointment – >92% / 93% on time to ORDD • Service and Productivity targets linked to price escalator – Adjustments based on carrier scorecard results – Network performance, not lane or location
10 11 Kraft Supplier Integration
12 What Is Supplier Integration At Kraft?
Supplier and Kraft resources working seamlessly and collaboratively to deliver innovation and drive efficiencies across the supply chain via strong integration and residency within Kraft What is different this time?
NEW COMPANY, NEW LEADERSHIP, NEW CULTURE
TRUST AND COLLABORATION – INSIDE AND OUTSIDE Suppliers And Kraft: FROM – TO
From (up to 2012) To (2013-2015)
•>7300 contracted suppliers •~500 suppliers with 80% of spend
•Varied supplier relationships, •Embrace our supply base as one of mostly transactional our most valuable collaboration platforms
•Aggressive bidding to drive •Integrated Kraft and Supplier focus “unit cost” productivity on TCO, service, quality, innovation, growth, inventory, processes.
•Cashflow via Payment Term •Cashflow via Supply Chain Financing Extension and Supplier Managed & Owned Inventories
•Optional Supplier Innovation •Targeted Supplier Innovation
How are we doing this at Kraft?
CATEGORY CAPTAINS
CATEGORY PREFERRED SUPPLIER ADVISOR NOT A SINGLE SOURCE
STRATEGIC COLLABORATION CULTURAL FIT ALIGNMENT TRUST Category Captain Selection Process
Foundation Category A: • Internal Candidate 1 Assessment Candidate 2 • Industry Candidate 3
Mapping Implementation Engagement • On going relationship • Supplier Category A: • Implement reviews Nominee Business Plan • CC Candidate • Culture Change Selection
Planning • Deep Dive Business Plan Assessment Acceptance • Business Plan Development
End To End Deep Dive Category Assessment
Suppliers’ Suppliers Kraft & Supplier Kraft Plants Kraft & Customer Customer Consumer Supplier Warehouses Warehouses
Innovation Across the Supply Chain • Interviews/ • Kraft / Supplier • Customer/ Linkage with • Walking the • Analytical Knowledge of the Consumer Supply Chain Supply Chain Work Business Information Resources
THE OUTCOME IS A BUSINESS PLAN INCLUDING: Category Strategy for next 3 to 5 years Short and long term: Productivity, Working Capital improvement, Simplification, Innovation, Resources and Investment requirements, Systems / Processes recommendations, Balanced Scorecard Aren’t Category Captains just preferred suppliers?
Yes, Category Captains ARE preferred suppliers, but they also: • Have access to internal / confidential information at Kraft
• Have embedded resources inside Kraft’s organization • Jointly own the category strategy • Are responsible to develop annual business plans • Are accountable for reducing Total Cost of Ownership • Have goals outside price and service: innovation, growth, process efficiencies, inventory, etc. • Have long term agreements (evergreen) • Have transparent cost models
ALL IN
In Summary: We Are Better Together
Joint Business Planning Cost and Information Collaboration Transparency
Top to Top Cross-Functional Business Balanced Relationships Leadership Scorecard Metrics
Product and Embedded Process Resources Innovation Mutual Value Delivery