Supplier Integration Transportation & Logistics Council 40 th Annual Conference
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1 Supplier Integration Transportation & Logistics Council 40 th Annual Conference
2 Kraft Network Overview 2
3 3 Kraft Manufacturing and Distribution Locations Jell - O Lunchables Pudding, Jell - O Refrigerated Snacks and RTE Jell - O Mason City - Hot Dogs, Cold Cuts, Deli Meats & Lunchables New Ulm Sandwich & recipe Davenport cheese, Handi - Snacks Madison - Hot Dogs & Cold Cuts Wausau - cheese Albany Spray cheese Woodstock Beaver - Cream cheese Dam - Pickles Marshmallows & caramels Kendallville Cream cheese Cottage cheese & sour cream Lowville Walton Campbell Dairy powder & cheese Avon Lehigh Valley Coffee, A1, Grey Poupon San Leandro Coffee (Ground, GFIC & Soft Pods) - Fresno - Planters Stockton Ontario Aurora Columbus Bethlehem Coshocton Dover - Bacon Tulare Dairy powders Fullerton Lunchables Kirksville Ham & bacon Columbia Hot dogs Springfield - Cream cheese, Dinners Ft. Worth Garland Houston Coffee, RTD, PSD's,, Meals, Sauces Ft. Smith Dry & oil roasted peanuts & Tree Nuts Norcross AMPDC Suffolk Rochelle Planters RTE Shelf - Stable Pudding Champaign Newberry Turkey, Cold Cuts & Turkey Bacon Jacksonville - Coffee - Pourables & cheese
4 Transportation is the largest component of logistics spend 500,000 Annual shipments (primarily temp controlled) 3,800 ship to locations 5 Protection classes (dry, refer, protected, conditioned, frozen) 8,500 Lanes (origin, dest city/st, prot, mode) Scale 6 Modes (truckload, intermodal, LTL, air, rail, backhaul) ~100 Carriers under contract Increasing utilization of intermodal 4
5 Transportation Supplier Relationship Management 5
6 Becoming Shipper of Choice is imperative to improving service, stabilizing costs, and insulating against capacity risk Challenges Kraft focus on Price versus Cost Perception of Kraft as short term focused shipper Actions 1. Become a Shipper of Choice Remove Kraft-driven inefficiencies Unload and Dwell Time reductions Reduce detention Systems and processes that make it easy to do business with Kraft Listen to our suppliers input Perception of Kraft as an inefficient shipper Perception of Kraft as slow paying shipper (versus industry average) 2. Partner with Core Carriers Largest carrier for Kraft today does only 6% of volume Assign lane ownership Volume commitments Leverage dedicated long term transportation relationships Shipper of Choice is led by Transportation Operations but the responsibility is shared across the supply chain 6
7 Strategy Summary Shipper Of Choice to insulate Kraft from market conditions 7 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
8 The Transportation and Procurement strategy will evolve the Gemstone Transformation : : Volume Concentration via Mega-Bids : Carrier Base Optimization To increase volume leverage Category RFP s to ensure Best Price : Best Price evaluation (use tools like Chainalytics) Targeted Bids as required Best Cost of Operation Go-to-market Strategies : Long Term contracts Lane / Location Ownership : Change refrigerated to dry. Inter-Modal conversion : Reef to Dry conversion Carrier accountability Inter-Modal for customer shipments Guaranteed capacity 2011: Use of L6S as enabler for JPI : Productivity/Innovation Gain sharing 2011: Launched Carrier Advisory Board to booster strategic relationships
9 Supplier Relationship Management (SRM) Carrier Segmentation is the foundation for strategic relationships 9 SRM Carrier Segmentation recommendation is to include 96 carriers to support Kraft s network Category Preferred # Carriers 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%
10 SRM Event Bid conditions support the Shipper of Choice strategy, while supporting overall Kraft s Service and Cost goals 10 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
11 11
12 Kraft Supplier Integration 12
13 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
14 What is different this time? NEW COMPANY, NEW LEADERSHIP, NEW CULTURE TRUST AND COLLABORATION INSIDE AND OUTSIDE
15 Suppliers And Kraft: FROM TO From (up to 2012) To ( ) >7300 contracted suppliers Varied supplier relationships, mostly transactional Aggressive bidding to drive unit cost productivity Cashflow via Payment Term Extension Optional Supplier Innovation ~500 suppliers with 80% of spend Embrace our supply base as one of our most valuable collaboration platforms Integrated Kraft and Supplier focus on TCO, service, quality, innovation, growth, inventory, processes. Cashflow via Supply Chain Financing and Supplier Managed & Owned Inventories Targeted Supplier Innovation
16 How are we doing this at Kraft? CATEGORY CAPTAINS CATEGORY ADVISOR PREFERRED SUPPLIER NOT A SINGLE SOURCE STRATEGIC COLLABORATION ALIGNMENT CULTURAL FIT TRUST
17 Category Captain Selection Process Foundation Internal Assessment Industry Mapping Category A: Candidate 1 Candidate 2 Candidate 3 Engagement Supplier reviews CC Candidate Selection Category A: Nominee Planning Deep Dive Assessment Business Plan Development Business Plan Acceptance Implementation On going relationship Implement Business Plan Culture Change
18 End To End Deep Dive Category Assessment Suppliers Supplier Suppliers Kraft & Supplier Warehouses Kraft Plants Kraft & Customer Warehouses Customer Consumer Kraft / Supplier Knowledge of the Business Interviews/ Linkage with Supply Chain Resources Innovation Across the Supply Chain Customer/ Consumer Information Walking the Supply Chain Analytical Work 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
19 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
20 In Summary: We Are Better Together Cost and Information Transparency Joint Business Planning Collaboration Top to Top Relationships Cross-Functional Business Leadership Balanced Scorecard Metrics Product and Process Innovation Mutual Value Delivery Embedded Resources
21
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