Creating a Service Vision Molly VandenHeuvel Sr. Director Customer Value Stream Kraft Foods
Kraft Overview 98% Household Penetration in North America #1 or #2 Position in 17 Top Categories (80% of Sales) 7 Brands with Annual Retail Sales Over $1bn Products Average >2x the Share of the Nearest Branded Competitor 2 Source: Company filings and Nielsen.
Unmatched North America Brand Portfolio Kraft has leading brands across 17 diverse core categories Selected Kraft Brands Kraft Brand Development Cheese (22% of Sales) 98% 10 43 or $107 Refrigerated Meals (19% of Sales) Beverages (14% of Sales) Meals & Desserts (12% of Sales) Enhancers & Snack Nuts (11% of Sales) Canada (11% of Sales) % Household Penetration # Brands per Household Purchases of Kraft Brands per Household (per Year) 3 Source: Company filings and Nielsen. Note: Foodservice and Exports together comprise 11% of Sales.
Leading Player in North American Food & Beverage Last Fiscal Year North American Food & Beverage Sales ($bn) $37.2 $27.9 (a) $21.5 $17.9 $13.7 $9.5 (b) $6.9 $6.4 $5.6 $5.5 $4.2 $2.4 (b) 4 Source: Company filings and Nielsen. Note: North America beverages reflects non-alcoholic beverages. (a) Nestlé sales data reflects 2014 financials converted from CHF to USD at average 2014 exchange rate. (b) Campbell s and McCormick sales data reflect U.S. sales only.
We Manage a $15 billion Value Chain Cost of Goods Sold ~$12.5B Transportation Other & Manufacturing Warehousing Indirect Scrap & Waste ~$15B Total Value Chain Commodities Ingredients & Packaging Plant Conversion $Billions
The Values We Share Win Together We re one team wearing the same jersey with Kraft on the front. We share the same competitive spirit. We win when the company performs. So share freely with, and steal shamelessly from, one another. Be individuals, yet remain indivisible. Keep it Simple Make smart decisions quickly and move on. Do it well, once. Don t let perfect be the enemy of good. Streamline cumbersome processes. Keep things loose and have fun. Inspire Trust Be transparent, be open, be real. Listen hard, talk less. Combine honesty with empathy. Have each other s backs. Make certain our actions match our words. When they don t, say so. Always do the right thing integrity matters. Make Tough Choices We own the results. No one else, just us. Be candid and accountable. Prioritize resources well. Treat our money like it s our very own. Make lean a competitive advantage.
Creating a Service Vision Aspirational Case Study Inditex / Zara Inditex HQ in Spain Largest global clothing retailer with over 6,200 stores worldwide Stock + 450% over 10 years; Net Income ~2X in 5 years Zara Inditex subsidiary 1,770 stores in 86 countries Supply Chain as strategic advantage and fuel for growth Zara Video
Aspirational Case Study Inditex / Zara Critical differentiators Constant change in part of the model vs. disruptor Original supply / order to forecast Zara = ~50% Competitors = ~80% Local production cost offset by higher revenue % and lower unsold merchandise % of Full Revenue: Zara = ~85% Competitors = ~60% % Unsold: Zara = <10% Competitors = ~20% Zara Video Audience Observations
Aspirational Case Study Inditex / Zara What does Zara have to do with CPG? Waste associated with aged inventory, packaging conversions, etc Excess inventory associated with inaccurate forecasts Inventory discounted or donated due to age / shelf life Constant innovation and complex Product Lifecycle Management Similarities with your businesses?
Setting the Service Vision Gather Input from Internal and External Key Stakeholders Customer Interviews Kraft Leadership Team Interviews: Chief Operating Officer Chief Customer Officer Chief Supply Chain Officer Division Presidents Customer Service & Logistics Team on-line survey: ~350 respondents: 13 questions + 1 for general feedback 69% in CS&L >5 years 81% at Kraft >5 years
Customer Feedback Priorities Inventory Levels Landed Cost Collaboration Fill Rates Code life Pallet/Case Configuration What we heard "I want to hold less inventory, but I can t get best pricing if I order in less than a full truck/pallet" "I pass all my savings on landed cost along to the price in my stores." "Many of my suppliers perform well but those that stand out collaborate with me on an ongoing bases" "I have product availability issues because I have a broad set of products" Products don t arrive with enough shelf life remaining especially slow movers" "I want to buy in pallets or layers because they fit my shelf/backroom" Performance vs. peers: None was highlighted as a "gold standard," as many do some things well, and some poorly
Kraft Leadership Team Interview Feedback Role and Purpose of Customer Service & Logistics: End-to-End, seamless, continuous flow of demand and supply Perfect orders to our customers Effective, efficient, preferred supplier Enable cost and cash Ideal Vision for Customer Service & Logistics: Customer-facing resources have a toolbox that enables development of customer-specific programs Best-in-class cost and service By taking time out of the supply chain, enable speed to market as a competitive advantage Faster Route-to-Market enables freshness Desired Behaviors from Customer Service & Logistics: Envisioning: Inspire the team AND internal and external customers Enabling: Build capability Execution: Daily, weekly and monthly
Customer Service & Logistics Team Member Feedback What are you most proud of? People Working as a team Leadership Customer Service (internally and externally) Delivering results What do you see as CS&L s strengths? People Leadership Technical mastery within the members of the team Teamwork Customer Service What do you see as CS&L s opportunities? On boarding, training and development systems Better communication, both internally and externally Integration with the Divisions Streamlining and simplification Clarity of goals and vision
Customer Service & Logistics Team Member Feedback How do you think CS&L should be leveraged to maximize Kraft s business results? Partnering with the Divisions to maximize gains in productivity and simplification Strong linkage with sales and commercial disciplines to deliver winning customer solutions Laser focus on delivering cash and service improvements Leverage systems and optimized business processes Involve CS&L early into project feasibility calculations to maximize return on investment What behaviors do you want to see in the future? Aligned objectives/one team Clear accountabilities Openness/trust Positive attitude/esprit de corps Effective communications (two-way) Learning, coaching, development Collaboration Servant leadership
Customer Service & Logistics Vision Creating exceptional speed, value and growth through integrated partnerships from farm to family SPEED VALUE GROWTH REDUCING CYCLE TIME TO IMPROVE CASH FLOW, COST PROFILE AND FRESHNESS RIGHT PRODUCT, PLACE, TIME, QUANTITY, QUALITY, PRICE EMERGING ROUTES TO MARKET
5 DIOH 99+% Service Level 6% Productivity CS&L One team (integrated partnerships)
Bringing it to Life and Driving Business Outcomes Leverage the Organization Performance Model (OPM)* to Achieve Required Outcomes Establish Clear Business Goals and Communicate Broadly & Frequently Cascade Goals to Every Team Member *Task, Information, Decision Making, People, Structure, Rewards
Strategic Priorities Deliver Service to Drive Top Line Growth Deliver Fuel for Growth Drive Cash Conversion Cycle Key Objectives Deliver service to drive top-line growth: Improve customer In Stocks, migrate towards On Shelf Availability Fill rate improvement Improve on-time delivery Deliver fuel for growth: Build productivity pipeline to 120% of target Deliver net productivity target Drive focus and process metrics to consistently limit waste Drive overhead cost accountability Drive Cash Conversion Cycle: Deliver AR objective Deliver Inventory objectives while delivering service Drive Supply Chain Fundamentals Business & Culture Transformation Drive Supply Chain fundamentals: Strict compliance with traceability and recall Optimize Route to Market while balancing service Improve inventory accuracy Optimize Module/Shipper execution Business and culture transformation: Implement Systems / Business Process improvements flawlessly VSMs and Loss Analysis as way of working Evolve supplier integration People Strategies & Talent Development People strategies and talent development: Drive a high performing & ownership culture Build employee capabilities Build talent pipeline and succession planning Drive organization effectiveness & employee engagement
CS&L GOAL-SETTING - 2015 Write down one* goal and metric for each strategic priority that you will personally help deliver from the 2015 CSL Goals document Strategic Priorities Specific Goal Metric/Target Key personal milestone to support the goal Deliver Service to Drive Top Line Growth Deliver Fuel for Growth Drive Cash Conversion Cycle Drive Supply Chain Fundamentals Business & Culture Transformation People Strategies & Talen Development * Intended to be a simple first step in developing individual and team goals for 2015.