Kraft Foods
Supplier Network Initiative
Chicago
August 2009
Agenda
• Kraft Overview
• Catalyst Project Introduction
• External Manufacturers (EM)
• Supplier Managed Inventory (SMI)
• Supply Network Collaboration (SNC)
• Benefits & Lessons Learned
• Questions
2
Fast Facts
2008
$41.9 billion in revenue
Sales in approximately 150 countries
Operations in more than 70 countries
Approximately 98,000 employees
Nearly $100 million in charitable contributions
3
An Amazing Brand Portfolio
9 Brands with more than $1 billion in revenue
50+ Brands with more than $100 million in revenue
40+ Brands over 100 years old
4
Agenda
• Kraft Overview
• Catalyst Project Introduction
• External Manufacturers (EM)
• Supplier Managed Inventory (SMI)
• Supply Network Collaboration (SNC)
• Benefits & Lessons Learned
• Questions
5
Introduction to Catalyst
• Catalyst is the name of our multi-year program to streamline and
standardize how we work throughout the company and do
business with customers, suppliers and other external partners
• Catalyst will provide Kraft with access to better information that
we can use to respond more effectively to opportunities in the
marketplace while helping us to better support business growth
and address business challenges
6
Enabling Responsive Supply Networks
Manage collaborative business processes end to end
7
“
Responsive Supply Networks enable companies with fluctuating demand and high product
complexity to sense and respond faster and smarter to demand, supply and compliance dynamics
across a globally distributed environment.
4
3
Demand forecast is updated
with actual orders to integrate
with Manufacturing
End-to-End
Processes
SOUCE
SUPPLY
MAKE
2
Integration with logistics
enables Available to
Promise (GATP)
SELL
MOVE
SERVICE
’’
Order is verified, fully
priced and credit check
applied based on
standard rules
CUSTOMER
5
From forecasts
Strategic
product supply
plans a
2 year horizon
Supply Network Strategy and Design
1
Collaborative Demand and Supply Planning
6
Tactical is
Suppler demand
visible in SNC,
Suppliers confirm
replenishment, Alerts
signal changes
Customer places
order with
customer service
team
Customer Demand
Response & Execution
Logistics and
Fulfillment management
Manufacturing Network
Planning & Execution
Supply Network Traceability
Delivered in 2008
Future Value Scenarios
7
Finished goods are shipped to
buffers/mixing centers & made
available for GATP
Catalyst North America
Catalyst NA went live in October 2007 with releases planned
through 2011.
Today
End state
28
Plants
(% of COGS)
63%
2008
Ext MFG
2009
52
(% of Spend Value)
2008
Status: 1 Aug
st
2009
2010
82%
2008
9,000
150
2009
$20B
Users
2010
69%
2008
Revenue
54
2009
$24B
2010
30%
2009
*(Revenue numbers based on 2007 figures)
30,000
2010
2011
8
Agenda
• Kraft Overview
• Catalyst Project Introduction
• External Manufacturers (EM)
• Supplier Managed Inventory (SMI)
• Supply Network Collaboration (SNC)
• Benefits & Lessons Learned
• Questions
9
Kraft SAP External Manufacturing objective is
standard business practices
• Standard Purchase Order Process
– Eliminate manual cost and purchase tracking
processes with SAP contracts and Purchase Orders
• Receipts into Kraft Distribution Network
– Transition from inventory at the vendor location to
initial receipt at the Kraft warehouses
Payment
Kraft Receipts
Supplier Collaboration
– Replace the historic manual process of e-mails /
phone calls with a system driven solution to
communicate and collaborate on requirements
Purchase Order Process
• Supplier Collaboration
EM Program
Four Pillars of the Kraft EM Program
• System Driven Three Way Match Payments
– Transition from manual invoice coding and receipt
matching process to an automated match between
the PO, Receipt, and Invoice
– Automated payment after matching within the
terms on the contract
10
External Manufacturing Design Summary
• EM’s divided into two groups – will have 2 designs:
– Subcontracting (Tolling/Converters)
• Plants that have Kraft owned materials (1 or more)
– Vendor (Finished Goods)
• Vendors that buy all materials – Kraft does not own ANY material
• All Purchases for Kraft owned / vendor ordered items
at subcontracting EM’s will utilize a Standard SAP PO
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Purchase Order Collaboration
• External Manufacturers access PO data via
the SNC tool
• Standard Tasks:
– Review Purchase Orders
– Confirm Delivery Dates
– Update Delivery Quantities
– Review Long Term Demand via Demand Monitor
• Sub Contractors Create R&P POs
– Portal Access enables EM to Order Materials via
Kraft Contracts
– Kraft owned materials used at EM location to
produce Kraft Products
12
Agenda
• Kraft Overview
• Catalyst Project Introduction
• External Manufacturers (EM)
• Supplier Managed Inventory (SMI)
• Supply Network Collaboration (SNC)
• Benefits & Lessons Learned
• Questions
13
Kraft enabled its SMI Business Model by implementing
processes and systems focused on four capabilities
• Statistically Driven Safety Stock
– Utilize a statistical approach to defining material
stocking parameters, which leverages historical
demand and supply characteristics
• Inventory Consignment
– Migrate from transfer of inventory ownership upon
receipt to transfer of inventory ownership upon
consumption
• Payment
– Migrate from transfer of liability to supplier upon
receipt to transfer of liability to supplier after
consumption
– Weekly payment to supplier for consigned materials
consumed during the period
Payment
Inventory
Consignment
Collaborative
Replenishment
– Transfer the responsibility for defining quantity and
timing of material inventory replenishments
(shipments to Kraft and manufacturing of materials)
to the supplier
Statistically –Driven
Safety Stock
• Collaborative Replenishment
SMI Program
Four Pillars of the KNA SMI Program
NOTE: SMI Consumption: Defined
Issuance to Production
Staging Area
Physical Inventory
Adjustments
Damaged Material Write-offs
Obsolete Material Write-offs
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Supplier to provide following data
to support SMI
SMI EDI requirements
Kraft
Supplier
iDoc
SAP SNC
iDoc
XML
Mapping
Current inventory
positions, status,
parameters,
& Gross
requirements
POD (material
receipts)
XML
iDoc
XML
iDoc
XML
ASN’s
iDoc
XML
POD (material
receipts)
EDI
852
Planned
Replenishments
XI
Planned
Replenishments
iDoc
852
Kraft Gross
Requirements,
Inventory &
Stocking Parms
EDI
Kraft Gross
Requirements &
Inventory
Inventory alerts
ASN’s
(Inbound Delivery)
Supplier’s
Systems
B2B Hub
XI
SAP ECC
EDI
ASN’s
856
POD (material
receipts)
EDI
861
iDoc
Existing
New
15
Agenda
• Kraft Overview
• Catalyst Project Introduction
• External Manufacturers (EM)
• Supplier Managed Inventory (SMI)
• Supply Network Collaboration (SNC)
• Benefits & Lessons Learned
• Questions
16
Kraft’s MFG Network Planning and
Execution Using SAP’s SNC
Internal ERP &
APS environment
Purchase Orders
Contract Mfg
ASNs
Kraft Foods
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Kraft’s MFG Network Planning and
Execution Using SAP’s SNC
Internal ERP &
APS environment
Purchase Orders
Contract Mfg
ASNs
Kraft Foods
18
External Access and Security
Backend
SAP
Servers
Supplier
Web
Browser
Remote
Connectivity
Kraft’s
Supplier
Portal
Internet
SAP ERP
Both
SAP SNC
Provides
Front door
Security
Provides
Application
Access
SAP BW
Provides Content Security
19
Advance Shipment Notifications
• Prior to Shipments, EM/SMI Create Advance Shipment
Notifications (ASNs) for each Truck Load
– Document lists Materials and Quantities being Delivered
– Interface to ECC creates an Inbound Delivery Document
– Additional EM specific requirements:
• Linkage to Purchase Orders for Invoice Payments
• Delivery Dates for GATP and Dock Scheduling
• Bills of Lading for Freight Payments
– Additional SMI specific requirements:
• Load Numbers in place of PO Numbers
• Vendor Batch Numbers
20
E-Mail Alerts
• Kraft and EM/ SMI Set Up Alerts
– Used primarily by smaller volume vendors
– User will go into SNC for further details
– Additional EM specific requirements:
• Notification when POs are created or changed
• E-Mail contains basic PO data
– Additional SMI specific requirements:
• Min/Max Stock warnings
• ASN Receipts differences
21
Master Data
• CIF (Core Interface) process is how SAP sync’s
Master Data between servers
• Both EM and SMI needs SNC Master Data
– CIF Models define which records are sync’d on SNC
• ECC Plant Master become SNC Customer Locations
• ECC Vendors become SNC Supplier Locations and BP Orgs
• ECC Materials become SNC Products
• ECC Contracts and Schedule Agreements become SNC
Transportation Lanes
• SNC User are linked to BP Persons which are linked
to BP Org’s
• SNC BP Orgs limit what data content Users can
access
22
External Manufacturer
– Example Message Flows
Kraft
SAP NW 2004s
EAI
Mapping
SAP ICH 5.0
No Mapping
SAP NW 2004s
Mapping
SAP ECC 6.0
Supplier
Create or
Change a PO
Change PO
Receive ASN
Receive
delivery and
post goods
receipt
IDoc
PORDCR1
PORDCR102
IDoc
DESADV
DELVRY 03
IDoc
DESADV
DELVRY 03
IDoc
STPPOD
DELVRY 03
XML
RON
ERP
Display PO
XML
DDN
Confirm PO
XML
Receive ASN
or create in
Web UI
DDN
XML
RDN
XML
iDoc
DDN
DESADV
Publish
ASN
Display GR
information
23
Supplier Managed Inventory
– Example Message Flows
Kraft
SAP NW 2004s
EAI
Mapping
SAP ICH 5.0
No Mapping
SAP NW 2004s
Mapping
SAP ECC 6.0
Supplier
Publish current
stock status
and gross
demand
Receive ASN
Receive
delivery and
post goods
receipt
IDoc
PROACT
PROACT 01
XML
IDoc
DESADV
DELVRY 03
XML
IDoc
STPPOD
DELVRY 03
PAN
DDN
XML
RDN
ERP
Display
current stock
status
Receive ASN
or create in
Web UI
XML
iDoc
DDN
DESADV
Publish
ASN
Display GR
information
24
SNC Upgrade Plan
• Kraft is planning on upgrading from SCM 5.0 to SCM 7.0 next
year.
• New features we are looking at are:
– The “PO Work List” is a new screen in SAP SNC 5.1/7.0. The purpose of the PO
Work List is to increase usability and the business users productivity when
processing PO’s.
– The “File Transfer” feature enables external partners to download data that they
would otherwise see on the given SAP SNC Web screens, edit the downloaded
file locally on the PC and update SAP SNC with latest changes by uploading the
modified file to SAP SNC.
– Quickview (Entry Screen)
– Gives comprehensive “at-a-glance” view of the users work and helps the
user to focus on most critical items
– Allows user to take immediate action by drilling-down to the detailed SNC
screens.
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Agenda
• Kraft Overview
• Catalyst Project Introduction
• External Manufacturers (EM)
• Supplier Managed Inventory (SMI)
• Supply Network Collaboration (SNC)
• Benefits & Lessons Learned
• Questions
26
EM & SMI Catalyst Design Summary
• EM’s divided into two groups:
– Subcontracting (Tolling/Converters/IMSC)–Accounts for 20% EM Spend
• Plants that have Kraft owned materials (1 or more)
• 18 EM and 20 Re-packers (Plant Managed and IMSC)
– Vendor (Finished Goods) – Accounts for 80% EM Spend
• Vendors buy all materials consumed+
• 110 locations
• Supplier Managed Inventory (SMI) – Materials owned by our
partners until just prior to their use in the manufacturing process:
– Demand visible through the SNC tool
– Materials are brought in and systematically segregated and staged
– Once materials are consumed, Kraft will pay for the materials w/out PO
or Invoices
– Benefits of costs savings shared between Kraft & Partners
27
Kraft – External Manufacturing
Process Benefits
Kraft
• Integration of planning & costing
processes for external
manufacturers
• Harmonized material and product
master files
• Enable supplier evaluations and
security access controls
• Standard Reporting capability to
drive business improvements
External Manufacturer
• Standard process used for Kraft
purchased FGs.
• Secure access to Kraft systems for
sub contract material ordering.
• Simplified delivery scheduling
process.
• Improved payment cycle
• Retirement of legacy systems
• Reduced contract complexity
• Variance analysis and cost
tracking
• Improved External
manufacturing Invoice matching
and payments
28
Kraft – Supplier Managed Inventory
Process Benefits
Kraft
• Reduced working capital
investment due to transfer of
inventory ownership
• Reduced costs associated with
material waste and obsolescence
• Less effort required to manage
raw/pack inventory
• Lower payment processing costs
• Reduced contract complexity
Supplier
• Greater control of inventories
throughout the supply chain
• Improved and expanded supply
relationship with Kraft
• Flexibility in meeting Kraft material
requirements
• Enhanced ability to optimize
operations through improved
planning
• Greater visibility to Kraft material
usages and variances
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SNC Lessons Learned
• Alert Process
– User defined Notification Profiles need to be monitored
• Access
– Varies by company and user and therefore can complicate the
startup and support model
• Demand monitoring functionality limited
– PO updates are not real time (once Daily)
• EDI Process
– Timing of jobs on both sides (inter-dependencies)
– Commercialization synchronization
– Validating cross-references
– Accuracy and timing of ASN’s
• CIF Process
– Defining the models to dynamically adapt to business
– Queue issues sending data to SNC
30
Agenda
• Kraft Overview
• Catalyst Project Introduction
• External Manufacturers (EM)
• Supplier Managed Inventory (SMI)
• Supply Network Collaboration (SNC)
• Benefits & Lessons Learned
• Questions
31
Kraft Foods
Supplier Network Initiative
Thank You
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