Introduction
ConAgra Foods is a $12 billion company headquartered in Omaha, Nebraska. The
company employs approximately 25,000 people in North America. ConAgra is a major company
within the food processing and production industry. Food processing and production
encompasses the procurement of harvested crops and butchered animal products in order to
produce attractive and marketable long shelf-life food products. ConAgra maintains a large
profile of brands that spreads across two business segments, consumer food products and
commercial food products. ConAgra brands for consumer foods include Healthy Choice, Hunts,
Snack Pack and many more. Consumer food brands are mainly carried by grocery and
convenience stores. While commercial food product brands main customers are restaurants.
Commercial food brands under ConAgra include Lamb Weston, Spicetec and others. One reason
why ConAgra has such an interesting supply chain is that their products for different business
segments serve customers that both require different distribution channels. Major competitors for
ConAgra include Kraft, General mills and Cargill. In 2012 ConAgra ranked 14th in the food
processing industry slightly below General Mills and one position above Cargill. Although
according to standard supply chain metrics ConAgra is performing below industry average, their
innovation in new product delivery, advanced inventory system, environmentally conscientious
logistics planning and socially responsible supply chain practices all help to make ConAgra a
strong player in the food processing and production industry.
Supply Chain Metrics
Examining ConAgra based on Supply Chain Metrics and drawing comparisons between
ConAgra, leading competitors as well as the industry average allows for a holistic performance
analysis of ConAgra’s supply chain
After examining the supply chain metrics for ConAgra, General Mills, and Kraft.
(Appendix 1). ConAgra has its strengths and weaknesses. Some of the weaknesses ConAgra has
is its PM, ROA, ROE, and Inventory Turnover. A weakness in all these areas can mean different
things. A PM problem can mean they aren’t as effective and efficient at making sales. A problem
with ROA can mean they aren’t as effective at getting a good return on the assets they have. An
issue with ROE means they aren’t as diligent with the owners money to invest in. A problem
with inventory turnover can mean they have too much inventory, or bad sales, or something
along those lines. A possible explanation for this is that they are offering higher quality brands
and lower prices, which can dampen all of those ratios.
For ConAgra’s strengths can include Debt to Equity and Current Ratio. Compared to
General Mills and Kraft, ConAgra is a lot more liquid. They could more easily pay their
liabilities if they all came do. ConAgra’s debt to equity is better than Kraft’s but worse then
compared to General Mills. ConAgra is more leveraged compared to General Mills but not to
Kraft. Which means they are operating on more debt than General Mills is but less so compared
to Kraft. For the higher debt to equity it depends on what ConAgra is doing. If they are changing
processes, reinvesting it to generate more revenue, etc, that is a good thing. However, if they are
paying back old debt and not using it wisely then it can be a problem. With there other weaker
ratios it can be problematic to have a higher debt to equity such as in this case.
Distribution Channels
ConAgra has two possible scenarios for their distribution network. Both scenarios include
distribution centers with different methods of arriving to the customer. The final shipping
method depends on the product and the intended use of the product.
ConAgra’s main distribution channel is a distributor storage with customer pickup type
system. This distribution channel is mainly for ConAgra products that are intended for retail
which includes brands like Marie Callender's and Healthy Choice. Each factory produces a
specific type of product (Chef Boyardee, Slim Jim, ect.) and then the products are shipped
internationally to distribution centers in which the orders are filled for retail locations. In this
case the retail locations are mainly grocery stores (Walmart, local grocery stores, etc.) or
convenience stores (Seven-Eleven, Maverick, etc.). For more popular products that require
greater supply chain responsiveness due to faster turnover ConAgra may adjust the distribution
channel and ship to Walmart or Seven Eleven distribution centers. Product is then distributed to
the individual retail locations. These retail locations act as pick-up sites in which the customers
pick-up and pay for their products.
The next scenario is distributor storage with carrier delivery. This distribution channel
scenario is predominantly used for ConAgra’s Commercial Food products. For instance, the
Lamb Weston brand division under ConAgra provides potato products for Arby’s as well as
many other fast food chains. The Lamb Weston plant produces the potato products which are
shipped to distribution centers across North America. From the distribution center 3rd party
carriers deliver the product to Arby’s locations and other fast food locations. From the fast food
restaurants products are delivered to the end consumer.
New Product Launching
ConAgra Foods is a major industry player in food processing and production. By
evaluating ConAgra’s consumer foods segment their market presence in food processing and
production is apparent. ConAgra products can be found in an astonishing 97 percent of
American households, and sells nearly 13 million packages of food products per day.
ConAgra’s other major business segment is the commercial food industry which accounts
for 35% of annual sales. Within the commercial food industry ConAgra has several brands
devoted to different successful types of products. Brands include Lamb Weston, ConAgra Mills,
Ultra grains, Spicetec and JM Swank. Having several well established brands within ConAgra
allows for a more extensive and diversified product portfolio.
ConAgra has a research and development team which develops products for all brands
and businesses across the company. The Research Quality and Innovation Team (RQI) is
extensive considering ConAgra’s expansive product portfolio. The team brings together
innovative employees from various specialized segments across ConAgra. The main products
that the RQI team focuses on is consumer food products across all ConAgra consumer food
brands. The team has a set procedure they follow to ensure that the environment is fit to
encourage innovation since ConAgra works to instill an innovative culture. RQI has close
partnerships with each business and operating group within ConAgra. These partnerships aid
RQI in building a strong communication network among businesses and operating groups.
Strong communication among partners enables RQI to prioritize innovation and allows them to
deliver products that address the needs of their customers as well as make a market impact that
satisfies ConAgra executives.
Some evidence that the RQI team innovation process is delivering successful results is
that in 2011 two products designed by the RQI team received Edison Innovation Awards, which
are given each year to innovative new products. They received one for their ‘Healthy Choice
Top Chef Café Steamers’ and one for their ‘Marie Callender’s Bakes.’
Head of the RQI team is Al Bolles, executive vice president of research, quality and
innovation, says his management style promotes employees with ideas to take risks and own
their products. He says that communication throughout the company and making folks
accountable for their actions leads them to have empowerment which will lead to innovation. He
also says that, “Innovation is our lightning rod for growth.” Bolles also states,“We exist to drive
the business; the business isn’t here to fund our science projects. We’re here to use science and
technology to find better ways of making better products.” Strong research and development
allows ConAgra to maintain customers interest yet product roll out and delivery is key in order
for customers to access products. Therefore supply chain ability plays an important role in
allowing for successful new product launches.
New product launching involves the whole supply chain from the very beginning. There are
cross-functional teams in each subsidiary company of ConAgra who help with design and
implementation of new products. Customer input is a highly valued piece of information for
ConAgra, as Bolles states, “Ideas start with consumer insights.” Bolles says there is a lot of
work which goes into these projects and new product ideas outside of work which is what really
makes a difference. Having these empowered team members in a culture which allows them to
thrive and turn their ideas into exciting new products, helps to drive innovation along the supply
chain for ConAgra Foods. (Troops, Food Processing, 2013).
Logistics Systems
ConAgra is dedicated to lowering their carbon footprint in every process from the farm to
the dinner table, and especially in their logistics system. ConAgra contracts 95 percent of their
transportation, and have come up with a sustainable transportation strategy. This strategy is made
up of three parts consisting of capacity utilization, utilizing most efficient transportation modes,
and exploration of alternative fuels.
For capacity utilization, ConAgra has developed a new pallet initiative that changes the
shapes and sizes of packages to match the type of transportation they will use. This means more
products on each trip, which leads to less trips and less carbon emissions. This project has cut
greenhouse gas emissions by more than 3,900 metric tons over the last four years. ConAgra has
also experimented with different types of transportation to find the most efficient way to move
products. Trucking still makes up about 84 percent of total transportation, but railroad at 9.4
percent and container transportation at 4.7 percent are on the rise. ConAgra is also looking at
ways to use less diesel fuel and has been exploring with alternative fuels such as biodiesel and
vegetable oil that produce less harmful emissions.
By actively moving toward more sustainable logistics systems ConAgra could ultimately
increase stakeholder satisfaction and grow their customer base. Industry players within the
commercial food industry are often chastised for having a lack of concern for environmental
conscientiousness. ConAgra’s dedication to best sustainable practices can help them to maintain
a competitive edge within the industry. By focusing on sustainability within ConAgra’s logistical
system a higher value will be associated with their products for customers and potential
customers that prefer environmentally friendly products. This could ultimately aid ConAgra in
increasing market share.
Inventory
ConAgra’s current inventory system begins with working with their customers to clarify
the customers’ needs, and develop a unique set of customer focused programs to assist in
managing their business. To provide what customers want, ConAgra offers customers, display
ready units for special promotions or events that arrive ready to be displayed instantly.
However, other customers may want to pick up their product at a plant or mixing center
depending on the type of product as well as the type of customer. At various locations ConAgra
is able to keep the product at ideal temperatures due to their network of dry and temperature
controlled facilities to maintain freshness. The mixing centers are located conveniently around
major stores and distribution centers to reduce miles shipped and delivery costs while increasing
responsiveness. ConAgra uses vendor-managed inventory to support their customer-centric
philosophy. By using vendor-managed inventory, ConAgra manages the ordering process at the
distribution-center level and holds themselves accountable for customers’ key metrics such as
days on hand, inventory turns, and the in-stock rate. ConAgra can identify costs and order
history for each product SKU to identify improvements in order efficiency. ConAgra then uses
warehouse and store-level inventory and sales data to help customers identify when items need to
be replenished.
To improve upon their current inventory system, ConAgra could employ a couple of
options. Currently, ConAgra keeps customers’ food items at ideal temperatures before shipping
them, or waiting for pickup. However, ConAgra could use trucks that transport goods at the
same ideal temperatures, to improve product quality, customer satisfaction and reduce the
spoilage rate of their products. Also, the trucks would allow shipments to deliver products at
locations further away since the products will be kept fresh. Another option ConAgra could use
to improve their inventory management system is to continuously improve on inventory
optimization using data. Senior Director Asis Sengupta at ConAgra gives insight into how his
company may improve, “mastering data cleansing and maintenance from end-to-end interfacing
with our facilities to manage inputs and monitor results. Creating a resourcing and/or research
team to ensure implementation would be a key driver behind success of this.” With the vendormanaged inventory model ConAgra will want to use this data to increase profits for themselves,
and their retailers by having the right demand and customer data.
In 2006 ConAgra restructured their inventory management system from 11 different
systems to a single integrated application suite. ConAgra implemented the SAP enterprise
inventory optimization application by SmartOps. The application helped to smooth out the
inventory process and reduce redundancy in inventory information storage. Since the
implementation of the new system ConAgra has experienced many improvements in inventory
management. Financially, ConAgra has lowered days of finished goods inventory by 20% and
has reduced transportation expediting costs. Operationally, store-in-stock rate has increased by
0.7%, forecast accuracy has increased by 30% and case-fill on-time rate has increased by 0.3%.
Strategically, ConAgra has increased customer satisfaction, boosted capacity planning and
increased productivity by automating manual processes.
Supply Chain Ethics
ConAgra has a strong focus on ethical supply chain practices. From implementing sustainable
best practices into their logistics system to procuring products from suppliers that provide high
quality products ConAgra applies ethical practices across many supply chain facets.
In order to promote sustainable long-term business success ConAgra promotes sustainable
practices into their supply chain. For instance ConAgra is committed to lowering greenhouse gas
emissions. ConAgra joined the Carbon Disclosure Project’s Supply Chain Leadership Council in
2009 to encourage accountability and disclosure practices with emission reduction targets. To
accomplish this ConAgra requested more than seventy of their top suppliers and contract
manufacturers to release their information related to their own greenhouse gas emissions in order
to collaborate efforts into the future.
One way that ConAgra is procuring sustainable raw material is by using palm oil that was
produced sustainably. ConAgra’s goal is for one hundred percent of ConAgra’s palm oil to be
RSPO sustainability certified by 2015. Successful goal completion will result in a sustainable
market, and help prevent deforestation of lands. Another way that ConAgra is procuring ethical
raw materials is by pledging to eliminate the use of pork from gestation crates from their supply
chain. Gestation crates measure about two by seven feet which is too small for sows to turn
around. By 2017 ConAgra expects all suppliers for their Slim Jim beef jerky and Hebrew
National hot dogs to produce action plans for eliminating gestation crates. ConAgra is also
demanding suppliers to create systems within their operations that allow the humane origins of
their pork to be traceable. ConAgra expects this to be a long term process that could take up to
ten years.
By reducing greenhouse gas emissions ConAgra can build a more cost efficient and
sustainable supply chain. Building sustainable products into ConAgra’s supply chain such as
sustainably produced palm oil shows ConAgra’s commitment to the environment and a healthy
future. Also by eliminating gestation crate pork products from ConAgra’s supply chain
exemplifies strong corporate social responsibility and increases stakeholder satisfaction.
Implementation of strong supply chain ethics will help ConAgra to build goodwill among
customers in order to tap a new market segment and stimulate demand.
Conclusion
ConAgra is a company that exemplifies how innovation in supply chain can lead to
ultimate business success. By setting up responsive distribution channels to serve key customers,
introducing innovative new products, and using sustainable logistic systems ConAgra has kept
their customer-centric philosophy. Combining ConAgra’s customer-centric philosophy with
effective inventory systems, and employing strong business ethics has enabled ConAgra to
become a nationwide leader in supply chain management.
Appendix
ConAgra
Profit Margin: 3.48
ROA: 3.99
ROE: 9.87
Current Ratio: 1.50
Debt to Equity: 2.10
Inventory Turnover: 4.99
General Mills
ROA: 8.27
ROE: 22.14
Inventory Turnover: 6.63
Profit Margin: 10.41
Debt to Equity: 1.14
Current Ratio: 1.02
Kraft
ROA: 7.92
ROE: 16.92
Inventory Turnover: 6.46
Profit Margin: 8.95
Debt to Equity: 2.66
Current Ratio: 1.34
Industry
PM: 6.3
ROA: 7.5
ROE: 15.90
Current Ratio: 1.75
Debt to Equity: .50
Inventory Turnover: 6.2
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