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Kellogg Company CPO Shares Ingredients of its Procurement Transformation
 

Kellogg Company CPO Shares Ingredients of its Procurement Transformation

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When consumer foods giant Kellogg Company set out on its Procurement Transformation effort, they knew they would be looking not just for solutions to address organizational and process opportunities, ...

When consumer foods giant Kellogg Company set out on its Procurement Transformation effort, they knew they would be looking not just for solutions to address organizational and process opportunities, but also for creating quick-hit yet meaningful opportunities to demonstrate sizable value creation to the business. The good news is, these aren’t just words on the page: progress so far has been extraordinary. After 120 days into their Procurement Transformation initiative, Chief Procurement Officer (CPO) Walter Charles has much to share about the transformation journey so far.

From this Procurement Leaders executive webcast presentation (April 30, 2013 - view at: http://response.procurementleaders.com/webinar_registration_april), this dynamic and engaging CPO described how the Kellogg Company is:
Generating value creation successes across several business-critical direct and indirect spend categories
Re-evaluating their “solution” toolset and how tool expansion plans are delivering incremental value
Facing significant challenges in how to best align their people resources and process to maximize time spent on higher-impact activities
Setting new stretch-target goals supported with renewed organizational focus
The presentation was sponsored by advanced e-sourcing solution provider, CombineNet, who also shared how their global customers, including Kellogg Company, leverage their unique capabilities to support Procurement Transformation efforts.

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    Kellogg Company CPO Shares Ingredients of its Procurement Transformation Kellogg Company CPO Shares Ingredients of its Procurement Transformation Presentation Transcript

    • Kellogg Company CPO shares ingredients of their transformation strategyWalter CharlesCPOKelloggsSteve HallEditorProcurement LeadersJennifer SikoraVP MarketingCombineNet30 April 20133:00pm BST / 4:00pm CEST / 10:00am EST
    • April 30, 2013 WebcastCopyright © 2013. CombineNet, Inc.Next-Generation E-Sourcing for Today’sProcurement & Supply Chain Transformations
    • “Everyone engaged in strategic procurementactivities – from a CPO down to a categorymanager or analyst – will learn something thatchanges how they think about sourcing fromtalking to CombineNet.“- Jason Busch, Five Specialist Vendors You Must Talk to in 2013(December 21, 2012)CombineNet Named a Top 5 SpecialistVendor to Talk to in 2013
    • Tactical Events•Fewer Items•Fewer Locations•Fewer Suppliers•Emphasis Primarily on PriceLarge Events•100’s or 1,000’s of Items•Many Locations•Many Suppliers•Aggregated/centralized spends•Multiple StakeholdersComplex AwardDecisions•Multiple price and non-price bidcomponents•Total supplier value and risk•Complex cost models•Competing Stakeholder interestsWhere CombineNet Fits for e-Sourcing
    • CombineNet ASAP Differentiators• Collect both detailed price and non-price bids from suppliers• Solicit alternative item proposals, conditional offers, packages, etc.• Drive competition and price compression with Expressive Feedback• Suppliers put their “Best Foot Forward” in a collaborative biddingprocessExpressiveBidding®• Easily supports events involving larger #s of items, suppliers, and/orbid attributes (involving hundreds of thousands of bid data points)• Support spend aggregation across item types, overlapping supplybases, locations, and/or business units.• Support complex categories , such as transportation, packaging.Scalability &Performance• Create robust scenarios with unlimited # of rules per scenario• Scenarios optimized and results returned in seconds• Easy to collaborate with stakeholders• Find the best scenario balancing innovation, value, and risk.Analytics &Optimization
    • 28% Savings on Packaging6% Savings from ConditionalOffers / Expressive Bids45% Savings on Displays8% Savings on Truckload10% Savings on Ocean Freight11% Savings on DirectMaterial Ingredients10% Savings on AggregatedFacility ServicesSourcing Cycle TimeReduced by 3xAnalytics Time Reducedby 10xReplaced 100s ofSpreadsheets“We are procuring on ahigher level.”Supply Base Optimized &DiversifiedAwarded Supplier forProposing a Better MaterialOptimized TransportationMode AllocationSecured Seasonal CapacityRe-Allocated Awards Basedon Market ChangesIncreased Spend UnderManagement by >2x.Actual Results for Our CustomersAdditional Savings Increased Throughput& EfficienciesSupply Chain Innovation& OptimizationSampling of results reported by CombineNet customers. Data available in our online case studies.
    • CombineNet’s Customers Include…Focused on the Needs of Supply-Chain DrivenGlobal CompaniesFood & BeverageManufacturersConsumer Goods &Pharma ManufacturersRetailers &Restaurant ChainsManufacturingLogistics
    • Direct Materials &IngredientsIndirect Materials Transportation Packaging Corporate & AggregatedFacility ServicesBakery ProductsChemicals (Aromas)Chemicals (Flavors)CommoditiesConsumablesDairyEggsFats & OilsFood IngredientsMeats & PoultryMetalsProduceSauces/CondimentsRaw MaterialsResinsSteelCapital ExpensesConstruction Mat’sDisplaysDisposablesEquipment (Kitchen)Equipment (Lab)Equipment (Mining)Equipment (Plant)FixturesFleet VehiclesFurnitureHangersOffice SuppliesMannequinsPrice TagsRFID TagsSmallwaresTelecom/IT EquipAir FreightDrayageFreight ForwardingGround/TruckloadHome DeliveryInboundLTLOcean FreightOutboundRail/IntermodalSmall ParcelTemp-ControlledWarehousingBagsBottles/VialsCansCartonsClosuresCorrugateFlexible FilmsFood ContainersLabelsPalletsRigid PackagingShrink SleevesArmored CarsBusiness ServicesCoffee ServicesConstructionElevator MaintenanceEngineering ServicesHousekeepingHVACLaborLandscaping & Lot CareLegal ServicesMarketing & MediaMeetingsPrintingRemodels & PaintingRoofingSecurity & Alarm ServicesSnow RemovalTreasury/FinanceWaste RemovalCombineNet Improves Your Sourcing fora Range of Spend CategoriesCopyright © 2013. CombineNet, Inc.
    • CombineNet supports key ProcurementTransformation and Sourcing Excellence EffortsCopyright © 2013. CombineNet, Inc.Aggregation &Centralization ofSpendsSupplier Collaboration& Supply ChainInnovationStakeholderCollaboration &AlignmentRe-Optimization ofSupplier Awards AgainstMarket ChangesStaff Efficiency,Elevation, andRe-AllocationCost Reductions for theSupply Chain
    • Thank YouCopyright © 2013. CombineNet, Inc.jennifer.sikora@combinenet.comVice President, Marketing - CombineNetVisit Our Online Resource Center:www.combinenet.com
    • Walter Charles IIIChief Procurement OfficerGlobal Procurement
    • Agenda• Setting New Stretch Target Goals• Value Creation Successes AcrossBusiness-Critical Direct and IndirectCategories• Solutions Toolset Re-evaluation• Organizational Implications• Call to Action on Shared Challenges
    • GOALS Deliver 1.5 times, (50%) improvement innegotiated cost savings in three yearsMake long-term sustainableRe-imagine Procurement’s operating model to:1. Best people, best process, best insights2. Maximize global spend leverage3. Minimize redundancy4. Operationalize Procurement best practices with KWS5. Be Relentless in our application of Best Practice &Continuous Improvement6. Go Bigger, Go Bolder & Highlight Different StrategicApproachesProcurement TransformationStretch Targets, Goals & Approaches…
    • Diagnose &Design Phase 1 RolloutRollout to rest ofthe organizationMultipleCategoriesClean SheetsCost-basedNegotiationGlobal CategoriesGlobal ExecutionMulti-regionalcategoriesRegional executionCapabilityBuildingPlaybook DesignProcurement & Supplier ToolsWorkshopsPerformance ManagementProcurement TransformationFocused on Three Main Work StreamsWave 3 - GlobalAug - DecWave 2 - GlobalFeb - JulyWave 1 – North AmericaSep - JanWAVE 1Lessons Learned Lessons LearnedSavingsProjectsPeopleDevelopmentOrganizationalStructureTimeline
    • Kellogg’s Procurement TransformationDelivered $113MM in the First 120 DaysIngredients200+ Specifications80+ SuppliersClean-sheet modelingCapability buildingRisk ManagementHuge Commodity Spend4-12 Financial toolsFocus on Speed of Decision MakingNew / Robust Governance ModelExpanded Financial ToolsetMaintenance &Repair (MRO)~30 plants in NA NetworkAll plant buying in scopeAggregated Spend Across PlantsConsolidated & Standardized keyCategoryLogistics~4600 lanesInbound & OutboundFuel in scopeNew CombineNet SolutionValue Lever orFocus AreaScopeTools andApproaches
    • CombineNet Solution MitigatesTraditional ConstraintsFROMFacing $10MM in InflationaryHeadwinds in September 2012Constrained by traditional limitations:• Headcount• Amount of data to be analyzed• Complexity of Quantitative & Qualitative Data• Robust Feedback Mechanism• Largest Bid Historically at ~40MM and 1/10th ofour NetworkTO$23MM in favorable budget movewith the largest logistics bid inKellogg HistoryWe Asked: How do we do the Largest Bid in thehistory of our business?Should we consider technology solve to mitigateour traditional limitation list?How do we action:• 4600 lanes• Full US network, with inbound lanes• 155+ suppliers• 95,000 bid resultsGet actionable award scenarios to make theanalytics doable!
    • CombineNet Solution MitigatesTraditional ConstraintsFROMFacing $10MM in InflationaryHeadwinds in September 2012Constrained by traditional limitations:• Headcount• Amount of data to be analyzed• Complexity of Quantitative & Qualitative Data• Robust Feedback Mechanism• Largest Bid Historically at ~40MM and 1/10th ofour NetworkTO$23MM in favorable budget movewith the largest logistics bid inKellogg HistoryWe Asked: How do we do the Largest Bid in thehistory of our business?Should we consider technology solve to mitigateour traditional limitation list?How do we action:• 4600 lanes• Full US network, with inbound lanes• 155+ suppliers• 95,000 bid resultsGet actionable award scenarios to make theanalytics doable!
    • Questions We Asked to Inform ourOrganizational Design ProcessWe asked the leaders globally: what would be the best way to managethe spend we had?Specifically, what should be managed Globally, Regionally or Locally?Are we structured today to effectively drive behaviors in an increasinglyglobal and cross-regional paradigm?What structural changes should we be considering to best deliver theaspiration of a sustainable 1.5X?How do we protect with Regional Priorities (What) and how can weFunctionally own the process (How) to deliver on the businesspriorities?
    • Procurement Organization fromRegionally to Globally ManagedStrategyExecutionLocal Regional GlobalGlobalRegionalLocalStrategy DevelopmentLocal Regional GlobalGlobalRegionalLocalCurrent strategic sourcing matrix% of total spendFuture strategic sourcing matrix% of total spend622266433221411StrategyExecutionStrategy Development2Organizational changes to improve focus on strategic sourcing All operational activities will be transferred to a newly formed procurement operationsfunction to free up 30-40% of category managers’ time Global and lead category manager structure enables strategy setting at global level andallows procurement to pull a more holistic set of levers and capture synergies globallyFuture Procurement Organization will move from~85% Regionally Managed to ~60% Globally Managed
    • Procurement Organization fromRegionally to Globally ManagedStrategyExecutionLocal Regional GlobalGlobalRegionalLocalStrategy DevelopmentLocal Regional GlobalGlobalRegionalLocalCurrent strategic sourcing matrix% of total spendFuture strategic sourcing matrix% of total spend622266433221411StrategyExecutionStrategy Development2Organizational changes to improve focus on strategic sourcing All operational activities will be transferred to a newly formed procurement operationsfunction to free up 30-40% of category managers’ time Global and lead category manager structure enables strategy setting at global level andallows procurement to pull a more holistic set of levers and capture synergies globallyFuture Procurement Organization will move from~85% Regionally Managed to ~60% Globally Managed
    • Call to Action on Shared ChallengesIf you believe as I do, that key procurement value levers are thefollowing:1. Having a robust, large and increasingly global supply base that shouldbe universally available – “Global Supplier Information Database”2. Having robust systems to quadruple the number of RFPs that yourstrategic resources are working on…….3. Develop better systems for the industry to standardize around quality,delivery, issue mitigation & continuous improvementIf any of you are interested in potentially partnering on any of the threeabove opportunity areas, contact Jessi Olivarri at jessi.olivarri@kellogg.com