Kraft Foods unveils procurement moves
By David Hannon -- Purchasing, 10/15/2009 2:00:00 AM
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Kraft foods said last month it plans to focus on procurement strategies and dramatically reduce its supply base in an effort to cut as much as $300 million from its cost structure.
In a presentation to investors, Kraft executives said there were several areas of procurement that could help the company better manage its costs. They included:
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Leverage scale with reduced number of strategic suppliers across total spend
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Expand global sourcing and low-cost country sourcing
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Simplify material and product specifications while maintaining quality
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Re-engineer processes to reduce inventory
In an interview with Reuters, Kraft's senior vice president of procurement and CPO Julia Brown said it would review each spend category's supply base and seek opportunities for consolidation and standardization. Kraft would not grant Purchasing an interview with Brown.
In addition Kraft is working to centralize its buying of certain materials across various business units to better leverage its spend. "Our goal is to become the customer of choice to our strategic suppliers," Brown said.
In addition to procurement efforts, Kraft officials unveiled several other cost-reduction measures:
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Reducing its cash conversion cycle from 46 days in 2008 to 41 days by 2011
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Reducing overhead as a percentage of net revenue from 14% in 2008 to 12.5% in 2011
And in manufacturing, Kraft plans to focus much of its efforts on category value chains, manufacturing platforms
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