Kraft confirms plan to cut suppliers by 50 per cent

17 September 2009

18 September 2009 | Allie Anderson

Kraft Foods plans to halve its 70,000-strong supply base in a bid to save millions of dollars, the company has confirmed to SM.

Julia Brown, senior vice-president of procurement, outlined the plan, which aims to save $300 million a year (£182 million), in an interview with news agency Reuters earlier this month.

The US company's consolidation of its purchasing operations, which have become increasingly complex as the company has expanded and acquired other firms, forms part of wider strategy to overhaul procurement of everything from ingredients to packaging.

A spokesman said: "Today we have more than 40,000 specifications for our products, and in some cases, those differences are not important to the consumer. So we will look to standardise specifications where possible."

The world's second largest food maker will offer some vendors longer contracts in an effort to build stronger relationships and get exclusive access to new products.

"We hope to partner with suppliers to drive costs out of our joint supply chains. That saves costs for Kraft Foods, and these strategic partners are likely to have access to a larger portion of our global business," added the spokesman.

He refused to comment on whether the procurement cost-saving exercise would involve redundancies. The news follows Kraft's proposed £10.2 billion acquisition of Cadbury put forward earlier this month, which the company said could lead to total savings of at least $625 million £378 million) a year.

Up to $300 million a year of this would be delivered from procurement, manufacturing and logistics cost reductions (Web news, 8 September).

SMsep2009

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