Kraft procurement geared up for business change

30 April 2010

30 April 2010 | Rebecca Ellinor in San Diego

Purchasing at Kraft Foods is in the midst of an overhaul under the direction of the firm’s senior vice-president of procurement Julia Brown.

Speaking at the 95th annual Institute for Supply Management conference in California this week, Brown, who joined the company 18 months ago, said she found a supply chain staffed with people with a mixture of abilities, a vast spread of systems (including 80 for procurement) and no holistic vision that everyone in purchasing could articulate.

She began work in March 2009 to develop her staff and transform processes in her department, as well as they way in which procurement worked with suppliers and internal customers. The aim is to reduce costs on the company’s annual spend of more than $30 billion (£19.5 billion) a year, $12.5 billion (£8.1 billion) of which is on commodities including food and energy, and to halve the number of suppliers. Kraft has around 77,000 vendors, 1,200 of which account for 80 per cent of spend.

“I very publicly stated last year that we were going to take an aggressive stance and consolidate our supplier base. We will be moving towards fewer, more strategic suppliers,” Brown said. As a consequence some vendors have gained significant pieces of business while others have lost out.

Brown said at the end of last year procurement had achieved 40 per cent of incremental savings. She would not say what that figure translates to in dollars, but said her department is “on track to double the productivity from last year”.

She said of her transformation plans: “You would assume when you walk into a company such as Kraft that this work would have already been done – and in many ways it had – but the world is changing, it continues to change and procurement needs to anticipate what’s happening in the marketplace and put in place strategies to bring value and mitigate risk.”

Brown added that, despite its size, Kraft was still quite a young firm, having only become a publicly traded company in 2001. It has mostly grown through acquisition. Its most recent takeover of Cadbury takes the company’s yearly revenue to around $50 billion (£32.5 billion) and its brands include Maxwell House, Oreo, Milka and Philadelphia.

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