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One of the not unexpected benefit of the program, says Lambotte, is that now sales is much more engaged with supply chain initiatives and improvements. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

It has taken a long while, but increasingly, suppliers and customers really are started starting to think like one supply chain.

There is perhaps no better example of that than Kraft Foods, which has been taking substantial steps to rethink and improve  its supply chain in recent years, including the way it finds opportunities to take out costs not only for itself but its retail channel partners.

That according to Philippe Lambotte, Senior Vice President, Customer Service & Logistics for Kraft, during a presentation last week at the Business Best Practices and Emerging Technologies Conference of the University of Wisconsin's E-Business Consortium in Madison.

Lambotte said the level of thinking and strategic planning between Kraft and retailers has really evolved.

"We have discussions now with retailers that start with the questions: What if you bought us? What if we bought you? What would we do differently?" Lambotte said.

He noted the conversation goes well with some retailers, less well with others, and is almost always in the context of current performance. "You can talk strategy, but they will usually focus first on any problems in service that happened the week before."

To improve its own supply chain performance and set the stage for joint improvement opportunities, Kraft is very focused on obtaining and leveraging actually retail point of sale (POS) data.  To that end, the company has developed a new analytic tool, the Kraft Integrated Demand Signal (KIDS), and hopes to have 60% of its volume data moving into the system by 2011.

POS data is increasingly available, Lambotte says, but there can still be wide variations in the capabilities and willingness to share that data depending on the retailer.

"Can you get the data by day, by store, by product? There are still challenges there," he says. He added that the KIDS system is already helping Kraft improve on-shelf availability, its Vendor Managed Inventory (VMI) programs, transportation planning and more.

Using Supply Chain to Drive Growth

According to Lambotte, there is a dramatic change going on at Kraft and its retailers. "Instead of the conversation being about all the "specialized supply chain stuff," it's about leveraging the supply chain to drive growth."

He notes that Kraft, like many companies, has done a pretty good job of capturing data on its own supply chain savings, but never really tracked how those improvements might have reduced costs for its retail customers as well.

"We realized there was a great opportunity to better understand and communicate the benefits to the customer in terms of cost, inventory, transportation and waste," he said.

(Supply Chain Trends and Issues Article - Continued Below)

He noted that Kraft has developed a three-phased approach to using innovation to drive out supply chain costs for its retailers:

• Formally and consistently Track the supply chain innovation savings for the retailer
• Partner with the retailer to get it to Acknowledge the savings have been delivered
• Track those savings over time, and how the resulting benefits are used to drive joint growth

"We ask the retailer to give us credit for the savings," Lambotte said. "Before, it was just on to the next project."

He said that working with sales, Kraft's supply chain team now asks the retailer that if Kraft can save it money, will some or all of it be invested in their mutual business? As just one of many potential angles, Kraft may work with the retailer to have it spend part of the savings on increased promotion or other marketing programs for Kraft brands.

One of the not unexpected benefit of the program, says Lambotte, is that now sales is much more engaged with supply chain initiatives and improvements.

"They can see a direct link between what we do in supply chain and growing their accounts," Lambotte said. "This often wasn't true before."

Kraft is using a number of tools and programs to deliver those supply chain savings for retailers, including an aggressive program for taking out transportation costs for both sides.

It has developed an advanced TMS application to enable what is calls "Collaborative Transportation Engineering" between itself and its partners. While it will look for savings opportunities for all of its partners, the larger and/or more strategic the relationship is, the greater investment in the logistics programs Kraft will make with that retailer, as shown in the graphic below.

Source: Philippe Lambotte, Kraft

Lambotte acknowledges that it will take some time to get the program fully up to speed, and that currently some retailers are much more receptive to the thinking that others.  But, he says, "This is what we are aggressively moving towards. We can already see the power of this to drive the top line. And supply chain innovation is the key to making this work.

What's your reaction to Kraft's supply chain innovation strategy? What will be key to making it work? Are you doing or seeing similar things? Let us know your thoughts at the Feedback button below.

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