SCDigest Editorial Staff
SCDigest Says: |
The company hopes to save some $300 million annual from the move – presumably from leveraging greater spend with fewer suppliers to gain price reductions on procured goods.
Click Here to See Reader Feedback
|
The recession is causing many companies to look at how they can simplify and standardize their businesses to take out additional supply chain costs.
Kraft Foods is among those on that bandwagon, having already closed some three dozen manufacturing plants that will provide annual savings of over $1 billion dollars.
Now, the company says it is going to go hard at rationalizing its supplier base and driving more standardization into what it buys.
At a conference last week, Kraft CFO Tim McLevish said, "We're narrowing our number of strategic suppliers to fewer than half the current 70,000. We'll select those that offer sustained competitive advantage and who can grow with us."
That will still leave the company with some 35,000 strategic suppliers around the globe, but would, nonetheless, represent a strong move towards simplifying Kraft’s business.
Almost in parallel, Julia Brown, VP of Procurement at Kraft, told the Reuters News service that "We're essentially taking a white sheet of paper and saying 'what is the right number of suppliers to support this particular category, who are they, what is the capability we need for now and in the future, and does the current supplier base have that?'"
Brown added: “This is probably the first truly holistic view we've taken," after years of acquisitions.
Brown said the company hopes to save some $300 million annual from the move – presumably from leveraging greater spend with fewer suppliers to gain price reductions on procured goods.
Kraft informed its supplier base in March of its plan to reduce its total vendor base – putting them on notice that they would be competing with each other to remain in the Kraft “club” of strategic suppliers. It is dangling the prospect of longer contracts for those that make the grade, implicitly saying that lower prices may get you a longer deal.
(Manufacturing Article - Continued Below)
|