Heading into this summer, Kraft Heinz knew it had a problem with its mayonnaise line.
Mayonnaise sales are historically higher in warmer months as dishes that include mayonnaise, like deviled eggs and macaroni salads, are more popular.
Kraft Heinz’s mayonnaise packaging supplier was hit hard by the pandemic, which signaled a potential bottle shortage, at exactly the time production needed to ramp up.
The manufacturer’s Ops Center was put to the test in figuring out the bottle problem.
“As we knew how critical that category was, we were already working on contingent suppliers in the case of a disruption,” Thiago Bastos, head of U.S. operations in enhancers, specialty and away-from-home at Kraft Heinz, wrote in an email.
Kraft Heinz was able to get product on the shelves “thanks to good synchronized work between our marketing, R&D and procurement teams — coordinated by the Ops Center,” said Bastos. “We were able to commercialize the new bottle format in record time, mitigating completely the shortage,” he said.
That result was thanks to an effort that began last year. Kraft Heinz put seemingly disparate groups, including supply chain and marketing, under the same (virtual) roof in a new Ops Center, in an effort to save $2 billion in five years.
“Unless you have great execution between marketing, R&D and the supply chain, product launches are not successful.”
Head of U.S. operations in enhancers, specialty, away-from-home at Kraft Heinz
The boundaries between supply chain and marketing are being broken down, or at least they must for enterprises that want to stay competitive.
“The last domain of competition is on the supply chain side,” said Chad W. Autry, professor of supply chain management at the University of Tennessee Haslam College of Business. “New products can be manufactured and they’re new and they’re exciting and they’re duplicated in such a short amount of time by competitors that it’s really hard to create a competitive advantage” on product alone.
Supply chain and marketing under one (virtual) roof
Previously at Kraft Heinz, marketing and supply chain “were relatively independent from one another,” said Bastos.
The groups interacted on forecasting and commercialization of new items, but those actions were limited. The perspectives each department got from the other were fragmented.
“The supply chain would not have full visibility to the long-term initiatives marketing was driving and vice-versa,” Bastos said.
The company found that supply chain was driving efficiencies across the network, but if those efficiencies weren’t in line with the overall product platform strategy, it’d create a gap with marketing, which in turn affected the launch of new items.
“Unless you have great execution between marketing, R&D and the supply chain, product launches are not successful,” Bastos said.
He also said the disparate relationship was creating waste, which was a problem for a company working towards being a zero-waste company. With the new Ops Center, Kraft Heinz has already begun to reduce waste.
Kraft Heinz has also cut its SKU portfolio by more than 25%, with that number closer to 40% on some platforms.
“That is something that the supply chain cannot achieve without strong collaboration from marketing, and vice versa,” Bastos said.
While the initiative to combat SKU proliferation started two years ago, the integration has helped significantly in driving those percentages down further and faster.
The new Ops Center has also allowed Kraft Heinz to “re-evaluate our whole distribution network to line up better with the product platforms we have, in order to deliver better customer service,” Bastos wrote.
He named examples such as addressing customer agreements with supply in mind, and collaborating on packaging.
“The journey is just beginning,” Bastos said.
Collective business goals over department KPIs
In Kraft Heinz’s new Integrated Business Plan, marketing, supply chain and finance work together while still maintaining clear ownership and decision rights over their processes.
“That’s helped us get to a whole new level of integration we didn’t have before,” Bastos said, adding that efforts are ongoing.
Along those lines, Kraft Heinz is also in the process of integrating its financial reporting system so that each business function has full visibility into the financial operations of the business, instead of a fragmented view.
This process is easier said than done, said Autry.
“The average marketing person is really concerned with getting into the mind of the customer and try to figure out what we can do to create attention and loyalty and get people to buy this product over and over and over again,” he said. “The average supply chain group gets really focused on, how can I drive the costs down. Both of those perspectives fall short.”
“The last domain of competition is on the supply chain side.”
Chad W. Autry
Professor of supply chain management at University of Tennessee
Sales and marketing might implement something to meet their own KPI that leads to increased supply chain costs, and vice versa “unless there is excellent communication across those functions, which there frequently isn’t,” Autry said.
He doesn’t expect everyone to follow Kraft Heinz’s lead, at least not right away. The company has gone through the arduous task of rethinking its entire business process, which other enterprises might hesitate to do.
“It would be awesome if everyone would do what Kraft Heinz is suggesting,” Autry said, but breaking down those silos are difficult unless someone — usually sales and operations planning that is championed by someone in the C-suite — consciously gets marketing and supply chain professionals to focus on business initiatives instead of their own KPIs.
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