Capitalizing on Improved Computing Power

Philip W. Carlson

Senior director of transportation, Kraft Foods, Northfield, IL.

Experience: Entire 28--year career has been with Kraft in field and corporate transportation, corporate logistics planning and plant production planning, inventory control, site distribution management, 3PL operations, distribution and transportation.

During your time at Kraft, what have you seen as the major changes?

Carlson: When I started 28 years ago, everything we did was decentralized. We collected, coordinated and managed orders and routed trucks manually, using pencil and paper, on a site--by--site basis. We made multiple phone calls to get a carrier to commit. Today we have a centralized transportation department controlling all over--the--road freight for the United States using a sophisticated transportation management system that optimizes and electronically tenders freight to carriers. Today’s process requires less staffing. Our distribution network has been consolidated into seven regional mixing centers that handle ambient, refrigerated and frozen products. Our product supply network is also centralized by category and managed through a single system.

Kraft offers such a diversity of products. How do you put them all together in a single distribution network?

Carlson: Kraft has grown into the largest food company in North America. Bringing all our brands into one distribution network to simplify interaction with customers has been our focus. Capitalizing on improved computing power and overall information management has been, and continues to be, the driving force for overall supply chain performance improvement. Kraft has created a network that allows us to absorb acquired businesses into our network quickly, thus building on our scale to improve product mix. With systems capabilities continuing to advance, we are challenged to invest wisely in technology to avoid rapid obsolescence or miss a breakthrough that may be just around the corner.

What's important to remember is this is just a point in time. We continuously test ourselves to ensure we have the best--designed delivery system possible. We know there are tremendous opportunities ahead with the improved capability to forecast and track products. Our goal is to synchronize demand with consumption, and ultimately increase the velocity of product flow and reduce inventory at the same time.

How is the company dealing with carrier capacity shortages and rising fuel costs?

Carlson: We are working on advanced transportation software that would capitalize on our network scale to create continuous moves or loops among suppliers, facilities and customers. We are also working on increasing the speed of movement from order placement to delivery. Capitalizing on our DSD network to provide flexible delivery is in development and provides a unique opportunity. Collaboration on joint supply chain opportunities with customers has become a standard operating practice.

Thousands of people handle Kraft's products all over the world before they reach the customer. What has the company done to maintain control over its products and ensure their level of quality through it all?

Carlson: The safety and quality of our products are central to building trust in Kraft and our brands. Throughout our history, we have been dedicated to delivering high--quality products and to enhancing the safety of the food supply. We have developed and implemented strong food safety systems, which we continually strive to improve.

We use science--based risk identification and management to systematically assess and control factors that potentially could compromise ingredients, packaging, manufacturing processes or finished products. We train employees to emphasize continuous improvement of product quality and safety. We extend our quality and food safety systems to business partners across the supply chain to supplement our efforts.

Reducing unsaleables became a significant focus for us in 1999. A cross--functional group at Kraft studied our handling practices and found we lacked defined loading standards, tools and techniques to prevent load shifting, internal ownership and a consistent and sustainable training method for all our locations. We developed a program to address these issues and implemented it in 2000. Our losses were reduced by more than 70 percent. Feedback from customers was overwhelmingly positive. We captured our program in a 15--minute training film, which we donate to the industry. More than 1,000 copies have been distributed through GMA at the nominal cost of reproduction and postage. The film is available by calling GMA's fulfillment service at (800) 382--0602.

And finally, what is the most significant challenge to your job that has emerged in recent years, and what can we expect from Kraft in this area?

Carlson: In a word, security. Moving goods safely around the world has become a primary focus of ours. Since 1999, we have initiated investments of more than $125 million to strengthen an already excellent system for ensuring product safety. Since 9/11, we've worked closely with the FDA on food security initiatives, enhanced our worldwide security procedures, implemented security tasks forces at our manufacturing facilities and upgraded our security expectations for our suppliers. We also have been assisting trade associations and supply chain partners to improve food security.

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