1 srm collaboration strategies (6-25-08 draft) supplier relationship management supplier engagement...

SRM Collaboration Strategies (6-25-08 DRAFT) 1

Supplier Relationship Management Supplier Engagement Strategies

Maria Velissariou6-25-08

FINAL DRAFT FOR JUDITH


SRM Mission

Enable Procurement, aligned with cross-functional stakeholders, to lead and facilitate supplier engagement strategies that drive profitable growth and margin enhancement for the BUs.

“Unleash supplier power to drive profitable growth”

Revenue must grow Profitable Growth

Costs must be reduced=

Determine that the thing can and shall be done, and then we shall find the way.

Abraham Lincoln


Total supplier power =

+ Best innovative ideas to deliver consumer and customer value

+ Maximum cost efficiencies without sacrificing quality

+ Speed to market

+ Supplier resources and capabilities

+ Preferred Customer status among suppliers

… and better positions Suppliers to grow their business by meeting Kraft’s needs

SRM creates …a sustained environment where Procurement engages suppliers and gains total value that enables profitable growth for Kraft.


How do we achieve Kraft = Preferred Customer?

SupplierElevate Kraft-supplier relationship to a collaborative or alliance status, which enables suppliers to achieve sustained business gains

• Growth in business size• Training / support from Kraft• “Badge” value among peers

KraftStrong SRM strategies position us to gain suppliers’ best ideas & resources first

• Delivering more total value • Driving profitable growth• Creating a competitive

advantage for Kraft as part of


Productivity entrenched in Kraft culture

Since 2004 SRM launch, we’ve made great strides …

50+ Supplier Challenges 200 ideas, 20+ launches (worldwide)

Supplier collaboration concept introduced in 2004

First Supplier Summit

2004 2005 2006 2007 - to date

Kickoff Alcan, Cargill Alliances

RSA Supplier Assessment tool

Brand Value Challenge

Growth metrics

1st Multi-supplier ChallengeSupplier

collaboration training

First Supplier Challenge showcase

Kraft SRM milestones from a business deliverables and organization standpoint

Open Innovation SRM roll outs(e.g. IM&S)

Collaboration launches


Health &

Wellness

Health &

Wellness

Growing CohortsGrowing CustomersGrowing Channels

Quick Meals

Premium

Snacks

SRM starts with the consumer or business need …

*Italy: Multi-supplier challenge idea (2008)

… and results in new ideas for Kraft

Sonoco 3Rs

Kenco footprint

Philly Gourmet Terrine*


Suppliers are helping us deliver innovations …

Supplier Challenge:

New super premium coffee launched with innovative consumer pack and in-store display in 6 months

R&D Innovation Day:

Supplier showcased new lid technology, used in personal health products, which ultimately becomes EZ Grip Maxwell House

External Manufacturing Innovation Session:

Utilized suppliers’ development resources, minimizing Kraft R&D support, to launch new line extension in 6 months

Supplier Collaboration:

Supplier helps Kraft develop new prebiotic fiber cereal, which is the category’s biggest new product launch for 2008


And suppliers are driving down costs, without compromising quality

Supplier Challenge: Supplier identifies innovative packaging solution that satisfies consumer’s easy-to-open and reclose needs while providing significant cost reductions projected at $5MM.

Service Solutions: Supplier suggests ways to reduce, reuse and recycle at Kraft facilities, which saves the environment and an estimated $5MM annually for better bottom-line brand value

Supplier Collaboration: Supplier worked closely with Banbury plant personnel and identified seven unique ideas to reduce energy on the freeze-dried process – saving $5MM or more across the coffee network

Supplier Expertise Optimized Inbound Shipping:

Supplier fills a long-standing internal capability gap to explore shipping efficiencies. Using the suppliers’ comprehensive system to control, manage and optimize inbound supply chain shipments saves $2.4MM annually


End to End

BUProcurement

Leads

BURDQ

Leads

Buyers RDQ / Open Innovation

Suppliers

SRM

Legal

BU

Direct communications, lead interface

Broad strategic communications

SRM Shared ServiceLinkages within Procurement and across functions will ensure effective supplier engagement and drive total business value


Continuing to follow the 80/20 rule: Focus on suppliers of highest potential

Alliance: Tailored and highly integrated business relationship between Kraft and the supplier that advances functional and technological challenges via co-development.

Transactional: One-time exchanges.

Collaborative: Cooperative business relationship between Kraft and the supplier that allows the supplier to develop for Kraft ownable product and/or supply chain solutions.

ALLIANCE

RELATIONSHIP

TRANSACTIONAL RELATIONSHIP

CO

LL

AB

OR

AT

IVE

Co

mp

atib

iliti

es

Economic Value Drivers


Primary role:Leading and enabling organizational change

• Idea leadership – Idea leader of SRM best industry practices

• Communications – Agent of change to maximize supplier engagement– Driver of SRM communication internally and externally with suppliers to draw the best ideas

and resources– Main Procurement link with stakeholders, such as RDQ/OI

• Business alignment – Enabler of aligning the best of supplier expertise with the Kraft business and corporate

priorities to get joint value creation

• Community of practice – Owner and custodian of tools, best practices and training worldwide

• Recognition – Driver of internal and supplier recognition and awards


Currently … We’re in a position of high potential

High understanding

of supplier collaboration

Collaborating with Suppliers

Not Collaborating with Suppliers

Innovators & early

adopters

Laggards High potential

Low understanding of supplier collaboration

Natural instincts


However, supplier consolidation is causing a shift from a buyers’ to a sellers’ market

Kraft competing for best supplier resources and ideas

Innovations

Production capacity

Productivity

More than 75% of companies give access to Preferred Customers of vital resources: production capacity, product/service innovations, productivity.― Corporate Executive Board Procurement Council, March 2007


Leaders are embracing Open Innovation & Strategic Alliances

Suppliers report delivering an average of 49% more value to their most collaborative key customers compared to their least collaborative key customers.

Vantage Partners

New Trends are emerging …

1. From Strategic Alliances to Alliance Strategies

2. Balance global partnerships with local executions

3. Ecosystems the blueprint for future collaborations


Commodities and Sustainability:Major external forces of industry transformation

• Escalating commodity prices

• Sustainability, the new transnational societal and industry phenomenon of the ’00s – like the Quality movement in the ’80

• Supply Chain efficiencies at the heart of cost management

More than ever cross-functional integration of strategies and supplier partnerships are imperative


How do we accelerate adoption of supplier engagement strategies for profitable growth?


Promote/refine existing tools and develop new efficacious approaches to maximize efficiency of SRM.

NEW VALUE CREATION

TOOLS

Engage the business and Shared Services to connect supplier expertise with business needs. Migrate from ad hoc tactical projects to aligned strategies.

BU GOAL ALIGNMENT

COMMUNICATIONS

Promote internally and externally the urgent need of SRM strategies as a means to enable innovation and margin enhancement.

Engage Shared Services to leverage SRM to drive corporate priorities, such as sustainability, beyond brand- driven initiatives.

SRM EXPANSION

Over the Strat Plan timeframe …

Four strategies will poise supplier engagement to help drive profitable growth

We will connect world-leading supplier expertise and resources with our business priorities in a framework that builds relationships and creates win-win gains.


1. Align SRM with BU Strat Plans Support Procurement BU leads to identify BU priorities and

create SRM plans Promote an optimized supplier network in line with BU

innovation funnel Longer term, champion Supplier Portfolio Management

(SPM)

2. Strengthen cross-functional alignment with key stakeholders Enable Procurement BU leads and buyers to maximize

SRM value to the BUs Act as the primary Procurement contact with RDQ / OI

3. Establish approach for Kraft – Supplier Joint Value Creation Joint goals and metrics Roles and responsibilities Resources

Engage the business and Shared Services to connect supplier expertise with business needs. Migrate from ad hoc tactical projects to aligned strategies.

BUSINESS GOAL ALIGNMENT


SRM EXPANSION

Engage Shared Services to leverage SRM to drive corporate priorities, such as sustainability, beyond brand-driven initiatives.

1. Continue to expand SRM application in new areas beyond brand-driven initiatives

Sustainability

Commodities

IM&S (e.g. MES, Transportation)

2. Proactively engage suppliers in helping us achieve specific goals (e.g., Sustainability pilots)

3. Adapt SRM approach and methodologies as needed per business and/or region


1. Behaviors and culture Assess spectrum of mindsets to SRM Uncover perceived barriers/accelerators to success via

auditing internally and with suppliers Step up communications to drive adoption & effectiveness

2. Community of Practice Share SRM best practices with world-wide Procurement

community Model best practices through peer-to-peer case study

endorsements/testimonials

3. Training Procurement Training Academy: Migrate Procurement staff

through understanding “the what” and “the how” Support suppliers navigate Kraft

4. Communications Internal cross-functional; Intranet workzone External (Suppliers, Media/Industry); Extranet

5. Incent behavior Reward and recognition internally and for suppliers Goals / MAPS alignment

Promote internally and externally the urgent need of SRM strategies as a means to enable innovation and margin enhancement.

COMMUNICATIONS

You communicate, you communicate, and then you communicate some more. Consistency, simplicity and repositioning are what it’s all about. -- Jack Welch


Promote/refine existing tools and develop new efficacious approaches to maximize efficiency of SRM.

NEW VALUE CREATION

TOOLS

1. Toolkit management

Refine existing tools– Supplier Collaboration – Supplier Segmentation (RSA) – Supplier Challenges (single and multi-)– Innovation Days (with RDQ/OI)– Supplier evaluation tools (e.g. Clareo Index)– Simplified contractual agreements and forms – MOR/PDR Procurement inputs (exploratory &

development)

Introduce new tools– SRM metrics– Joint Value Creation (jointly with OI)– Benchmarking (jointly with OI)– Supplier Ecosystem as part of

2. “One-stop shop” library and helpline Centralize all tools and communications on the Intranet

3. Continued education Stay abreast with academia and industry


Ensuring we’re in-step with industry best practice

• Gaining executive reinforcement

• Creating common language, goals and metrics

• Developing alliance manager leadership competencies and credentials

• Focus on hard and soft enablers, measures and cultivating relationships

• Aligning with ’09 BU Strat Plans

Kraft

Align with corporate & business strategies 1

Balance the “what” & how”• The right business arrangement & working relationship

• Ends Metrics and Means Metrics• Eliminating and Embracing Differences

• Enabling formal systems and collaborative behavior• Managing external partners and internal stakeholders

5

Appoint Alliance Manager & ensure governance4

Share goals, metrics & language3

Secure executive endorsement 2

5 Supplier Collaboration Imperatives


2008 2009 2010

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

SRM Strat Plan

Contract simplification

Supplier Challenge optimization Next generation Supplier Challenge

Joint Value Creation / Metrics Ecosystem

SRM Training Academy

Updated Intranet

Revamped Intranet

Extranet

Community of Practice (quarterly)

SRM mindset mapping Rewards & Recgn

Supplier Excellence Awards

Supplier Summit

Alignment with BU/Corp growth / sustainability priorities

Pilot optimal supplier network

Optimal supplier network Supplier Portfolio Management

Alignment with BU/Corp Cost priorities

IM&S (MES and Transport) supplier segmentation

Multiple Supplier Challenges

Driv

e d

ow

n c

ost

sR

ew

ireR

efr

am

eE

xplo

it sa

les

Supplier engagement roadmap


SRM will provide regional focus based on individual needs

NA Enable SRM penetration within Procurement

SRM alignment with regional business strategies

Tools and best practices

Training Academy

EU Share learnings / best practices on optimal supplier network in line with innovation funnels

EEMA Enable SRM penetration within Procurement

SRM alignment with regional business strategies

Tools and best practices

Training Academy

LA Tools and best practices

Training Academy

AP Tools and best practices

Training Academy

Tool adaptation to regional needs

Global SRM Expansion to Corporate Initiatives

Communication Strategies

Tools, Best Practices, Training Academy

Strengthen links with cross-functional stakeholders


SRM EXPANSION COMMUNICATIONSNEW VALUE CREATION

TOOLS BUSINESS GOAL

ALIGNMENT

Develop “One-stop shop library” and helpline

Instruments of Growth

Drive ExtraordinaryScale

Masters of Service

Lead toolkit roll out and facilitate adaptations as needed

Enable Tool kit optimization Introduce next generation of

tools Support contract

simplification Drive continued education Explore Ecosystem

Launch SRM Procurement Training Academy

Lead Community of Practice

Revamp SRM intranet

Develop Supplier Extranet

Step up Internal & External Communications

Drive behaviors and culture Incent behavior (internally & with

suppliers)

Strengthen cross-functional alignment

Maximize SRM value to BUs Primary contact with RDQ,

linkage with E2E

Promote an optimized supplier network against BU innovation funnel

Champion Supplier Portfolio Mgmt

Align with BU Strat Plans Establish approach for Kraft-

Supplier Joint Value Creation (goals, metrics etc)

Expand SRM application in IM&S

Expand SRM application in Sustainability & Commodities

Adapt approach/ methodologies to regional needs

SRM strategies deliver against the three Procurement priorities …


How can supplier engagement help the business accelerate the drive for profitable growth?

New ideas SRM can engage suppliers’ best innovative ideas to deliver against your consumer and business growth priorities

Cost efficiencies SRM can maximize supplier cost efficiencies without sacrificing quality

Gain speed to marketSRM can deliver ideas faster than traditional approaches

Sustainability solutionsSRM can leverage supply chains to deliver against sustainability goals

How can you help?

Share business priorities with SRM

Work with RDQ to identify technology enablers

Work with Procurement to link priorities with supplier capabilities and identify collaboration strategies

Share with suppliers our needs and invite their ideas for win-win gain

More resources SRM can leverage supplier resources and capabilities


How can supplier engagement help Procurement enable profitable growth?

Align with business strategies Leverage communications & training to

create behavior & culture Learn more about new value creation

tools and how to apply How can you help?

Get clarity and alignment with BUs on goals

Put collaboration and alliance strategies in place

Share with suppliers our goals and establish deliverables. Look for win-win opportunities

Communicate progress regularly and reinforce Kraft’s commitment


How can SRM help Kraft and Suppliers attain win-win relationships

Help key suppliers navigate Kraft Reinforce the behavioral changes to enable SRM Help Procurement communicate the Kraft

message externally

How can you help?

Buyers bring to life SRM with suppliers

Agreement team establishes streamline contract process

Executive support for fair and reasonable sustained relationship with suppliers


In summary,

SRM Supplier Engagement Strategies …

• Connects world-leading supplier expertise and resources with our business priorities in a framework that builds relationships and creates win-win gains

• Over the three year strat plan, our SRM approach will help us earn “Preferred Customer” status among suppliers to get their best ideas first

• We’re committed to four strategies to drive the change in culture and mindset within Kraft

• We’ll begin by aligning our supplier networks with the business priorities

• It’s the right thing to do, and it starts with you!

What can you do to unleash supplier power to drive profitable growth for Kraft?


Supplier Relationship Management Supplier Engagement Strategies

Maria Velissariou6-25-08

DRAFT


APPENDIX


Chocolate Growth Platform & Supplier Network Example

Surprising flavours

Fresh & Authentique

Emotional Packaging and Formats

Act Responsible

Nutrit, improvem.

Portion control

Calorie reduction

Mental wellbeing

Mess free eating Convenience Portion size

Existing Suppliers Type

Huthamaki PackPremium flow pack

Reclosable technology

Easy opening technolgy

Tate & Lyle IngredientsNatural flavors

Barry C. Raw MatCocoa specialities

Sustainable Cocoa

Theobromine fractionates

Friesland Food CommodityEncapsulation technology Fat replacer

Brandt EMEHollow figure technology

Cargill CommodityCocoa specialities

Sustainable Cocoa Fat reduction

Südzucker IngredientsSugar replacer

Random TechnolgyInline printing

New Suppliers

National StarchSugar replacer

NovozymesSpec. Enzymes

BayerSchwartau Dried fruit

Growth Platform

Consumer Need

Premiumize Health and Wellbeing Snacking


Protect ideasfor Kraft

• Further develop firewalls to protect Kraft innovations

• Link ABU strategies with IP strategies with contract executions

• IP, exclusivity & innovation development agreements

• “First in market”

Develop collaboration strategies

• Engage suppliers to deliver solutions at reduced time to market

• Select / recommend suppliers and most effective ways to engage them

• Build Strategic Alliances to advance functional & technological challenges (co-development)

• Foster collaborative partnerships to deliver "ownable" product / supply chain solutions

• Build matrix displaying Growth Platform needs vs. supplier capabilities

• Systematically screen for new suppliers and technologies

Link capabilities to Growth Platforms

• Re-assess supplier base with focus on innovation capabilities for Growth Platforms

Fully understand Supplier Innovation Capabilities

SRM enables an optimized supplier network, aligned with BU innovation funnels

• Understand Growth Platforms & underlying consumer needs

UnderstandGrowth Platforms


SRM will champion Supplier Portfolio Management to integrate with BU priorities. Adopt BU pilot model.

Plan Explore Negotiate Form Manage Evolve

Individual SupplierCollaboration or Alliance

SPM = an instrument of growth and scale

Business Portfolio RESULTSSTRATEGY

New Alliances/

Collaborations

Exit / Restructure

OptimizeSPM

Idea

l

To

day

Skills and mindset

Alliance knowledge/ value added

OrganizationStructure/Governance

Organizational Enablers

-- Vantage Partners


SRM intranet workzone


What’s an ecosystem?An effective network of interdependent relationships that enables Kraft to deliver more total value to the market than its competitors with less effective relationships

What ecosystem will do for Kraft (barriers to competition or

expansion to new territories

Sustainability

Connected ti kraft and each other (show Kraft vulnerabilities)

Suppliers

Others (e.g., Entrepreneurs)

Peers/competition

Academia

Customers

Public Opinion / Lobbies

CommodityGrowers / Producers

Government & Regulatory

KRAFT

CONSUMERS

A strong ecosystem can help Kraft enable expansion into new areas and create barriers to competition

Customer responsive

Consumer centric

Trusted partner

Com

mun

ities

of i

nnov

atio

n

Industry focused excellence

Inclusive

Interdependent


… and it continues to gain momentum

My job is to find productivity advantages

I’m creating new value for Kraft by engaging suppliers more collaboratively to enable their expertise to bring solutions to our business needs

I know new value creation is critical to Kraft’s growth, and the company wants to work with suppliers differently. I’m just not sure what that really means for my job.

I think changing the way we work with suppliers is important, but I don’t know how to apply that to my job.

I feel I can make a real contribution to Kraft by working with my suppliers differently. I’m going to try to do this.

KNOW KNOW KNOW THINK THINK THINK FEEL FEEL FEEL DO DO DO

Kraft spectrum

We’re building on management reinforcement, role modeling, and expansion across and deeper in the organization

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