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Click to edit Master subtitle styleImplementing Zero Based Budgeting
Chris Winter, Heinz
An introduction to Heinz
A Brief History of Heinz
Founded by Henry J Heinz in 1869
First product was Horseradish in clear jars
First order for UK placed in 1886
In 1896 H J Heinz introduces “57 Varieties”
Now #1 or #2 food brand in over 50 countries
Valentines Day, 2013 - a declaration of love?
Warren Buffett Jorge Lemann
Who are 3G?
Heinz Vision
To Be the Best Food Company, Growing a Better World
Vision Supported by 5 Values
Consumer First
Quality
Integrity
Ownership/Meritocracy
Innovation
ZBB PRINCIPLES
Every cost is part of a package
Simple Packages
Complex Packages
• High compression 40%+ with very limited business risk
• High reliance on policies
• Behavior change
• Distributed management
• Global consistency expected
• Low/mid compression 10-25%
• Technical in nature
• Some are variable with volume
• Centralized management
• Efficiency related
PACKAGES1. Fees2. Institutional3. Legal4. Leases/Rentals5. People6. Variable Compensation7. Services8. Technology9. Travel10. Utilities
11. Logistics Support12. Maintenance 13. Marketing14. Sales15. Supply Chain Losses16. Transport
Lease of EquipmentLease of Real EstateLease of VehicleLease of AirplaneOther Leases/Rentals
Sub Packages
Every cost has two owners
Pa
cka
ge
s
Gro
up
s o
f E
xpen
ses
A
cc
ou
nts
ENTITIES
P
A
C
K
A
G
E
S
Entity Owners with “vertical” or organizational responsibility
Package Owners with expense (grouped by nature) responsibility
Entities Groups of People Cost Centers
ZBB Principles
Well defined owners
Shared responsibilities
Deep understanding of expenses drivers (price and consumption)
Other principles
Cost reduction targets
Budget built line by line with high level of granularity
Regular reviews with senior management during the process
GETTING STARTED
1. Define what is in scope
Sales
COGS
Gross Profit
DistributionMarketingOverheads
EBITDA
all other costs
variable costs
2. Define your packages
• ZBB Packages provide detailed and standard visibility of the company’s expenses and have been broken down into sub-packages
• Sub-packages are described in the PDB with unique definitions to enable consistent mapping of the company’s cost structure
Audience:
• The package definition book should be read by all Entity Owners, Package Owners and other individuals contributing to the ZBB Budgeting process. It is the best place to start understanding ZBB costs
Contents:
• This document defines what types of spend should and should not be included into each package
When to use:
• Anytime you are unclear as to where a type of spend should go in the budget
3. Build yourself a baseline
Use your last 12 months of actuals
GL account codes mapped to sub package and package
Cross reference with accounts payable data
This will serve as a base for target setting
4. Get the correct people in position
Zone Entity Owners
ZonePackage Owners
Global Package Owners
Top Leadership
Zone ZBB
Zone Presidents
Global ZBB
ZBB Report ZBB Meeting
Global level:
Zone level:
Country ZBB
Country Entity Owners
Country level:
5. Set global policies
Audience:
• All employees spending money in the Package
• Entity Owners and Package Owners who are budgeting in these packages
Contents:
• Employee Policies and Guidelines for spending and individual behavior
When to use:
• When budgeting and anytime when spending company money
6. Build yourself a reporting system
SAP DS
HFM
BPCS
EXTRACT G/L BALANCES
EXTRAC
T
G/L BALAN
CES
EXTR
ACT
G/L
BAL
ANC
ES
EXTRACT
G/L BALANCES
Data Repository
EXTRACTWHQ Profit & Loss
Pack H
ierarchy G/L B
alances
ZBB T&M Tool(Business Objects
BW / BOBJ reporting)
Other SAP
EXTRACT
G/L BALANCES
TRA
NS
FOR
MZBB VISIBILITY
U8 JDA
Keystone SAP
NON-ERPWorksheets
G/L BALANCES
Budgeting Tool
GET GOING
Routine, routine, routine
Week 1 : close books
Week 2: Review with Package Owners
Week 2: Review with Entity Owners
Week 3: ZBB Zone reviews with Global
Week 2: Entity reviews with Global
Week 4: Action Plan reviews
Qtly: Package Owner review with CEO
Standardise reporting
Package owner reviews – 4 slides
Entity owners reviews – 3 slides in the Review deck
How do you change behaviour?
Management By Objectives (MBOs)
• Qualifier
• KPIs
How do you change behaviour?
Reporting Entity Performance
How do you change behaviour?
Show who prints the most
How do you change behaviour?
Communicate, communicate, communicate
Package (USD '000) Budget Actuals Delta Delta % Budget Actuals Delta Delta %
Travels - Eric Dhaese 646.1 681.7 -35.6 -6% 7,619.2 7,517.4 101.8 1%Lodging 210.3 223.4 -13.1 -6% 2,491.3 2,441.5 49.8 2%Airfare 178.7 210.6 -32.0 -18% 2,458.5 2,709.3 -250.8 -10%Local Transportation 120.8 124.2 -3.4 -3% 1,361.2 748.7 612.6 45%Mileage reimbursement 62.5 63.8 -1.3 -2% 673.1 1,076.9 -403.9 -60%Other Travel Costs 40.6 23.4 17.2 42% 260.7 255.5 5.2 2%Meals 18.9 18.0 0.8 4% 205.6 205.6 0.0 0%Rental Car 14.4 18.3 -3.9 -27% 168.8 130.0 38.8 23%Cost Travel Provider 0.0 0.0 0.0 0% 0.0 -50.0 50.0 0%
November YTD (Jan-Nov)
646.1
681.7
Budget Actuals
Travels Eric Dhaese
November
-35.6 -6%
USD'000
November
-35.6 -6%
USD'000
7,619.2
7,517.4
Budget Actuals
Travels Eric Dhaese
USD'000
YTD (Jan-Nov)
101.8
1%
USD'000
New Heinz quotes
“The budget is the budget” - Europe CFO
“Just because it is in the budget doesn’t mean we are going to spend it”
- the same Europe CFO
KEEP IT GOING
Keep updating your policies
Update Global Policies
Introduce Local Policies for better control
Action plans – how to deliver more
Est. Annual Impact (USD 000s)
Item Subpackage Zone Country Action Responsible In Budget IncrementalDate
CompletedStatus
1 All HNA United States [ ] [Name] $100 $100 3/14 Complete
2 Subpackage [X] HNA Canada [ ] [Name] $100 $0 5/30 In Progress
3 All APAC China [ ] [Name] $100 $0 1/31 Delayed
4 Subpackage [Y] APAC Indonesia [ ] [Name] $100 $0 9/30 Complete
5 All APAC Indonesia [ ] [Name] $100 $0 3/15 In Progress
6 All Europe UK [ ] [Name] $100 $0 1/31 Delayed
7 All HNA Brazil [ ] [Name] $100 $0 5/30 Complete
8 Subpackage [Y] Corporate Brazil [ ] [Name] $100 $0 9/30 In Progress
9 Subpackage [Y] Europe United Kingdom [ ] [Name] $100 $0 3/15 Delayed
10
11
12
13
14
15
16
THE RESULTS
Hidden benefits
Bottom up budget will enable you to negotiate from a stronger position e.g. # of hotel nights
Everyone understand what is in the plan
When asking for variance explanations you can be specific
Mondelez International to cut costs by EUR2bn
Accenture's system is already being used by 3G Capital, owners of AB InBev and Heinz. Irene Rosenfeld, Mondelez CEO, said, "We've watched the work that 3G has done with AB InBev and Heinz and we believe they can be of great help to us."
- Source: IGD Supply Chain Analysis 25th Feb 2014
Imitation is the sincerest form of flattery - Charles Caleb Colton
Q&A