Promotion Optimization Institute Spring 2013 Summit

Transforming Sales & Operations Planning into aCompetitive Advantage

John Buckley

Director of Integrated Business Planning

Kraft Foods – Beverage Business Unit

Promotion Optimization Institute Spring 2013 Summit

Transforming Sales & Operations Planning into a CompetitiveAdvantage

A robust and mature sales & operations planning (S&OP) process is essential forcreating and sustaining competitive advantage. However, what was once aperiodic exercise in simply balancing supply and demand has now transformedinto a highly collaborative real-time exercise in reconciling varying perspectiveson inter- and intra-enterprise demand to dramatically improve both demand andsupply side forecasting and fulfillment. In this session, learn how Kraft isconsidering recent technology innovations to address the challenges ofconsensus demand building and financial integration.

How was this session “advertised”

Kraft Foods Group, Inc.

Who is this guy in front of you…

Kraft Foods Group, Inc.

Kraft at a Glance

• Our products are found In 98% of U.S. households, 99% in Canada• 10 brands with more than $500MM in 2011 annual sales• Another 17 brands over $100MM• $19B net revenue• More than 25,000 people

Source: Kraft Foods Group, Nielsen

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Kraft Foods Group, Inc.

Kraft’s Beverage Business Unit

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Kraft Foods Group, Inc.

What are we going to discuss today?

1 Challenges facing the consumer products industry

2 S&OP evolution

3 How Kraft views IBP

4 Questions and discussion

Kraft Foods Group, Inc.

S&OP has been and still is a process that can help organizationsovercome these challenges and be successful

S&OPStrenuous and Often Painful

Kraft Foods Group, Inc.

S&OP has been and still is a process that can help organizationsovercome these challenges and be successful

S&OPStrenuous and Often Painful

Sales and Operations Planning

Kraft Foods Group, Inc.

S&OP “in the beginning”

Demand Supply

Early

80’s

Kraft Foods Group, Inc.

Consumers today aresavvy, fickle, demanding– and “always on”

Now more than ever,consumers want to beassociated with brandsthat are relevant andcompelling

Trends spread atlightning speed basedon positive or negativeconsumer sentiment

Consumers can buyfrom anyone, anytimeanywhere, and theywant what they wantwhen they want it

Consumers are changing…making companiesrethink their S&OP processes

Kraft Foods Group, Inc.

Demand and supply volatility is causing companies toinvestigate if their S&OP process is working

Channel complexity –Explosion of channels andstore formats, includingdirect-to-consumer andhybrid models (e.g. buyonline, fulfill in store)

Global sourcing – Sourcingfrom a complex globalnetwork of suppliers, alongwith associated lead time,visibility, compliance andregulatory challenges Price and margin management –

No longer “one size fits all” pricingand offers

The connected consumer –always on, and connected withone another, using a new pathto purchase

Commodity availability / pricevolatility – Availability andpricing of manufacturing inputsis much more variable andvolatile

Kraft Foods Group, Inc.

S&OP is evolving to… At Kraft we call it IBP

Kraft Foods Group, Inc.

What is Kraft expecting to get from their IBPefforts?

Improved forecastingaccuracy

Reduced inventory

ImprovedCash Flow

Less stock-outs atretailers shelves

Improved customerservice metrics

HigherMarket Share

Better visibility intoKPIs that are driving

our business

Improved Collaboration –internally and externally

IncreasedRevenues

Faster and improveddecision making with

“BIG DATA”

Improved Annual andLong-term Planning

Processes

OrganizationalStrength

Consistent and Reliableachievement of organizational goals,

targets and commitments!!

Kraft Foods Group, Inc.

Ultimately, we want to have the ability tomake faster and more effective business decisions

ForecastDemandForecastDemandForecastDemand

Create multipledemand

scenarios

Understand impacton inventory

levels instantly

Explore what-ifsto confidently

commit

Make decisionswith a full view ofthe impact acrossyour organization

CheckInventory

CheckInventory

AdjustCapacityAdjust

CapacityAdjust

Capacity

MeasureFinancialImpact

MeasureFinancialImpact

MeasureFinancialImpact

Kraft Foods Group, Inc.

Best Practice for demand

• Collaborate with suppliers and customers and don’t forget internalteams

• Forecast modeling in “like groups” – segmenting and categorizingdemand forecasting units. Using the best algorithm for the rightproduct grouping

• Incorporate demand signals: point of sale data, syndicated data,wholesaler / distributor data, weather data, consensus data, ERPdata…now we are talking “BIG DATA”

• Being able to quickly aggregate and disaggregate demand to see howchanges impacted other views

• Get to a “one number” , “one plan” throughout the organization

• Integrate IBP demand consensus back into the business

• Single source for data repository and reporting

Kraft Foods Group, Inc.

Best practice for measuringfinancial impact

• Convert volume into revenue, margin, profitability instantly

• Decision matrix to help facilitate lower level decisions

• Multiple period view – operational to tactical to strategic

• Integrated annual operating plan and long range planning withIBP

• Make decisions confidently understanding impact to allalternatives

• Measure assumptions accuracy, not the number

• Turn analysis into insight to drive the business

Kraft Foods Group, Inc.

Kraft needed to look at their processes in adifferent way

The way we think… Rethink ourprocesses…

And our use oftechnology…

The way we behave…

Kraft Foods Group, Inc.

Today’s technology is allowing Kraft to rethink howwe meet our requirements

Highly scalable and flexible technology deployment withlow-cost, low-risk deployment options

Real-time access to broad categories of highly granularinternal and external data for cross-functional analytics,modeling and forecasting

Embedded analytics for real-time process and decisionsupport tightly integrated with corresponding,complementary business processes

Highly connected environment supported by commonlyavailable social collaboration tools available across businessstakeholder functions

Totally integrated solution; exchanging and passing details inand out of solutions creating an aligned and transparentorganization.

SAP Sales and Operations PlanningSAP Sales and Operations Planning

Demand

Demand

Supply

Supply

Partnership

Partnership

ExecutiveRevie

w

ExecutiveRevie

w

Financial

Planning

Financial

Planning

Supply

Chain

Planning

Supply

Chain

Planning

ERP

ERP

CRM

CRM

Files

Files

Other

Other

Product MasterCustomer Master

Actuals, Price, Cost

Demand Plan QtyKey Resources , Routing, BOM

Annual Operating PlanMonthly Finance Plan

OpportunitiesTargets

AttributesPlans

Constrained Demand Plan Qty Constrained Plan Rev/ProfitConstrained Demand Plan Qty

Reporting

Reporting

AttributesPlans

Constrained Plan Qty/Rev/ProfitSales Forecast

Market Size, Commodity pricingPOS data, IMS dataTrade Promotions ,Customer ForecastSupplier Commit

Kraft Foods Group, Inc.

Kraft is on it’s journey

Successfully implement and sustain a commonIntegrated Business Planning Process across Kraft as the

“way of managing our business”.

Enabled by common processes

Supported by common systems solutions

Kraft Foods Group, Inc.

Questions

John BuckleyDirector, Integrated Business PlanningKraft Foods - Beverage Business Unitjohn.buckley2@kraftfoods.com

Transforming Sales & Operations Planninginto a Competitive Advantage