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Supplier Webinar March 26, 2014. 2 Welcome Why we’re here 2013 in Review 2014 People, Priorities and Project K Supplier Relationship Management Supplier.

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Presentation on theme: "Supplier Webinar March 26, 2014. 2 Welcome Why we’re here 2013 in Review 2014 People, Priorities and Project K Supplier Relationship Management Supplier."— Presentation transcript:

1 Supplier Webinar March 26, 2014

2 2 Welcome Why we’re here 2013 in Review 2014 People, Priorities and Project K Supplier Relationship Management Supplier Measurement Enhancements What’s next Agenda Kellogg Confidential

3 3 2013-2014: Period of significant Change Global Procurement Transformation Project K People and Leadership Change in Supplier Engagements Supplier Day shift to later in year Find a more frequent/effective way to engage with our suppliers Why We’re Here Kellogg Confidential

4 4 2013 in Review Success! Kellogg Confidential

5 5 Great Results Delivered the budget – forecast accuracy Met Direct materials savings targets Significantly exceeded Indirect savings targets Supplier Diversity spend Exceeded goal 15 consecutive years of growth Diversity & Inclusion Partners and relationships Capability and leadership 2013 in Review All in the midst of tremendous changes in our function and across our business Kellogg Confidential

6 6 Global Procurement Transformation Year 1 of 3 year journey Wave Approach – Capability building Org Effectiveness Org Design 2013 in Review Kellogg Confidential

7 What is Global Procurement Transformation? Goals: Deliver 1.5X (50%) improvement in negotiated cost savings over 3 years 1 Make savings long-term sustainable Re-imagine operating model to: 1.Best people, best process, best insights 2.Maximize global spend leverage 3.Minimize duplication of effort 4.Operationalize Procurement best practices with Kellogg Work Systems (KWS) 5.Be Relentless in our application of Best Practice & Continuous Improvement 6.Go Bigger, Go Bolder & Highlight Different Strategic Approaches 1 Compared to historical 09-12 average cost savings Kellogg Confidential

8 8 Key structural changes – sustainable change and results Change reporting structure of Regional CPOs to report directly to Global CPO ▪ Drive single vision for procurement globally ▪ Deliver 1.5x savings using new procurement tools & standard techniques globally Establish regional procurement operations group to segregate tactical and strategic activities ▪ Ensure category managers focus on key value added activities ▪ Identify clear roles and responsibilities and escalation paths to manage day to day operational activities Establish global category managers that drive strategic sourcing of key categories globally ▪ Leverage global spend and volume to improve savings capture ▪ Ensure categories are managed at right value creation level, e.g. global vs. regional vs. local ▪ Enable development of strategic supply base to support Kellogg globally Develop in-house analytical capability ▪ Establish an entry level position for procurement to attract talent ▪ Develop capability to conduct market analysis, spend analytics and provide analytical horse power to support category managers Establish Procurement Knowledge Center ▪ Standardize processes globally and implement advanced procurement tools (clean sheet, fact based negotiations etc.) ▪ Invest in capability building Rationale Key changes Establish Procurement Management Office ▪ Program management of transformation wave activities globally ▪ Manage key procurement initiatives and special projects 1 2 3 4 5 6 Kellogg Confidential

9 9 We have designed the future Procurement organization to be much more global in the way strategies are developed and executed Current strategic sourcing matrix Future strategic sourcing matrix % of total spend LocalRegionalGlobal Strategy Development Strategy Execution Regional Global Local 0 6 2 22 66 4 Strategy Execution Global Regional Local 19 43 1 34 12 RegionalLocalGlobal Strategy Development % of total spend Organizational changes to improve focus on strategic sourcing ▪ All operational activities will be transferred to a newly formed procurement operations function to refocus 30-40% of category managers’ time ▪ Global and lead category manager structure enables strategy setting at global level and allows procurement to pull a more holistic set of levers and capture synergies globally Kellogg Confidential

10 10 Results are grounded in a fundamentally different approach Category transformations Capability building Organization Waves 1-4 procurement savings at or above target Additional impact from continuous improvement and reformulation opportunities Next-generation sourcing levers (e.g., best-in-class cleansheets / RFPs, component based pricing) Leverage of global purchase volume Assessment of demand and process levers (e.g., spec optimization, contractor management) Energized and motivated procurement organization 75+ leads trained in KNA, KEU, KLA Responsible sourcing introduced Best practices introduced Reinforcement of KSS 2.0 through regional boot camps Cross functional engagement (e.g., with RQT and Engineering) Side-by-side working model to sustain change Global category management went “live” with Cocoa and Capital Continued design and implementation of the new Procurement organization Approach Outcome Kellogg Confidential

11 Walter Charles III Global CPO & VP Shelly Van Treeck KNA CPO Fernando Martin del Campo KLA CPO Robert O’Connor KEU CPO Brian Bancroft KAP CPO Adam Beuker Knowledge Center Komal Patel PMO Cathy Kutch SRM & Diversity Jessi Olivarri Sr. Exec Secretary Kurt Brouwer Procurement Finance BP Nick Leonard HRBP Dan O’Connor Legal BP Global Procurement Global Leadership Team Contractor/ 3 rd Party Open Position Global Category Manager Debasis Chanda Procurement IT BP Brenda Brenner CoMan BP 11 Kellogg Confidential

12 Shelly Van Treeck KNA CPO & VP Paul Steele VP Global Packaging OPEN VP Raw Materials Tracy Joshua VP Indirect Brenda Minter Direct Operations Richard Johnsonbaugh Indirect Operations Kristen Halverson Innovation Manager Christopher Schumacher Senior Analyst Jessi Olivarri Sr. Exec Secretary Kellogg Confidential Global Procurement KNA Leadership Team Contractor/ 3 rd Party Open Position Global Category Manager 12

13 2014 KNA Procurement Priorities Deliver Results 1. Align and/or improve (as appropriate) the 4 SC Foundations: –People Safety –Food Safety and Quality –Customer Service –Financial Performance and Cost Savings 2. Deploy, Align and/or Execute Project K initiatives: –Network Optimization –Global Business Services –Functional Transformations - Global Procurement, Regional CLS Initiatives, Global Engineering Strengthen the Organization 3. Support S&OP, KIMM, and DTV across the Business Units delivering improved supply management, pipeline of savings and initiatives through partnering and engagement. 4. Align KSS 2.0 capability training, playbooks, and rollout to KWS principles 5. Develop KNA/global Procurement organization talent and bench strength through regular talent review, PDP, PMP, coaching and mentoring programs and cadence. 6. Visibly support diversity and inclusion, and improve on D&I metrics. Create the Future 7. Support and enable Global Growth Categories, deliver the day to day business, enable Responsible Sourcing and execute the business growth and innovation objectives. 13 Kellogg Confidential

14 Supply Chain Town Hall | Feb. 13, 2014 Project K 14 Kellogg Confidential

15 15 Our Vision To enrich and delight the world through foods and brands that matter Our Purpose Nourishing families so they can flourish and thrive Vision & Purpose Supply Chain Town Hall | GBS Update | Feb. 13, 2014 Kellogg Confidential

16 16 Kellogg Confidential

17 Supply Chain Town Hall | GBS Update |Feb. 13, 2014 Catalyst for Growth 17 Kellogg Confidential

18 Catalyst for Growth Supply Chain Town Hall | GBS Update |Feb. 13, 2014 18 Kellogg Confidential

19 Project K Update: Investing in Growth Project K Update Global Business Services Supply Chain Town Hall | GBS Update |Feb. 13, 2014 19 Global Business Services Global Regional Local Kellogg Confidential

20 20 Kellogg Confidential

21 The New and Improved Supplier Measurement System (SMS) 21 Kellogg Confidential

22 Improving – Team Effort 1. Met with Focus Group of Suppliers 5 Suppliers - GPI, Chaucer, Kerry, Exopack and Bunge 2. Met with Statistician at WKKI 3. Met with Focus Group of Internal Surveyors 5 Plants - Battle Creek, Grand Rapids, Lancaster, Omaha and Zanesville 4. Conducted 2 Pilots Plant Pilot - 5 Plants above CoMan Pilot – Entirety of Mid-Year 2013 Ratings 5. Multiple Training Webinars and Training Documentation 22 Kellogg Confidential

23 Comparison The Old SMS Surveyor chose suppliers to rate Surveyor had to navigate to SMS site We could not track compliance Manual Reminders AFTER Numbers-based ratings Once submitted, survey was not viewable/editable No view into historic ratings The New SMS We know who should rate who We PUSH the surveys to the surveyor We have visibility - ALL surveys Automatic reminders round Descriptor-based ratings Surveyor can view/edit surveys until due Surveyor can see historic ratings 23 Kellogg Confidential

24 The New SMS: The Survey Brief Descriptors Rating Buttons – no numbers In Depth Descriptors Comments Historicals 24 Kellogg Confidential

25 The New SMS: The Rating Scale New 7-point scale Focus on Color No Numbers – only descriptors HARD ANCHORS 25 Kellogg Confidential

26 The New SMS: The Descriptors Detailed and specific GUIDELINES Aids all surveyors – old and NEW Removes subjectivity 26 Kellogg Confidential

27 The New SMS: The Comments Unlimited comment length Ability to attach documents as evidence of rating Ability to see last round’s rating for this supplier 27 Kellogg Confidential

28 28 Questions? (SupplierCommunications@kellogg.com)SupplierCommunications@kellogg.com Feedback please! Engagement target June 2014. Supplier Day/Supplier Diversity Event in November 2014. What’s Next? Thank you! Kellogg Confidential


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