Quest for the best
Dec. 1, 2013
by Dan Malovany
For Mondelez International, it’s not exactly a case of out with the old and in with the new, but it’s pretty close. Since splitting from Kraft Foods in October 2012, the Deerfield, IL-based company has taken advantage of its clean slate to adopt a much different outlook on how to run its global snack, candy, chocolate, food and beverage business with such highly recognized household brands as Oreo, Ritz, Cadbury and LU, just to name a few.
It’s meant changes throughout the organization, including in its structure, culture, how it manufactures and even how it sells its products to customers and consumers.
It’s also resulted in a new role for Cynthia Waggoner since she spoke at the Biscuit & Cracker Manufacturers’ Association’s Technical Conference in Kansas City, MO, in May. Back then, she was vice-president, snacks and confections, North America Operations. Today, her title as vice-president, North American Integrated Supply Chain, Biscuits, reflects what has been rapidly happening behind the scenes at the $35 billion company.
“We’re integrating ourselves as one entity instead of being broken down the old, traditional way with manufacturing, customer service, logistics, quality assurance, engineering and procurement,” she explained.
With her new responsibilities, Ms. Waggoner is now in charge of a category — namely the whole integrated supply chain for biscuits — instead of overseeing a manufacturing function, and it’s a dramatic change in the way the company operates.
“I’m the one point for procurement, CS&L [customer service and logistics] and manufacturing, and report to the president of our North American Biscuit category,” she said.
She handles scheduling, forecasting, materials management, product supply, quality assurance, manufacturing and CS&L.
“Instead of being functional silos, we go from farm, where we get our ingredients, to fork, where our consumers eat our products,” she explained. “We look at all of that against a value stream, and we make sure that every function and every touch point of our organization are linked and aligned with every one of our functions in our company.”
Setting new standards
To measure the success of the integrated supply chain, Mondelez International is standardizing procedures and actively monitoring performance on a weekly basis. It established 32 metrics to standardize and gauge operational performance around the world. It requires 100% buy-in by its 70,000 employees to create a Six Sigma-driven organization with a single mindset on goals and objectives, including improving worker safety, reducing customer complaints, bettering service, enhancing productivity and cutting inventory.
Every employee — hourly or salaried — has detailed scripted goals and objectives. The company crafted a textbook — Ms. Waggoner described it as similar to an NFL playbook — based on integrated lean manufacturing and Six Sigma that guides exactly how all of its 170 manufacturing facilities should operate.
“It’s a journey we are on, and we now have a global standard on how we want all of our facilities to run across North America from a day-to-day, tactical perspective,” she noted.
It doesn’t matter if these plants are located in developing markets such as Asia Pacific, the Middle East or Latin America with a huge potential for growth or in mature markets such as Europe or North America, where competition for shelf space and share of stomach is more intense.
“Our mantra is the quest to be the best,” she said. “It’s about unleashing the power of our people. It’s about being cost competitive and having a zero mindset in terms of zero accidents, zero defects and zero losses.”
To establish a baseline at each of its operations, Mon-delez International uses a five-phase certification where facilities are rated from zero to four with the latter ranking as highest on the company’s road to world-class excellence, according to Ms. Waggoner.
The goals, she added, won’t be accomplished overnight. “The journey is never over,” she said. “The journey is the journey. To get to ‘phase four’ takes five to seven years.”
An integral part of that journey involves continuous improvement via employee engagement and the learn-do-teach philosophy. That’s where the 100% buy-in starts to play out. “This is not top-down management,” Ms. Waggoner explained. “Everybody has a voice. Everyone talks about how the line ran and what we can do to improve the line because we have several facilities across the globe that are in phase zero.”
During a Barclays Back-to-School presentation in September, Daniel Myers, the company’s executive vice-president, integrated supply chain, noted that only about 15% of its 70 plants in Europe are top-rated. In North America, about 60% of Mondelez International’s manufacturing facilities are more than 40 years old. Keeping old, subscale facilities requires significant ongoing investments to maintain such locations, he added.
Specifically, the company needs strong sanitation and maintenance programs to clean equipment so it looks like it just came out of a supplier showroom, according to Ms. Waggoner. But there is another issue. “We have very mature factories and assets, and being able to have the flexibility with those assets to change along with changing consumer trends is difficult,” she said.
Without going into specifics on costs, the company plans to add capacity, replace aging equipment and even build state-of-the-art facilities and production lines. In the future, Mondelez International intends to develop one set of common production lines for making its power brands’ products across the globe. In fact, Mr. Myers told analysts a prototype Oreo line now in development will take half the space yet provide double the capacity of existing lines and require fewer people to operate. The company began designing its “line of the future” for all of its powerhouse brands — those with more than $1 billion in annual revenue — about 20 months ago. A significant chunk of the investment will be done between 2013 and 2020, he noted.
“We wanted to be able to install new capacity in one-third of the time using a modular format, focusing on seven days’ startup,” he said. “Using a ‘building block’ design, we do the engineering design once for the line, for the building and for all facilities,” he said.
Ms. Waggoner called the reinvention of Mondelez International a huge undertaking, but there is a potentially greater payback. The standardization of equipment, processes and best practices throughout the company will allow Mondelez International to more easily transfer employees from facility to facility or from country to country.
“If you have an Oreo line in the US and an Oreo line in a country in Europe or somewhere else, the assets could be the same, the formulas the same, the utilities, the infrastructure and the plant layout the same,” she noted.
She stressed that standardization and innovation are not mutually exclusive. In fact, with the integrated supply chain category model, all facets of the company get involved sooner in the innovation or new product process.
“At the end of the day, we work with our marketing partners to make sure we’re standardizing, and we are determining what assets we’re going to use,” Ms. Waggoner said. “We’re working together to provide them what they need in the future.”