Executive Briefings

KRAFT FOODS

Lori Morgan, Director of Logistics - Kraft Foods North America

Now director of logistics and supply chain methods and applications for Kraft Foods North America, Lori Morgan began her career as an industrial engineer at J.I. Case in Wichita, Kan. Four years later she shifted her industrial engineering skills to Kraft, successively advancing at the company' sheadquarters to a production scheduling role, then to positions as category logistics manager, division logistics manager and director of logistics. Morgan served as director of supply chain prior to being named to her current post.
A division of Philip Morris, Kraft markets more than 70 major brands - including Kraft, Maxwell House, Oscar Mayer, and Post - that net the company more than $1bn in sales annually. Kraft Foods North America is based in Northfield, Ill.


Q. What challenges do you see for supply-chain managers in 2001?
A. I see a range of challenges that fit into four buckets: speed, technology, people, and consumer and customer requirements.

Q. What do you see happening in the technology arena as it relates to supply-chain management?
A. There are several underlying themes in the technology area. First and foremost is the rapid change and movement in technology in general. Computer chips are getting smaller and can hold vast amounts of data. This will increase the amount of information readily available to supply-chain managers, adding depth and width to the database underlying supply-chain management decision making - an opportunity for the future. General business software as well as supply-chain-specific software continues to change at an accelerated pace, and this presents buyers with widening capabilities available in off-the-shelf packages.

We also see the continuing development of the various e-marketplace exchanges that are function-specific or industry-specific. The emergence of these exchanges presents supply-chain managers and their companies with options - whether to buy software externally, seek those capabilities via the exchanges, or develop information technology capabilities internally on their own.

Q. How involved are you in e-business and web-based technology at Kraft?
A. It varies by function and according to Kraft's prevailing business needs. We have some elements of our organization that are advanced in the use of web-based technology. Kraft Kitchens, for example, has significant activity on the internet, and there are other areas we haven't moved on yet because it is not yet the right solution. The whole concept of e-business and what that means to supply-chain operations is an opportunity supply-chain managers in virtually all businesses, not only Kraft, will be wrestling with throughout the year.

Q.. And the exchanges?
A. Before a company can make an informed decision, it first has to understand what the exchanges are all about. Most of the exchanges facilitate collaboration and connections via some common standards. If everyone tried to connect one-on-one with different standards, it becomes overwhelming to almost anybody from a technology standpoint. Individual businesses need to evaluate and determine the appropriate standards for businesses to communicate to each other in their particular markets. What are the processes that make sense to work through an exchange? What is the competitive advantage for any given supplier or customer or manufacturer to participate in that exchange? There needs to be a value relationship to the exchange for all the business partners, and that value has to mesh with each organization's strategies and priorities.

Q. Do the exchanges currently play a part in the Kraft supply chain?
A. The exchanges are all fairly new, and we're constantly evaluating them as they evolve. What is this particular exchange going to do or not going to do? What are the defined standards for participation? What role and what business processes make sense within that for Kraft Foods as we think about our supplier and customer base? These are the questions we are asking.

Q. How do you see buying practices and priorities changing for customers and consumers in the consumer goods markets you serve?
A. The key element is to continue to be aware of the unique features and unique needs that our customers have, whether it's the snacking arena or easy meal solutions, and being prepared to deal with those changing needs and the implications they may have for the supply chain. As our customers focus on meeting the needs of the end consumers who shop in their stores, we must ensure that our customers have an effective supply chain connected to ours so we can move products through our network and theirs to provide the consumer with the freshest possible product at the right time and in the right format.
Customer requirements are changing, but the specifics of change and the implications for our supply chain depend to a large part on our trade partners and their particular market niche. A key element is a focus on the cost aspect of our customer's supply chain and making sure that, for example, the loads we send them can be handled efficiently at their location. They work in the same labor markets as we do in many cases, so they have tight labor pools and cost profiles to meet as well.

That brings us to issues such as the concept of modules that have been big over the last several years. Modules are display-ready pallets. They can be a single product or multiple products packaged in a specific tray so it is highly visible - a mixture of multiple types of cereal that are being promoted on specific dates, a mixture across multiple brands. It can vary with seasonality, but the concept allows our customer to take the module right to the store level without any significant rehandling. It's effective for protecting, displaying, merchandising and handling on the customer end, and it's an effective program for us. What's going to be that next version of display-ready module? We need to find the right collaborative processes to make those determinations and achieve the desired merchandising impact.

Q. How do companies develop those collaborative processes?
A. I think it comes in multiple ways, first and foremost by just being connected with your customer. At Kraft, we have a field supply-chain organization whose members routinely join our sales force on customer calls in order to better understand what their future requirements are going to be and to help translate those requirements back into our organization in terms of supply-chain processes.

Q. That sounds pretty labor-intensive. How do you do that while staying within your cost parameters?
A. Within our supply-chain organization, we have people who are focused on a number of customers. The most important factor is to understand joint priorities between Kraft and the customer base. This allows you to most effectively utilize the resources you have. That being said, circumstances constantly are changing, so you can't get too locked into one single approach or one single agenda for an identified group of customers.

Q. How do you see customer relationships in your consumer goods markets changing in the coming year?
A. We are going to continue to focus on supply-chain effectiveness, so we'll be looking for our customers to tell us about their focus areas and how they may be changing as the new year unfolds. And while it's very important to listen to what they say when they talk about what is driving their business and how those drivers are changing, we also need to make sure that we take new programs into our customers. For example, we've been very successful with our direct plant shipment program, so we're going to continually be looking at those kinds of strategies that provide efficiencies for Kraft while also helping our customers achieve their end game vision. I can't really give you specifics on what's coming up next because those dialogues are going on as we speak, both in internal discussions within Kraft as well as in our conversations with customers. This gets back to the need for speed and flexibility in being able to look at new circumstances as they surface.

Q. Talk to us about people. Do you see changes afoot in the human element of the supply chain?
A. There are two key elements facing supply-chain managers in the human resource field, not only for Kraft and similarly situated companies but for the supplier and customer bases as well. First, we have to look at the people we have today and what we are asking them to do in the future, then compare their existing skill sets with those required to do the job going forward, with an eye towards making sure we are working on their development needs. The second element for supply-chain managers is understanding the labor pool and how tight it is and preparing their companies for the future. This requires an honest identification of any potential gaps and understanding how you as a supply-chain manager are going to fill those gaps in the future for your company. And we have to look beyond our own companies, beyond the four walls of Kraft Foods, to our suppliers as well. There have been times when our suppliers have experienced labor tightness and have not being able to move as fast as we would like them to move, so understanding those dynamics across the supply chain will be important.

Q. How do you see the skill sets changing in terms of requirements for supply-chain personnel?
A. One of the key elements is the ability to think across the supply chain, not only from a business process standpoint but also understanding the financials that go with that view. When I say supply chain, I am thinking all the way from suppliers to customers, and understanding the implication of those actions and reactions when you build new business processes and think about new supply-chain tools or listen to a customer request and understand what it means as you translate it back upstream to a supplier requirement. So instead of everyone being a niche player, we will need people who understand in considerable detail some functional aspect of the supply chain and also have the ability to step back out of that particular function to work across the supply chain with a good understanding of the right business plays going forward.

Q. At what level of the corporation are we talking about here?
A. I can see it at every level I manage all the way down to entry level, even though the decision-making authority is different. Even at an entry-level position, there's an action and reaction within the supply chain to individual decisions. Consider, for example, a production scheduler and whether or not they choose to change over a production schedule. The broader consequence is whether the company is able to meet demand for a specific product. Agreeing to a marketing team request to accelerate the rollout of a new product faster than the specified time line can have serious supply-chain implications. A sales department request to create the next module program without making sure that supply-chain managers fully understand the requirements that are associated with that new module can be disastrous. So it can come at all levels and in all parts of the organization.

Q. How do the changes in skill set requirements affect the territories in which you prospect for new talent?
A. Our first preference is to continue to develop the people we have within the organization. We have tremendous talent within our own company. The breadth of what people see and the different product lines we have and the variety of manufacturing facilities we operate across the U.S. and Canada ... we find terrific talent within. Now, there are times when we go outside Kraft. Within the supply-chain community we've had luck looking to multiple resources as we seek talent from the outside. We have a select group of schools that we continue to look at. We go into these key schools and create intern-type programs to continuously rebuild our entry-level talent. At the mid-level manager positions where we identified gaps in talent, we've gone out either through web sites, recruiting programs or in some cases, external recruiters, and we've had very good luck with all three approaches.

Q. How are you going about developing the talent in house?
A. At Kraft, we use a multiple-pronged approach. One of the elements is our in-house training program. These programs may be generally oriented, such as how Kraft Foods works, or they may be specific functional training programs that we have developed. We also look externally for programs to develop very specific skill elements such as the communication and presentation skills to make people more effective and therefore more valuable to us. We try to tailor these activities to individual needs versus a generic program. Our managers play a very important role in continually assessing and providing feedback for individuals in helping to identify various areas they need to develop. We may choose to have a particular individual work on a special project that may help them hone certain skills or develop cross-functional knowledge in an actual hands-on situation. We also have internal mentoring programs in different functions. The bottom line is that we try to pull lots of different levers, because every person learns and develops differently, and we want to make sure we capture what is most appropriate for them.

Q.Can you give an example or two of the specific functional training programs you provide at times?
A. Some of those would be specific processes and tools that are used within a function. For example, we have programs in logistics in which we instruct on how you use the systems and processes for managing materials, such as the materials replenishment, finished goods replenishment, forecasting and inventory control ... it depends upon the process and the systems in any given function.

Q. Given the tightness of the labor market, do you expect to see an increasingly greater emphasis on in-house training and development not only at Kraft but within similarly situated companies?
A. Yes, for a couple of reasons. First, smart supply-chain managers want to make sure that they continue to move their people internally and promote them and reward them for the value they bring to the organization. At Kraft, there's a tremendous benefit to keeping within the corporate structure the depth of understanding employees have regarding our organization and the way it works. This foundation of knowledge improves our ability to react to the rapid changes in customer requirements; the more employees understand about Kraft processes and the way the world of Kraft works today, the more opportunity we have for ideation and understanding how to change to meet those needs going forward.

So we want to maintain those employees. They are a valuable asset to the organization. We don't want them becoming dissatisfied and moving off somewhere else and taking that knowledge and understanding with them.

Q. Do you expect the size of your supply-chain management team to grow or shrink as the company moves into 2001?
A. That's a tough question every manager has to face in today's business environment. Again, it's constant evaluation of the company's business requirements and what it is going to take to execute and deliver performance. And that's performance in every direction - performance to our consumers and customers, performance for our employees, performance to our stockholders. So as to your question, I don't think there's a pat answer for that.

Now director of logistics and supply chain methods and applications for Kraft Foods North America, Lori Morgan began her career as an industrial engineer at J.I. Case in Wichita, Kan. Four years later she shifted her industrial engineering skills to Kraft, successively advancing at the company' sheadquarters to a production scheduling role, then to positions as category logistics manager, division logistics manager and director of logistics. Morgan served as director of supply chain prior to being named to her current post.
A division of Philip Morris, Kraft markets more than 70 major brands - including Kraft, Maxwell House, Oscar Mayer, and Post - that net the company more than $1bn in sales annually. Kraft Foods North America is based in Northfield, Ill.


Q. What challenges do you see for supply-chain managers in 2001?
A. I see a range of challenges that fit into four buckets: speed, technology, people, and consumer and customer requirements.

Q. What do you see happening in the technology arena as it relates to supply-chain management?
A. There are several underlying themes in the technology area. First and foremost is the rapid change and movement in technology in general. Computer chips are getting smaller and can hold vast amounts of data. This will increase the amount of information readily available to supply-chain managers, adding depth and width to the database underlying supply-chain management decision making - an opportunity for the future. General business software as well as supply-chain-specific software continues to change at an accelerated pace, and this presents buyers with widening capabilities available in off-the-shelf packages.

We also see the continuing development of the various e-marketplace exchanges that are function-specific or industry-specific. The emergence of these exchanges presents supply-chain managers and their companies with options - whether to buy software externally, seek those capabilities via the exchanges, or develop information technology capabilities internally on their own.

Q. How involved are you in e-business and web-based technology at Kraft?
A. It varies by function and according to Kraft's prevailing business needs. We have some elements of our organization that are advanced in the use of web-based technology. Kraft Kitchens, for example, has significant activity on the internet, and there are other areas we haven't moved on yet because it is not yet the right solution. The whole concept of e-business and what that means to supply-chain operations is an opportunity supply-chain managers in virtually all businesses, not only Kraft, will be wrestling with throughout the year.

Q.. And the exchanges?
A. Before a company can make an informed decision, it first has to understand what the exchanges are all about. Most of the exchanges facilitate collaboration and connections via some common standards. If everyone tried to connect one-on-one with different standards, it becomes overwhelming to almost anybody from a technology standpoint. Individual businesses need to evaluate and determine the appropriate standards for businesses to communicate to each other in their particular markets. What are the processes that make sense to work through an exchange? What is the competitive advantage for any given supplier or customer or manufacturer to participate in that exchange? There needs to be a value relationship to the exchange for all the business partners, and that value has to mesh with each organization's strategies and priorities.

Q. Do the exchanges currently play a part in the Kraft supply chain?
A. The exchanges are all fairly new, and we're constantly evaluating them as they evolve. What is this particular exchange going to do or not going to do? What are the defined standards for participation? What role and what business processes make sense within that for Kraft Foods as we think about our supplier and customer base? These are the questions we are asking.

Q. How do you see buying practices and priorities changing for customers and consumers in the consumer goods markets you serve?
A. The key element is to continue to be aware of the unique features and unique needs that our customers have, whether it's the snacking arena or easy meal solutions, and being prepared to deal with those changing needs and the implications they may have for the supply chain. As our customers focus on meeting the needs of the end consumers who shop in their stores, we must ensure that our customers have an effective supply chain connected to ours so we can move products through our network and theirs to provide the consumer with the freshest possible product at the right time and in the right format.
Customer requirements are changing, but the specifics of change and the implications for our supply chain depend to a large part on our trade partners and their particular market niche. A key element is a focus on the cost aspect of our customer's supply chain and making sure that, for example, the loads we send them can be handled efficiently at their location. They work in the same labor markets as we do in many cases, so they have tight labor pools and cost profiles to meet as well.

That brings us to issues such as the concept of modules that have been big over the last several years. Modules are display-ready pallets. They can be a single product or multiple products packaged in a specific tray so it is highly visible - a mixture of multiple types of cereal that are being promoted on specific dates, a mixture across multiple brands. It can vary with seasonality, but the concept allows our customer to take the module right to the store level without any significant rehandling. It's effective for protecting, displaying, merchandising and handling on the customer end, and it's an effective program for us. What's going to be that next version of display-ready module? We need to find the right collaborative processes to make those determinations and achieve the desired merchandising impact.

Q. How do companies develop those collaborative processes?
A. I think it comes in multiple ways, first and foremost by just being connected with your customer. At Kraft, we have a field supply-chain organization whose members routinely join our sales force on customer calls in order to better understand what their future requirements are going to be and to help translate those requirements back into our organization in terms of supply-chain processes.

Q. That sounds pretty labor-intensive. How do you do that while staying within your cost parameters?
A. Within our supply-chain organization, we have people who are focused on a number of customers. The most important factor is to understand joint priorities between Kraft and the customer base. This allows you to most effectively utilize the resources you have. That being said, circumstances constantly are changing, so you can't get too locked into one single approach or one single agenda for an identified group of customers.

Q. How do you see customer relationships in your consumer goods markets changing in the coming year?
A. We are going to continue to focus on supply-chain effectiveness, so we'll be looking for our customers to tell us about their focus areas and how they may be changing as the new year unfolds. And while it's very important to listen to what they say when they talk about what is driving their business and how those drivers are changing, we also need to make sure that we take new programs into our customers. For example, we've been very successful with our direct plant shipment program, so we're going to continually be looking at those kinds of strategies that provide efficiencies for Kraft while also helping our customers achieve their end game vision. I can't really give you specifics on what's coming up next because those dialogues are going on as we speak, both in internal discussions within Kraft as well as in our conversations with customers. This gets back to the need for speed and flexibility in being able to look at new circumstances as they surface.

Q. Talk to us about people. Do you see changes afoot in the human element of the supply chain?
A. There are two key elements facing supply-chain managers in the human resource field, not only for Kraft and similarly situated companies but for the supplier and customer bases as well. First, we have to look at the people we have today and what we are asking them to do in the future, then compare their existing skill sets with those required to do the job going forward, with an eye towards making sure we are working on their development needs. The second element for supply-chain managers is understanding the labor pool and how tight it is and preparing their companies for the future. This requires an honest identification of any potential gaps and understanding how you as a supply-chain manager are going to fill those gaps in the future for your company. And we have to look beyond our own companies, beyond the four walls of Kraft Foods, to our suppliers as well. There have been times when our suppliers have experienced labor tightness and have not being able to move as fast as we would like them to move, so understanding those dynamics across the supply chain will be important.

Q. How do you see the skill sets changing in terms of requirements for supply-chain personnel?
A. One of the key elements is the ability to think across the supply chain, not only from a business process standpoint but also understanding the financials that go with that view. When I say supply chain, I am thinking all the way from suppliers to customers, and understanding the implication of those actions and reactions when you build new business processes and think about new supply-chain tools or listen to a customer request and understand what it means as you translate it back upstream to a supplier requirement. So instead of everyone being a niche player, we will need people who understand in considerable detail some functional aspect of the supply chain and also have the ability to step back out of that particular function to work across the supply chain with a good understanding of the right business plays going forward.

Q. At what level of the corporation are we talking about here?
A. I can see it at every level I manage all the way down to entry level, even though the decision-making authority is different. Even at an entry-level position, there's an action and reaction within the supply chain to individual decisions. Consider, for example, a production scheduler and whether or not they choose to change over a production schedule. The broader consequence is whether the company is able to meet demand for a specific product. Agreeing to a marketing team request to accelerate the rollout of a new product faster than the specified time line can have serious supply-chain implications. A sales department request to create the next module program without making sure that supply-chain managers fully understand the requirements that are associated with that new module can be disastrous. So it can come at all levels and in all parts of the organization.

Q. How do the changes in skill set requirements affect the territories in which you prospect for new talent?
A. Our first preference is to continue to develop the people we have within the organization. We have tremendous talent within our own company. The breadth of what people see and the different product lines we have and the variety of manufacturing facilities we operate across the U.S. and Canada ... we find terrific talent within. Now, there are times when we go outside Kraft. Within the supply-chain community we've had luck looking to multiple resources as we seek talent from the outside. We have a select group of schools that we continue to look at. We go into these key schools and create intern-type programs to continuously rebuild our entry-level talent. At the mid-level manager positions where we identified gaps in talent, we've gone out either through web sites, recruiting programs or in some cases, external recruiters, and we've had very good luck with all three approaches.

Q. How are you going about developing the talent in house?
A. At Kraft, we use a multiple-pronged approach. One of the elements is our in-house training program. These programs may be generally oriented, such as how Kraft Foods works, or they may be specific functional training programs that we have developed. We also look externally for programs to develop very specific skill elements such as the communication and presentation skills to make people more effective and therefore more valuable to us. We try to tailor these activities to individual needs versus a generic program. Our managers play a very important role in continually assessing and providing feedback for individuals in helping to identify various areas they need to develop. We may choose to have a particular individual work on a special project that may help them hone certain skills or develop cross-functional knowledge in an actual hands-on situation. We also have internal mentoring programs in different functions. The bottom line is that we try to pull lots of different levers, because every person learns and develops differently, and we want to make sure we capture what is most appropriate for them.

Q.Can you give an example or two of the specific functional training programs you provide at times?
A. Some of those would be specific processes and tools that are used within a function. For example, we have programs in logistics in which we instruct on how you use the systems and processes for managing materials, such as the materials replenishment, finished goods replenishment, forecasting and inventory control ... it depends upon the process and the systems in any given function.

Q. Given the tightness of the labor market, do you expect to see an increasingly greater emphasis on in-house training and development not only at Kraft but within similarly situated companies?
A. Yes, for a couple of reasons. First, smart supply-chain managers want to make sure that they continue to move their people internally and promote them and reward them for the value they bring to the organization. At Kraft, there's a tremendous benefit to keeping within the corporate structure the depth of understanding employees have regarding our organization and the way it works. This foundation of knowledge improves our ability to react to the rapid changes in customer requirements; the more employees understand about Kraft processes and the way the world of Kraft works today, the more opportunity we have for ideation and understanding how to change to meet those needs going forward.

So we want to maintain those employees. They are a valuable asset to the organization. We don't want them becoming dissatisfied and moving off somewhere else and taking that knowledge and understanding with them.

Q. Do you expect the size of your supply-chain management team to grow or shrink as the company moves into 2001?
A. That's a tough question every manager has to face in today's business environment. Again, it's constant evaluation of the company's business requirements and what it is going to take to execute and deliver performance. And that's performance in every direction - performance to our consumers and customers, performance for our employees, performance to our stockholders. So as to your question, I don't think there's a pat answer for that.