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The Kraft Heinz procurement overhaul

The Kraft Heinz procurement overhaul

Date: 29 September 2020

Chief Procurement Officer Marcos Eloi outlined four areas he's working to transform: sourcing, manufacturing, centralization and product development.

Kraft Heinz is in "urgent need" of a procurement upgrade. 

That's how Chief Procurement Officer Marcos Eloi described the state of his department last week at the company's Investor Day presentation. It has been just over one year since Eloi joined the company and just under two years since Kraft Heinz received a subpoena from the Securities and Exchange Commission. That investigation would eventually reveal procurement misconduct that caused Kraft Heinz to restate nearly three years of financial results. 

But the company's procurement problems run deeper than mistakes made by rule-breakers and missed by management. Kraft Heinz has been on a losing streak for more than a year, in terms of financials — and longer than that in the eyes of food industry experts. And executives see procurement as lagging behind in contributing to a tidier balance sheet. 

Eloi said he now wants his department to be a competitive advantage for the company, which expects changes to Kraft Heinz's procurement practices to contribute $1.2 billion of the $2 billion in savings a new approach across the supply chain is set to generate over five years. 

Kraft Heinz will bring together procurement, production, distribution teams, marketing and R&D within the Ops Center. And within procurement, Eloi outlined four areas of transformation: sourcing, manufacturing, centralization and product development. 

 Less-transactional sourcing

"We identified an urgent need to elevate our procurement capabilities to address unexplored opportunities, enhancing our sourcing results while strengthening our relationships with key suppliers," Eloi said.

The CPO described a less-transactional approach to sourcing, enhanced by digital tools such as data analytics and e-auctions, which Kraft Heinz is already using. But Eloi would like to grow them further. 

E-auctions and other technological process improvements can be game-changers, according to David Natoff, procurement and finance operations management consultant at Blue Sphere Consulting. But they aren't a fix-all. 

"I'm a big fan of e-Auctions but it's important to remember that they are just one part of the multi-step sourcing process," Natoff said, adding that pricing is just one segment of a strategic sourcing strategy. 

New techniques and tactics for sourcing will help Kraft Heinz broaden its supplier base to eliminate dependencies, while also producing more strategic supplier relationships, Eloi said. 

Source: Supply Chain Dive