Kraft's Cost-Cutting Model

Sept. 7, 2007
Many Top 100 processors have been cutting fat from their manufacturing as part of formal manufacturing initiatives for a decade.

For some, the roots of current efforts trace back 20 years or more. For such companies, the low-hanging fruit was picked long ago.

So how can companies continue to turn to manufacturing to deliver cost savings they can drop to the bottom line? Technology has to fill in the void of lost manpower and experience.

Northfield, Ill.-based Kraft Foods faced this very challenge at its Springfield, Mo., plant, noted Chad Harris, continuous improvement engineer for Kraft, at a Manufacturing Perspectives conference sponsored by Rockwell Automation last year.

Knowing further cost improvements would be tough to find, Kraft began an integrated process control improvement (IPCI) project with Rockwell Automation. Company goals were to increase packaging effectiveness, first-pass quality, overtime reduction, giveaway reduction and raw material inventory.

The alliance team put together a manufacturing assessment plan. After analyzing operations and target areas, the team determined it could extract a potential 7 percent per year reduction in controllable costs and had the opportunity to reduce head count by two.

Coordination between processor and supplier team members was critical. The team stressed, too, that winning plant support would be critical to achieving objectives. That meant finding or creating plant champions and communicating goals and objectives to plant personnel. To keep project costs under control, Kraft also planned to use off-the-shelf technology that Rockwell could support as much as possible.

The project relied upon RS BizWare, manufacturing business software from Rockwell, along with its Factory Talk information features: Historian, Production Centre, Transaction Manager and View. The solution team was able to identify and solve a number of costly problems buried in its operations.

One was an automated process improvement, noted Harris, which involved "an ingredient that couldn't be accounted for." Research identified several problems, including an incorrect control code and over-delivery of costly ingredients. Two to three hours of research and a roughly equal amount of time dedicated to code repair resulted in a significant reduction in the use of high-cost ingredients, better forecasting and reduced inventory. The IPCI effort also effected improvements in product quality and manual processes (including delivery, paper tracking and labor-intensive inventory management practices).

The program proved even more effective than projected. Harris noted that total benefit to Kraft at the Springfield plant already had achieved a 10.5 percent per year reduction in controllable costs from raw material, labor and effectiveness. The plant was able to reduce headcount by four.

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