Supply Chain & Logistics

Mondelez Drives Margin Expansion Through Supply Chain Redesign

September 4, 2013
/ Print / Reprints /
ShareMore
/ Text Size+

Mondelez International, Deerfield, Ill., announced initiatives to redesign its supply chain, which over the next three years, will bring in about $3 billion in gross productivity savings, $1.5 billion in net productivity and $1 billion in incremental cash. These savings will be the primary driver of an approximately 60-to-90 basis-point annual improvement in base operating income margin.

Mondelez plans to pay for these investments primarily by expanding margins in North America and Europe to levels at or above the average of peer companies.

"In North America, we're targeting a 500-basis-point improvement in operating income margin, and we now expect to reach that target by 2016, a year earlier than originally anticipated," says Irene Rosenfeld, chairman and CEO. "In Europe, we're targeting an improvement of 250 basis points in OI margin, which we also expect to reach by 2016."

Driving supply chain productivity savings to reinvest in growth
"We're building an integrated supply chain organization that's laser-focused on delivering a demonstrable competitive advantage and generating savings we can reinvest in our growth," says Daniel Myers, executive vice president, integrated supply chain.

Myers detailed the company's journey to reinvent its complex supply chain, beginning with upgrading leadership talent and capabilities. Leveraging experience from more than a dozen leading CPG companies, the team is transforming manufacturing processes and partnering with suppliers to develop more efficient, modular designs for global product platforms.

To support expected demand, the company will invest in 14 Greenfield plants by 2020, to be built on advantaged platforms in locations with optimized logistics. By 2020, the volume produced on advantaged assets will rise from 15% today to about 80%. Similarly, revenue per plant is expected to more than double by the end of the decade.

The company is also driving major productivity improvements through Lean Six Sigma, procurement transformation and simplification programs. Several examples include $400 million of conversion productivity savings over the past two years, largely from Lean Six Sigma work; a 20% reduction in procurement costs by partnering with strategic suppliers; and simplification of the European biscuit portfolio that is expected to reduce complexity by 60% and save $100 million in costs.

Finally, Mondelez plans to improve cash management by addressing all of the levers of the cash conversion cycle, including Days Sales Outstanding, inventory levels and suppliers' payment terms. In doing so, the company delivered a $400 million step-up in cash flow last year and expects to deliver incremental cash of $1 billion over the next three years.

"We're well-positioned for success," says Dave Brearton, executive vice president and CFO. "We're bullish on the future and in our ability to deliver top-tier financial results and superior shareholder returns."

Did you enjoy this article? Click here to subscribe to Refrigerated & Frozen Foods magazine.

You must login or register in order to post a comment.

Multimedia

Videos

Image Galleries

OSI, 2014 Refrigerated Foods Processor of the Year

Find out how this global food provider secured a new supply chain global trading platform, opened a new culinary innovation center and continues to keep food safety top of mind.

Read cover story here.
Read plant story here.

7/31/14 12:00 pm EDT

Engaging the Manufacturing Workforce to Drive Business Improvement

AIOE’s Workforce Development Solutions Group will soon release its work product, “The Engagement Framework”. This is a robust resource tool that both CPGs and suppliers should find useful in their organizations. Attendees will learn of the key attributes of Engagement, and cases and lessons learned on how to apply these guiding lessons within your company. The value proposition is fundamental to business success in our industry: business performance, competitive globally, recruitment and retention.

Refrigerated and Frozen Foods Magazine

CoverImage

2014 September

Refrigerated & Frozen Foods' September 2014 issue features the six Processors to Watch in 2015 and the Cold Storage Construction Guide.

Table Of Contents Subscribe

Processors On The Rise...

What aspects of an up-and-coming company are most important for it to become successful in the cold food marketplace?
View Results Poll Archive

The Refrigerated and Frozen Food Store

ColdPackagingMaterialsGuide_products
Cold Packaging Materials Guide

A guide to cold packaging containers and materials.

More Products

Refrigerated & Frozen Foods Delivers

RFF Infographic 133x133Click here to see a snapshot of the many different ways Refrigerated & Frozen Foods delivers business and technology solutions to cold chain professionals.

STAY CONNECTED

facebook_2014 twitter_40px youtube_40pxlinkedin_40px

Buyer's Guide

Visit our Buyer's Guide!

Refrigerated & Frozen Foods offers a Cold Packaging Materials Guide, as well as a Cold Storage Warehouse Guide, the most comprehensive listing of cold storage warehouses.

Visit the Buyer's Guide page today!