In early 1990, Kraft Food Limited’s eleven Australian food production plants confronted several problems familiar to manufacturers around the world – high inventories, chaotic scheduling, poor forecasting accuracy, weak communication and ineffective planning.
Kraft’s senior managers were determined to reverse this situation and make their plants competitive in the global marketplace. “We wanted to provide a basis on which we could move into Total Quality Manufacturing,” says Dick Ridgwell, MRP II Project Manager.
How to create – and manage – such change? Through managing and operating the business to Class A standards.
Not only have sales improved, but inventories at one plant were slashed from $9 million to $6 million; another plant cut inventories from $500,000 to $250,000.
Class A Results
Class A certification and the changes necessary to achieve it meant a profound shift in Kraft Food Limited’s operations and manufacturing processes. Among the results of this shift are:
- Finished goods, packaging and raw materials inventories slashed dramatically. At one of Kraft Food Limited’s manufacturing plants, inventory levels were halved from $500,000 to $250,000 – and are still dropping.
- Manufacturing plants delivery to schedule improved from as low as 40% to 100%.
- A plunge in manufacturing cycle time, with a resulting increase in flexibility and improved ability to serve customers.
- Inventory record accuracy approaching 100%. Previous average at one plant hovered at 50%.
- Improved Bill of Materials accuracy, so Kraft now can calculate with confidence the cost of each product it manufactures.
- Finished goods inventory has been reduced by 18% without any adverse effect on customer service level.
Advantages of Class A Capabilities
These are some of the capabilities Kraft food Limited’s management gained from Class A operations:
- Ability to accurately monitor supplier performance and provide feedback to suppliers, which ultimately reduced time spent expediting deliveries and improved supplier relations. Supplier performance can now be measured and the measurements help suppliers achieve on-time delivery to Kraft.
- Increased manufacturing flexibility resulting from shortened cycle times and changeover times allows the company to adapt more quickly to its changing competitive environment and customer demands.
- Ability to forecast more accurately and engage in long term capacity planning with confidence.
- Ability to introduce products in a shorter lead time.
- Greater concentration on achieving excellent quality by manufacturing people.
Summary of Accomplishments
- Schedule stability. Manufacturing schedules are no longer thrown into chaos due to poor deliveries, expediting, etc. Says N.F. Cator, plant manager, “One of the major benefits at our plant has been we are confident that our production schedules are correct, which allows us to schedule labor and running times.”
- Accurate inventory records, leading to vastly reduced material usage variances and lower costs.
- Lower carrying costs of inventory due to sharply reduced inventories of finished good, raw materials, and packaging.
- Virtually 100% delivery to schedule by manufacturing plants, month after month.
- Good supplier relations. “Our suppliers are relishing the measurements that we are providing,” says Robb. “They are in fact implementing improved quality processes within their systems to ensure that only the best is delivered.”
- Senior management control of operations through Sales and Operations Planning. Through the formalized Sales and Operations Planning process, communication between levels and departments throughout the organization has improved. “Before, says Ridgwell, “schedulers decided how much we would make and sales decided how much we would sell and the management team only found out the results of all that after it happened.” Senior management now reviews and approves the manufacturing and sales plan prior to implementation.
- Trust between departments. Vastly improved communication throughout the organization has resulted in departments that once were ‘separate kingdoms’ with their own agenda now trusting one another to work toward the same organizational goals.
- Employee pride of ownership. “Employees now take considerable pride in obtaining goals and get job satisfaction out of the fact that they have done something meaningful,” says David Robb, a Kraft plant manager.
- Kraft foods limited is now striving for Total Quality Manufacturing. Senior management’s purpose in implementing MRP II and Class A was to lay the foundations for TQM and make Kraft Foods Limited a World Class Manufacturer.
Role of the Consultants
“I don’t think we could have achieved Class A without our consultant,” Ridgwell says.
Phil Heenan, our Class A MRPII consultant, helped guide the firm through the challenging task of implementing Class A standards at not one, but eleven, manufacturing plants. Even after achieving Class A, Kraft managers continue to rely on our experienced consultant.
“What they bring to the party nowadays is their experience,” says Ridgwell. “They’re able to share the good ideas that we wouldn’t otherwise be privy to.”