KRAFT Awarded 2003 Circle of Excellence Award

Kraft Foods was selected by the Distribution, Business Management Association (DBMA) for its 2003 Circle of Excellence Award.

The preamble to the Kraft Foods environmental policy states:  “At Kraft Foods, preservation and protection of our natural resources and the environment are fundamental to the success and sustainable growth of our business and to the health of our communities.  We will conduct our business in an environmentally responsible manner.”  It is followed with specific guidelines for achieving this environmental pledge.  

This policy reflects that today, the notion of accountability has expanded.  It extends upstream, through the supply chain, as well as downstream, across consumer usage and disposal of products.  It covers not just financial or economic performance, but also social and environmental impacts.  

Increasingly, companies will find themselves reporting how much energy they consumed, what their CO2 emissions were, how much solid waste their packaging generated, the environmental and human right impact of their supply and all their diversity statistics, the charitable contributions they make, and on and on.

Kraft recognizes that over the long term, some sustainable practices can increase product quality and actually reduce cost.  The company’s efforts to span the value chain in its initiatives to prevent waste have successfully managed loss for itself and it customers with some tangible results.

Two initiatives illustrate this: 

(1) Damage control for products in the supply chain

(2)    Food bank donations

A third initiative, disaster relief and preparedness, demonstrates the company’s understanding that sometimes nature or human error intervene in catastrophic ways to throw businesses and families into chaos.  Here, Kraft uses its expertise to put in place an infrastructure to be able to react quickly when such an unexpected emergency occurs.

1. Damage control

Kraft has made a commitment as a leader in the industry to identify and adopt measures that prevent product damage that leads to waste.  Product damage is an ongoing problem for the food industry, from processor to store shelf, and these measures are intended to prevent product becoming unsaleable, and ultimately wasted.

In 2001, total unsaleable losses in the warehouse delivered food and grocery distribution channel totaled $2.5 billion, which represents approximately 1.14% of sales.  Product damage comprised 63%, or $1.6 billion, of the total.  The remaining portion --approximately $0.9 billion -- was due to out-of code, discontinued and seasonal product.  Although these figures are significant, the good news is that 2001 results show a 4% improvement over 2000. (2002 figures will be published in late July, 2003)

Kraft is the largest food company in North America, with hundreds of shipping sites and thousands of people handling its products.  In an effort to define and solve the problem, the company looked at two primary avenues for reducing product damage:  packaging and palletizing standards, and in-transit shipping practices

Packaging and Palletizing Standards

A cross-functional task force convened in 1999 to improve current packaging designs and establish standards for palletization.  To improve packaging designs, team members identified those products that experienced significant crushing or other types of damage to the outer case.  Numerous improvements followed the team’s recommendations, including replacement of paperwrap with recyclable corrugated, upgrades to existing box strength, new gluing or taping methods, and in some cases a complete packaging redesign. 

In addition to packaging improvements, the task force established new palletizing standards to ensure that products were properly palletized to prevent product damage during routine shipping and handling activities.  Specifically, Kraft adopted a new internal policy for packaging and palletization, based on guidelines issued by Grocery Manufacturers of America (GMA).   In addition, Kraft eliminated the use of clamp trucks at some facilities, and converted these operations to forklifts to prevent damage caused by clamping.  These new palletizing standards and practices have resulted in a reduction of product damage for both Kraft and its customers.

In-transit Shipping Practices

In addition to the packaging and palletization task force, another core team, with members who had a broad base of supply chain expertise, convened in 1999 to pursue solutions to reduce product damage during shipping, or in-transit damage.  This team identified three key solutions to reduce in-transit damage and successfully sold their solutions to senior management:

(1)               Tools and techniques to minimize in-transit damage

(2)               Establishment of internal ownership (with incentives for improvement); and

(3)               Consistent training applicable not only at Kraft, but with customers and carriers.

Tools and Techniques:  what works?

Simply put, this solution consists of identifying the best means of protecting full truckloads of Kraft products from in-transit damage, and then communicating these findings to the individuals who need to apply these practices.  However, for a company like Kraft, with many different types of products requiring different handling methods, standards needed to be customized by plant and groups of products.  The standards were based on five principles of load protection.

Once formalized, the standards were incorporated into a training video, which dramatically built the case for making changes to traditional warehouse loading practices through the use of visual displays of in-transit damage. 

Establishing internal ownership

Initial resistance and unwillingness to accept responsibility were early barriers to implementation.  But with senior management support, new financial incentives to plants and distribution centers and new documentation practices overcame the bias toward status quo. 

Consistent training

Nearly every employee at every Kraft location where products were shipped viewed the video.  Plus, it was made part of new employee orientation.  Progress charts, photos and success stories were posted or shared at each site, which helped to maintain focus.  When new products, with a unique set of handling needs, were introduced, a rapid response team applied the principles accordingly to set standards for the new products.

Program offered to others

The very complexity and size of Kraft make its learnings applicable to others in the food industry.  Recognizing this, and recognizing the huge impact this program could have if broadly applied, Kraft offers the training film to customers, suppliers and other food businesses through GMA’s publication center. 

2. Food Bank donations

Kraft believes there is no human need more basic than hunger and that hunger relief is fundamental to ensuring human dignity.  Hunger in America is a problem that can be solved, but food banks and food rescue organizations cannot do it alone.  As the nation’s largest food company, Kraft is committed to helping end hunger in America.  Together with its parent company, Altria Group, Inc., Kraft is the largest corporate donor to hunger programs in the United States. 

In 2002, Kraft provided 23.6 million pounds of food to food banks across the country.  Additionally, through grant making, Kraft assists food banks and food rescue organizations with infrastructure and capacity building, such as funds to be used for refrigeration, transportation, food handling and other necessary equipment.

To highlight the needs of food banks and to solicit engagement from food industry professionals, Kraft supply chain leaders and America’s Second Harvest teamed up to develop and present a hunger study with recommendations for involvement.  Together with America’s Second Harvest, Kraft has taken a leadership role in informing others in the food supply chain about a variety of opportunities to assist the “hunger supply chain.”

One venue that reached across suppliers, processors and customers was the 26^th Annual Conference of the Warehousing Education and Research Council, where Kraft and A2H addressed participants.

Food access

The key here is for processors, distributors, retailers and other potential sources of food to look for opportunities to provide wholesome food that might otherwise end up as waste:

-         Food approaching the end of its useful code life

-         Packaging or filling errors

-         Excess inventories, bulk food, food ingredients

As added encouragement, potential donors are told of potential savings on warehousing, disposal and handling costs; tax deductions; an extensive tracking system to help ensure that product will not reenter the market; and protection for donors through the Bill Emerson Good Samaritan Donation Act.

Non-food items, space and expertise

Boxes, bags, pallets and stretch wrap all can contribute importantly to an efficient hunger supply chain, and may seldom come to mind for businesses that could help.  Additionally, Kraft and A2H recommended that warehouses provide space for food donations and cross-docking, if possible; transportation firms consider offering hauling to fill empty miles; and consulting services offer assistance to food banks with layout and set-up, as well as help find ways to streamline the movement of donations.

Kraft has taken a leadership role in helping A2H disseminate the message:  more donations and more efficient food banking operations means more resources available to feed the hungry.

3.  Disaster relief and preparedness

Kraft is actively involved in disaster relief through partnership with the Red Cross, both in the U.S. and worldwide.  In 2002, Kraft provided approximately 600,000 pounds of non-perishable snack and beverage items for 16 different disaster situation in the United States, including tornados, floods, and wild fires.  To date in 2003, Kraft has provided similar food donations to the Red Cross, including for search efforts following the Columbia shuttle disaster; tornadoes; and support for troop deployment sites in the U.S. This assistance occurs through an established infrastructure within the company through which all requests for disaster relief are channeled.

Additionally, Kraft provides assistance wherever possible with refrigerated trailers for relief efforts in the absence of power following a weather emergency.  Locally, employee volunteers frequently mobilize after a weather incident.

With plants in communities of various sizes across North America, Kraft strives to develop working relationships with emergency responders locally.  As part of this, Kraft properties are regularly the site for training exercises for firefighters, hazmat teams and joint drills to ensure preparedness. 

Of course there are costs to Kraft in implementing the activities cited above – damage prevention, food distribution to the hungry, and disaster preparedness and relief.  But, the company firmly believes that in the end, a greater cost to Kraft and society would be incurred by failure to lead and failure to act.