Kellogg, the global owner of ready-to-eat cereal and convenience food brands, has over the past several years, sought to stay on-trend with consumers in many ways. Some are easy to see, here-today initiatives; some are far-reaching supply chain optimization efforts.

One of the most readily apparent aspects to consumers has been the company’s foray into the healthy food sector with brands such as Morningstar Farms, Kashi, Bear Naked, and Gardenburger. On the leading edge of that category is the direct-to-consumer customization portal, where consumers can create their own, unique blend of Bear Naked granola from more than 50 ingredients. According to Consumer Goods Technology’s story, “Bear Naked Creates a Custom Experience,” the e-tail tech behind this system includes a specialized application installed on the Salesforce software platform, with help from IBM’s Chef Watson technology.

Making more with less

On the other end of the supply-chain spectrum and far less visible to consumers, Project K, the company’s ongoing efficiency initiative, seeks to restructure operations and the supply chain with benefits above the billion-dollar mark. Among other benefits, executives expect “an optimized supply chain infrastructure, the implementation of global business services, a new global focus on categories, increased agility from a more efficient organization design, and improved effectiveness in go-to-market strategies,” according to the company’s latest annual report (2016).

In total, Kellogg and its subsidiaries earned US $1.4 billion in profits amid 13,014 billion in net sales, representing a trend in recent years toward higher profits on lower revenues. This is consistent with the global manufacturing and supply chain trend in which global brands shed non-core competencies — including manufacturing assets — to focus on value-added intellectual property. In doing so, Kellogg, like other brands, relies more heavily upon external suppliers, contract manufacturers for production and contract packaging service providers (including 3PLs) to handle the details of mass customization.

Increasingly, a combination of company-owned assets and a network of external co-pack service suppliers are responsible for production, customization, and distribution of Kellogg Co.’s many branded products.

In this context of manufacturing assets being owned by external suppliers, it’s critical for Kellogg — for all CPGs who outsource production while holding full liability for any mistakes — to acquire the tools to manage and control the outsourced processes governing the production of their products. This is for practical purposes the reason Nulogy exists!

Moving into mass customization

To meet retailer needs, any single product line may still be sold in many different forms (and SKUs) to meet each retailer’s promotional, geographic, demographic or other needs. Much of the customization is handled by a network of external co-pack suppliers.

To ensure that these external customization suppliers provide the same care as Kellogg’s own facilities, the brand owner turned to Nulogy Corp. And because its products are regulated by governmental bodies such as the U.S. Food and Drug Administration and Health Canada, Kellogg must hold production sites — whether internal or external — to the same level of compliance in terms of quality, as well as production efficiency.

In Canada, for instance, the company recently identified the need for greater real-time data visibility into orders being processed around the world and chose Nulogy Corp. to provide solutions. Specifically, Nulogy’s task was to help Kellogg Co. Canada achieve improved quality compliance, reduced waste, and improved cost-efficiency across its co-pack supplier community.

With its SaaS (cloud) solution installed across brand and supplier facilities, Kellogg gained a standard environment, with a simplified user interface, to manage disparate suppliers as a unified network offering real-time data visibility, data analysis, and integration.

As a result, the company improved tracking and tracing of products across external suppliers, reduced waste, and more:

  • Recovery of undamaged products rose from less than 10 percent to more than 50 percent by gaining the visibility to better identify damaged products from returns, and recoup undamaged products for sale.
  • Automation of quality enhanced the efficiency of quality and food safety compliance. Standardizing and automating the recall process has reduced the time it used to take for some functions from hours to under a minute.
  • Customization was achieved in various forms, from providing varying language and other regional requirements to enabling fast, accurate execution of packaging and display innovations for specific retail customers.
  • Standardization, employed through an easy-to-use interface, further helped reduce risks, costs, and variability across a community of disparate customization suppliers.

In addition to helping Kellogg Canada operate more efficiently and profitably, the “ready-to-eat giant,” in turn, supported the growth and profitability of its external suppliers. Co-packers were better able to integrate with Kellogg’s business and supply chain systems for faster, easier reporting and tighter control of production orders, productivity metrics, QA/QC, inventories, materials planning, pricing, and billing.

And that is how all parties can win in the mass customization game at Kellogg and across the consumer goods supply chain.

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Jason is a co-founder, CEO and brand ambassador for Nulogy. He is focused on corporate development, executive leadership, and understanding the evolving landscape of Nulogy’s clients. He is also on Nulogy’s board and speaks throughout the industry on the agile supply chain.

Written By
Jan 23, 2018

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