Ep: 16 Kraft Heinz’s Recipe for Production Planning Success

00:07 Therese Snow 

Hi, and welcome to our DELMIA podcast, Global Operations on the Go. I'm your host Therese Snow. Today I'm here with Jesse Moya from Kraft Heinz. Jesse is a Staff Data Scientist overseeing supply chain and procurement teams within the digital transformation organization at Kraft Heinz. I'm also here with Roel van den Broek, Chief Revenue Officer with The Logic Factory, our DELMIA partner. Gentlemen, welcome. So, Jesse, let's start with you. What exactly is the puzzle you needed DELMIA Quintiq to solve?

Experiment Using Waffles

00:42 Jesse Moya 

Sure, and thanks for having me. Before we get into the meat of it, pun completely intended. Let's go out and experiment using waffles as a simple example. So, imagine we want to make a batch of waffles out of some dry mix, some milk, eggs and butter. We have two possible recipes that we can use that produce equally tasty waffles, let's assume. They use the same amounts of dry mix and butter. But the first recipe uses two cups of milk and one egg, and the other uses one cup of milk and two eggs. Which recipe is cheaper depends on the price of eggs and milk then.

So, whenever a cup of milk costs more than one egg, the second recipe is cheaper than the first. When an egg is more expensive than a cup of milk, the first recipe is going to be cheaper. We can figure that one out in our heads. Now, imagine instead of two defined recipes, we can use any recipe that fits between a minimum and a maximum range that we've established for each of those ingredients. That recipe can look quite different from either of those two defined recipes that we had, especially as the relative pricing of those ingredients change. That's quite a bit more difficult to figure out. But it can still be done with some basic spreadsheet solving tools. Now imagine there's not just four ingredients that we can use, but dozens. And each of those ingredients can be sourced from multiple vendors, each of which has different pricing for them.

And that pricing changes week over week. And now we don't want to make just waffles but pancakes and crepes and biscuits as well. And we're limited in the amounts of each ingredient that we can buy from our vendors. It quickly becomes a large scale complex mathematical problem to try to figure out not just what recipe to use for each product, but how we're going to source our ingredients for them as well. With hundreds of ingredients being sourced from dozens of vendors to go into hundreds of end products being produced across multiple plants, Oscar Meyer needed an optimization platform we could use to find that optimal solution quickly to share with our procurement partners. That's why we needed a platform like DELMIA Quintiq.

02:52 Therese Snow 

Alright. Can you please tell us about the challenges you were facing before you got in contact with The Logic Factory and DELMIA Quintiq?

Disconnection Between all Systems

03:00 Jesse Moya 

Sure. Prior to implementing DELMIA Quintiq, one of our biggest challenges was the disconnection between all the systems that touched our product formulations and our raw material sourcing. We had a very complex workbook that our R&D team used to design our products and determine an expected formula for them. We had a formulation system used by the plants that was a bit outdated, and didn't give us the true flexibility we needed in our formulas to respond to changing circumstances on the factory floor.

It was producing formulas that, while perfectly valid and in compliance with our product definition and quality limits, were sometimes different from what R&D assumed the formula would solve to. And we had yet another complex workbook that we used to forecast our raw material needs, which was using another set of formula assumptions that in many cases were different from what R&D was expecting, and different from the formulas that the plants were producing. We needed one platform that could be used by R&D to design and plan our formulas by procurement to optimize those formulas and build sourcing plans around them, and by the plants to get their batch sheets so we could all be on the same page.

04:15 Therese Snow 

All right, what were your objectives when starting the project?

3 Main Objectives

04:21 Jesse Moya 

Outside of that single platform goal that I described, we really had three main objectives. First and foremost, we needed the formula outputs of the system to be 100% in compliance with our product identity, quality and food safety specifications. It sounds a bit cliche, but the quality and safety of our products is really are our number one priority well above the cost of those products. We needed to make sure that every batch sheet coming out of our system would produce a quality and wholesome product. Second, we wanted to be able to achieve true flexible formulation, meaning we wanted a system that would be able to find feasible solutions to our recipes, that changed as our pricing, supply and demand pictures changed, so we could respond to those changes in the best way. And finally, we wanted to be able to capture value by producing sourcing plans that fulfilled all of our commitments and obligations with our supplier partners, while allowing us to source at the lowest cost available within those agreements.

05:22 Therese Snow 

Got it. Thank you, Jesse. Now Roel, let me ask you. How did you first approach Kraft Heinz’s challenges, and what made you confident that the DELMIA Quintiq solution would deliver high value for Kraft Heinz?

Trusting Their Process at The Logic Factory

05:36 Roel van den Broek 

Yeah, thanks Therese and also, thank you for having me in this podcast. At The Logic Factory, we have an office close to Philadelphia and the slogan of the NBA team in Philadelphia, the 76ers, is “trust the process” and if you're in the stadium, everybody's chanting “trust the process.” And this is also the process we trust very much in our own process. For example, we believe in our value-based selling approach where we, together with customers at Kraft Heinz, explore the true value when solving the actual puzzle. In this case, reducing the cost of the procurement of ingredients by smart optimizing the recipes, given the cost, the availability and demand, while ensuring the quality of the product, like Jesse said.

So, we trust that we know the puzzle and the value for the customer. And the second trust is in our suite of project methodologies that we could choose from given the puzzle and the customers’ maturity and the expected rollout strategy. Important here is also the constant focus on our side on the three key success factors in every project. The data, the value and change management. And Jesse can perhaps confirm that, especially on the data part, this is a very important topic that we addressed it in Kraft Heinz. The third trust is in the team that does the job, both from Kraft Heinz with experts like Jesse, and the experts from The Logic Factory team. Both companies were providing this and they made a success out of this.

07:03 Therese Snow 

Okay, so let me ask both of you, Jesse and Roel, what do you think are the three key ingredients of the solution and project approach that deliver value for food manufacturers?

Separate Planning Instances

07:16 Jesse Moya 

Sure, I can start. From the solution standpoint, one of the biggest features that I've enjoyed using is scenario modelling. So, the ability to quickly create separate planning instances in the system was really a game changer for us. We could create plans with different demand schedules, supply availability pictures or pricing scenarios, and compare the outputs of those plans to get an idea of how they would impact everything from inventory flows to formula costs. Along that line, the visibility and openness of the solution is a huge benefit.

We didn't want a Blackbox type application where we plugged in our inputs, press the button and got a solution with no insight into how it got there. And DELMIA Quintiq, when we see results that we maybe didn't expect, we can trace everything back through the system to see what's driving it. So, if we see maybe less of the materials being used in a batch than we would have thought, we can trace that material back through the processing unit that goes through to see if maybe we're bumping up against our max grinding capacity, for example. Or we can see that we kind of source and store as much of that material in our plant inventory, because another material we have high demand for the next day is eating up that capacity.

Or we can see that we're already sourcing that material at our maximum availability from our suppliers. So, we can't put any more into the batches because we can't buy it. It really does help us explain our results to our internal procurement stakeholders, so they can go and help mitigate any of those issues that we're seeing. And finally, one thing that has been really monumental for us is the ability to push the output of our plans from Quintiq into our cloud analytics environments. This has enabled us to build a suite of visualization dashboards that communicate our plan results in clear ways to our stakeholders, and allows us to join that data to data from elsewhere in our organization like finish good forecasts. It lets us rapidly communicate our results so more time can be spent discussing and acting upon them.

Two More Key Ingredients

09:18 Roel van den Broek 

Thanks, Jesse, and I believe that Jesse already touched most of the crucial points and if I may add two additional key ingredients, the flexibility for DELMIA Quintiq solution to deliver 100% fit solution and the optimizer capabilities. To start with the first one, Kraft Heinz was not searching for a standard commercial off-the-shelf solution for this problem. And the main reason is, is that they realized that tackling this puzzle required a solution that could really cover their requirements and their business rules and the calculations to generate the value. 80% will also do a type of solution would not have worked with Kraft Heinz. The second is the optimization capabilities in DELMIA Quintiq. They are second to none and a powerful tool to solve any complex mathematical problem in a short amount of time.

10:07 Therese Snow 

Right Roel, I appreciate that information, very insightful.

10:19 Therese Snow 

Jesse, how do you take advantage of system flexibility today? And what lessons did you learn over the course of time?

Flexible Optimizer Strategies

10:26 Jesse Moya 

Yeah, one area that has actually been quite fun to play around with is the flexible optimizer strategies. So, we're able to set different strategies based on the use case of the end user that's executing the plan, and tune the weights or levels of the targets to get them the best results for what they're trying to do. So, for our R&D partners, we can set up an optimizer strategy that prioritize spec compliance and price but doesn't consider supply availability or processing capacity. So, they can see some of the best case possibilities for our products. For procurement, we can set a strategy that de-emphasizes maximum availability at our vendors, so they can see what our lowest cost sourcing would be in an ideal world, and target those levels when they are negotiating contracts with our suppliers during RFP season. For our manufacturing partners, we can set a strategy that prioritizes spec compliance and capacity above all else so they can get feasible plans and then find the lowest cost formulas within that more heavily constrained feasible space. We have complete freedom to build and modify those strategies, and it's something we can do to help improve our results and the performance of the system.

11:41 Therese Snow 

Yeah, well, definitely improve results and performance of the system. Great takeaways here. So now, Roel, let me go back to you. Can you tell us a little bit more about other use cases you've encountered for this solution within the food market?

Formulation at Kraft Heinz

11:56 Roel van den Broek 

Thanks, Therese, for asking and to focus on DELMIA Quintiq in this case. Next to the formulation challenge at Kraft Heinz that is of relevance for many other producers working with recipes at a daily or weekly fluctuation in price and quality of the inbound ingredients, we also see three other interesting use cases in optimizing the food supply chain. The first one is optimizing the inbound logistics. The second one is in the optimizing of the supply and the demand while taking care of seasonal influences, promotions, campaigns, and typical in the food industry are also shelf life or maturation processes. And the third one is in protein planning.

Regarding the first one, imagine for example, dairy companies able to not only optimize the routing part of the inbound logistics, so what to collect when and where and how to get that as cost effective as possible back to the plant, but also taking into account the decision – which tank, which product to go to which plant, not only on a thought or a gut feeling but based on the actual demand and the supply planning in and over all the plans of the dairy company, to steer the supply, for example, milk to the most valuable and actually needed amount – the cheese, the yoghurt, the fresh milk, powder, etc, etc. And with the key goal to improve the value proposition of a dairy company.

The second is to imagine a large retail or food producer with large food production capabilities in fresh produce and meat products like sliced melons, vegetables, spice, quiche, sausages – their daily puzzle is to deliver on time in full. And for the large retailer, its key goal is to prevent empty shops. And traditionally, the main mitigation for this risk is to increase stocks and the inventory. And with this there is a big risk of increasing waste, as many of the products are having a limited shelf life. To reduce the waste and the inventory while maintaining or even increasing the operational performance by optimizing the supply and demand of single production lines, the whole factories and the whole business units, this is becoming more and more critical. And there you see that the key goals are to reduce the cost and to increase the service.

And the third one to mention is in protein planning, where from the first step in the slaughter process, it's close to determine what may be produced out of the cow or the pig. In these kind of production processes, not linking the actual demand with the seasonal or campaign influences on a daily or weekly basis is also leading to waste and loss of efficiency. And for many companies in this field of operations, there is an increasing pressure not only on margin, but also in the public opinion to reduce the waste and the unnecessary loss of resources. So, also here you see that there's a key goal in reducing the waste and to improve the image of the public. From our perspective, the DELMIA supply chain planning and optimization platform has all the capabilities to tackle any of these challenges. And it's been very successful, it's been proven very successful to solve them.

14:53 Therese Snow 

All right, Roel, great. That's definitely great information for our listeners. Now going back to you Jesse, what has been your experience of the current trend towards consuming less meat and the increase in demand for other forms of protein?

15:09 Jesse Moya 

Sure, I can't really speak too much to the development of alternative protein products as I'm not involved in that area. But I can say that Kraft Heinz constantly reevaluates its product portfolio to ensure we're producing the products that our consumers are craving. And on the meat side, we have a focus to continuously improve our products based on changes in consumer preferences, as we did with our push to remove artificial preservatives from many of our cold cuts and hot dog lines. What I do know is that like most industries, ours is constantly changing. And we need the tools to help us be flexible to those changes in order to be a leader in our market. And DELMIA Quintiq really is helping us, or helping set us up for success in that regard.

15:54 Therese Snow 

Excellent. Thank you, Jesse and Roel for taking the time to discuss Kraft Heinz: Recipe for Production Planning Success.

16:01 Jesse Moya 

Of course, thank you for having me.

16:03 Roel van den Broek 

Same on my side, thanks for this podcast everybody.

16:06 Therese Snow 

Absolutely. My pleasure. And our listeners can stay tuned for the upcoming DELMIA Operation Series webinar, where experts will dive deeper into the details of the transformation project. If you have any questions don't hesitate to contact us. Thank you for listening to Global Operations on the Go.