Innovation Term Paper

1842 words - 8 pages

Case Study
Kraft Foods Implementation of SAP

Table of Contents

INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …. 3

INNOVATION………………. . . . . . . . . . . . . . . . . . . . . . . . . . . . ………………3-4

PEOPLE……………….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......5

STRATEGY………………….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..5-7

SUCCESS………………………. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-8

Kraft Foods was founded in 1903 by J.L. Kraft who began by buying cheese at wholesale ...view middle of the document...

As companies were acquired over the years they each had their own ERP system which they continued to maintain. Many of the locations were using Kraft designed systems that were becoming costly to maintain and had few capability updates. With the planned SAP implementation it would facilitate the retirement of over 300 legacy systems.
The cost of the implementation was budgeted for one billion dollars with no direct savings associated to it. Kraft did realize benefits from the SAP implementation in several ways. One function that was heavily impacted was Finance; prior to SAP each plant had their own way of costing products. Creating standard costing allowed Kraft as a company to have confidence in true cost of goods manufactured and allowed plants to fairly compete for production volume based on which location is the low cost producer.
Another affected function was logistics, specifically warehousing. Prior to SAP each BU or location could use one of three different Warehouse Management Systems (WMS) and the processes for Shipping, Receiving and Inventory Control were controlled locally. After the SAP implementation every site had to follow the Standard Operating Procedures (SOPs) that were created by the core Logistics team function.
With Kraft’s expansive product portfolio there were many opportunities to increase economies of scale for the purchasing of Raw Materials. For example, having one system allowed Kraft to understand company-wide usage of common materials such as White Sugar and negotiate better pricing. Another common practice at Kraft is for plants to produce Semi-Finished Goods (SFGs) that get consumed by another plant in a Finished Good. An example of this is when the Springfield plant produces cheese slices that get consumed by the Davenport plant in Lunchables products. Having one ERP system allowed for every plant to have visibility to the inventory of shared items or SFGs, as well as a simplified internal purchase orders and shipping process.
All of the above standardization would be a direct result of implementing an ERP system and was seen by Kraft as a way to improve their stock price, productivity and profits. The potential success of implementing SAP would also give Kraft a competitive advantage over their competitors who have yet to invest in an ERP system.

The implementation was first supported by the Board of Directors who had to approve the capital investment of the one billion dollar cost to implement SAP at Kraft Foods. This implementation was a shared vision and fully supported by every layer within the Kraft organization. Over the several year planning and implementation period the leadership at Kraft often spoke of project status and accomplishments on internal company websites and communications including literature and speeches to employees.
Kraft Foods company CEO was considered our Executive Sponsor for the SAP implementation project. Within North America each BU had...

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