kellogg planning system kps in action team 4 김광수, 김동현, 김태화, 김태훈, 양하준,...

Kellogg Planning SystemKPS in Action

Team 4

김광수 , 김동현 , 김태화 , 김태훈 , 양하준 ,

이경우

November 8, 2007

All Rights Reserved © YSMBA Team 4 2007, November

2

Serial Market in US and Korea

7 조 5 천 억원 and relatively flat.

0

200

400

600

800

1,000

1,200

1,400

Increm 62 77 89 99 160 214 244 270 298 275 281 305 306 321 314 296Base 966 978 969 988 972 981 980 948 908 927 884 831 770 727 714 697

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Cereal 이란 "Processed grains for human consumption" 라고 정의되어 있습니다 .

(‘Breakfast Cereals and How They Are Made’ (Robert B. Fast and Elwood F. Caldwell, 1987)

미국 한국

1,500 억 원 and gradually increasing.

( 미국시장의 1/50 규모 )

0

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006

42.0%

44.0%

46.0%

48.0%

50.0%

52.0%

54.0%

56.0%

Total Post(M/S) Kellogg's(M/S)

ISSUES : 미국이나 한국 모두 H&W 추세에 따라서 설탕에 대한 소비자들의 염려가 점증되면서 2000 년대

초 ( 미국 ), 2004 년 ( 한국 ) 에 언론에서 크게 이슈화되면서 시장이 감소해 왔으며 , 국내 시장은 점차 회복해

가는 중임 .

따라서 국내외 시리얼 시장에서는 H&W 를 중시하는 방향으로 저감 , 저염 등의 신제품 개발이나 기존 제품의

품질개선을 지속하고 있음 .


3

Cereal Market Structure of USA

RoutineUnsweet

HealthyUnsweet

Healthy Balanced

Tasty Balanced

Wholesome

Sweet

SweetTreat

Unsweetened SegmentSweet segment Balanced Segment

Driving MotivatorsFun to Eat

(Kid-directed)

Fun to Eat(Mom-

directed)

Taste thenHealth

Health thenTaste

Routine Healthful

Brands

Pebbles Post Golden CrispHoneycomb Post Frost SWFroot Loop s Kel Frost FlakesCinn Toast Crunch

Post HBO Post GNTMCPost SW Kraft SBDSpecial K Post SelectsGM Cheerios Kel Smart Start

Post Rsn Bran Post GrapenutsPost SW Biscuit Post 100% BranChex Kel All BranSpecial K

Segment Share

$ vs. PY

47.9 22.2 29.6

-3.7% +7.5% -2.8%

Company Share

Post

Kellogg’s

General Mills

10.8

27.5

35.8

2.9

38.4

28.1

42.6

32.5

16.5

18.4

38.2

9.7

8.4

36.4

41.9

27.2

35.0

14.6

15%

33%

30%


4

Serial Market in US and Korea – Usage occasion

1

2

2

3

91

Carried From Home

In-Home Lunch

In-Home Dinner

In-Home Snack

In-Home Breakfast

0

2

0

54

44

Carried From Home

In-Home Lunch

In-Home Dinner

In-Home Snack

In-Home Breakfast

Hot Cereal6%

Bacon & Sausage6%

Breakfast Sandw iches

2%

Toaster Pastries2%

Donuts2%

Yogurt2%

Bars1%

Pastries3%

Toast10%

Bagels2%

Fruit10%

Eggs/Omelettes9%Pancakes/Waffles/F

T6%

All Other15% RTE Cereal

24%

미국 한국

미국에서는 아침 식사로 취식되고 있는 반면에 한국에서는 아직도 스낵으로 취식하는 소비 행태를 보임 . 따라서 이 점은 국내 시장의 성장 기회이기도 하고 , 저 성장의 원인이기도 함 .

2 Years of Data Ending May 2005Source: National Eating Trends, NPD

Morning Breakfast Foods (Share of Eatings)

+4 pts

, 77.9%밥

, 7.4%시리얼

, 6.0%빵

, 0.2%편의점

, 7.5%안먹음/ ,생식 선식

1.0%

Cereal U&A(2007 년 9 월 )


5

Flaked product

곡물원료 익힘 (Cooking)

건조 (Drying)숙성(Tempering)

후레이킹(Flaking)

토스팅(Toasting)

코팅 (Coating)건조 (Drying)

포장(Packaging)

완제품


6

Non-flaked product

곡물원료

성형사출(Extrusion)

건조

코팅 건조

포장완제품

혼합(Blending)


7

Kellogg History

Kellogg Company was formed when production of Kellogg’s Corn Flakes® began at W.K. Kellogg’s newly formed Battle Creek Toasted Corn Flakes Company in 1906. The ready-to-eat cereal innovation would change the way people eat breakfast worldwide. W.K. Kellogg’s product innovation and drive for market expansion influences the Kellogg Company and the food industry around the world today.

W.K. Kellogg began worldwide expansion of the company in 1914. By 1938, Kellogg had build plants in England and Australia. After W.K. Kellogg's death in 1951, Kellogg continued to expand its operations, building plants in Latin America and Asia. In 1958 Tony the Tiger® won a contest over Katy the Kangaroo to become the sole spokes-character for Kellogg's Frosted Flakes® and a mainstay in American culture.


8

Kellogg History – Cont’d

Breakthrough Kellogg food innovations include breakfast convenience foods like Pop-Tarts® toaster pastries, Eggo® frozen waffles, and Nutri-Grain® bars. Kellogg has established itself as an industry leader with health-conscious, innovative breakfast choices like Special K®, All Bran® and Product 19® cereals.

Kellogg continued to expand its operations and innovate by acquiring the vegetarian-based food group Worthington Foods in 1999 and the organic-based food group Kashi Company in 2000. Kellogg also acquired snack leader Keebler Foods Company in 2001. A multi-year global relationship with Kellogg and Disney was formed in 2002 to introduce several new cereal and snack food products to the market.


9


Since 1906, people just like you have come to know Kellogg as a company they can rely on for great-tasting, high-quality foods. With 2006 sales of almost $11 billion, Kellogg Company is the world’s leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, frozen waffles and meat alternatives.

The Company's brands include Kellogg's®, Keebler®, Pop-Tarts®, Eggo®, Cheez-It®, Club®, Nutri-Grain®, Rice Krispies®, All-Bran®, Special K®, Mini-Wheats®, Chips Deluxe®, Sandies®, Morningstar Farms®, Famous Amos® and Kashi®. Kellogg products are manufactured in 17 countries and marketed in more than 180 countries around the world.

Kellogg icons such as Tony the TigerTM, Snap! Crackle! Pop!TM, Toucan SamTM and Ernie KeeblerTM are among the most recognized characters in advertising.


10


Consumers around the world are enjoying Kellogg products, one of which –Kellogg’s Corn Flakes®– has been part of a healthy, delicious morning for a century. The company that makes breakfast and snacks for millions began with only 44 employees in Battle Creek, Michigan, in 1906. Today, Kellogg Company employs more than 26,000 people, manufactures in 17 countries and sells its products in more than 180 countries.


11

Why Kellogg introduced KPS?

The Kellogg Company had long used

spreadsheets and special software for

materials requirements planning (MRP) and

distribution resource planning (DRP). But by

1987 Kellogg realized that its expanding

product line and geographically dispersed

production facilities required some means of

systematic, global coordination and

optimization. KPS was the result.


12

How complex in Kellogg’s operations?

- 5 Plants (Battle Creek, Omaha, Lancaster, Memphis, London) in USA and Canada

Variety Pak can be packed only at Battle Creek.

- 7 core Distribution Centers (California, Florida, Georgia, Maryland, Virginia, Pennsylvania, South Carolina)

- 15 co-packers

- 90 production lines for 80 products/600 SKUs

- 180 Packaging lines

Needs to seek for the optimal solutions to save the costs against the complexity of the above conditions

- 100,000 contstraints/700,000 variables/4 million nonzero coefficients


13

5 Plants / 7 DCs - Location

•BC

•MP

•OM

•LC

•London

•DC

•DC

•DC•DC

•DC

•DC

•DC


14

Kellogg Distribution Center

Can handle 200 trucks

903,000 sf Warehouse space

6,000 sf office element


15

Kellogg Planning System (KPS)

KPS

•Tactical KPS•Operational KPS

•

Kellogg Planning System


16

Summary of KPS (Kellogg Planning System)

Two different versions of KPS

(1) Operational KPS:

• At a weekly level of detail, helps determine where products are produced and how finished products and in-process products are shipped between plants and distribution centers.

• Operational KPS reduced production, inventory, and distribution costs by an estimated $4.5 million in 1995.

(2) Tactical KPS:

• At a monthly level of detail, helps to establish plant budgets and make capacity-expansion and consolidation decisions.

• Tactical KPS recently guided a consolidation of production capacity with a projected savings of $35 to $40 million per year.

For over a decade, the Kellogg Company has used its planning system (KPS), a large-scale, multi-period linear program, to guide production and distribution decisions for its cereal and convenience foods business.


17

KPS - The Basic Operational Linear Program

•The operational version of KPS makes

production, packaging, inventory, and

distribution decisions at a weekly level of

detail.

HOLDt = HOLDt-1 + MAKEt – Demandt

for all time periods (weeks) t,

Where HOLDt is the inventory for a single

product at the end of period t (a decision

variable), MAKEt is the production of the

product during time period t (a decision

variable) and Demand, is the exogenous

demand for the product during period t

(data)


18

KPS - The Tactical Linear Program

The tactical model is identical to the operational one except that;

(1) time periods consists of four-week blocks called months,

(2) transportation is typically treated as instantaneous, and

(3) a special time-cascade solution technique helps deal with the limited

product shelf lives.


19

KPS – Objective Function

Objective

Minimize production costs + packing

costs + inventory costs + shipping

costs + penalties for processing line

capacity violations, packaging line

capacity violations, unmet demand,

and unmet safety stock requirements.


20

KPS – Decision Variables

•MAKEhpt – klbs of product f(h) produced using process h at plant p during

time period t.

•PACKkmpt – klbs of sku k packed on line m at plant p during time period t.

•HOLDkpt – klbs of sku k in inventory at plant p at the end of time period t.

•SHIPkpp’t – klbs of sku k shipped from plant p to plant p’ at the beginning of

time period t (nominally arriving in period t + 1).


21

KPS – Indices & Data


22

KPS - Constraints

Within a plant, basic constrains for each week require that the system:

•(C1) Does not exceed processing line capacities;

•(C2) Does not exceed packaging line capacities;

•(C3) Packages all products produced in a week into skus during that week (these are flow-balance constraints between processing and packaging);

•(C4) For each sku, balances inventory from the previous week plus current packaging plus incoming shipments with outgoing shipments, plus consumption in assemblies if this is a constituent sku, plus exogenous demand assigned to the plant;

•(C5) Satisfies safety stock requirements with in inventory of each sku at each plant;

•(C6) Coordinates processing lines and packaging lines as needed during each time period.


23

A commercially available ERP – SAP


24

APO Planning Process in SAP – bonus slides example

Production costs Only variable costs are considered

When storage costs are not considered, deliveries are made to the requesting node within the network (decentralized approach) – Costs of the solutions are not affected

You can use storage cost scaling to carry out desired storage policy

For non-delivery and late delivery

Costs for additional capacities

Penalty costs

Storage costs

Transportation costs


25

Q&A

Thank You for your attention!

kellogg planning system kps in action team 4 김광수, 김동현, 김태화, 김태훈, 양하준,...

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