Dive Brief:
- Kraft Heinz has added $30 million to its sales by applying artificial intelligence to its supply chain visibility functions, the company said in an investor presentation last week.
- The food manufacturer has used AI to drive operational priorities as well as automate service risk identification and operator alerts. To that end, Kraft Heinz has reduced its operator alerts by 42% with the technology, the company said.
- Kraft Heinz’s service levels have steadily improved since September as the company focuses on supply recovery. Case fill rates in March were up by more than five percentage points to a little over 95%.
Dive Insight:
CEO Miguel Patricio told analysts on a conference call last week that “we are improving our planning, our service levels, reducing waste, reducing times.”
Among other efforts, Patricio pointed to a partnership with Microsoft and its Azure cloud service to help digitize its supply chain. It includes a supply chain “control tower” built to provide real-time visibility into plant operations and automation of distribution across Kraft Heinz’s product categories. The initiative represents one of the food company’s largest technology investments, according to press release from the announcement last April.
Kraft Heinz has also made capital improvements during Q1 at a factory that makes frozen potato products in an effort to ramp up production in the second half of 2023.
Despite its broader supply efforts, lingering ingredient shortfalls led low cold cut inventory at Kraft Heinz in Q1, executives told analysts. Unspecified supply chain issues also affected the company’s Kraft Heinz Cheese business, preventing it from taking advantage of some sales.
With cold cuts, the company’s presentation pointed to labor challenges in the supply chain that it said are now “solved,” while Kraft Heinz rebuilds its inventory in the category. The Wall Street Journal reported last summer that Kraft Heinz told retailers shortages in carbon dioxide, used to preserve the shelf life of some deli products, was pressuring supplies as well.
Overall, inventories reached $4 billion at the end of Q1, up about 10% from the same period last year. Asked by an analyst about the growth, CFO and EVP Andre Maciel said that “we have very robust plan to bring the inventory down” over the course of the year.
With the company expecting higher discounting in the market, Carlos Abrams-Rivera, EVP and President of Kraft Heinz’s North American zone, noted that Kraft Heinz has developed a trade management system that provides management “real-time access to essentially over 10,000 promotional events.” The system also provides the company with digital tools and data analytics that provide “insights and recommendations in a very simple way” around price promotions, he added.
