Boston — Mondelez International, Inc. is planning a supply chain redesign that will save more than $5 billion throughout the next three years, the company said during its presentation at the Barclays Back to School Consumer Conference Monday.
Expanding margins in North America and Europe, the firm reports it is increasing its investments in emerging markets. “In North America, we're targeting a 500-basis-point improvement in operating income margin, and we now expect to reach that target by 2016, a year earlier than originally anticipated,” Chairman and CEO Irene Rosenfeld explains. “In Europe, we're targeting an improvement of 250 basis points in operating income margin, which we expect to reach by 2016.”
Daniel Myers, executive vice-president, integrated supply chain, says the company has upgraded its leadership and talent capabilities and is transforming its manufacturing operation into a more modular design. He pointed to the company’s installation of Oreo manufacturing lines that require 30 percent less capital and reduce operating costs by $10 million per line. They can be installed in one-third the time, provide double the capacity and require half the space as previous designs, Myers claims, noting Mondelez is in the process implementing the designs for other products.
In another supply chain reconstruction to support expected demand, Mondelez reports it will invest in 14 completely new plants by 2020, which will be built on “advantaged platforms with optimized logistics.” The company says its expects volume produced on these advantaged assets will rise from its current stance at 15 percent to about 80 percent by 2020. In addition, Mondelez expects revenue per plant to more than double by the end of the decade.
Myers also highlighted the company’s $400 million in conversion productivity savings throughout the past two years, largely a part of waste-reduction initiatives. He touted a 20 percent reduction in procurement costs and simplification of the European biscuit portfolio that is expected to reduce complexity by 60 percent and save $100 million.
Further, Mondelez delivered a $400 million increase in cash flow in 2012 as a result of its improvements in cash management, including the cash conversion cycle, inventory levels and suppliers’ payment terms, Myers says. He says the firm predicts a $1 billion cash increase throughout the next three years.