Cereal maker Kellogg’s has been increasing its investment in supply chain initiatives, it said its third quarter results.
“We increased the levels of investment in our supply chain in the quarter, a process we will continue. This multi-year program will improve the infrastructure and drive reliability and capability," said John Bryant, president and chief executive officer.
However, it said these initiatives had affected operating profit in the third quarter. This was down 14 per cent to $464m (£291m) despite a 3.3 per cent rise in sales to $5.5bn (£3.5bn).
The group said some eight points of the decline was due to increased supply chain costs and 12 points was due to the reinstatement of incentive compensation costs.
Interviewed at a Sanford Bernstein Strategic Decisions Conference in June, Bryant highlighted some of the supply chain challenges that the organisation had faced in 2010 – pointing out that Kellogg’s was now auditing its supply base and had discontinued a number of suppliers.
“We have a new head of supply chain for the company from the outside. I don't, I can't – I don't think in our history we've hired from the outside the head of supply chain. So that's a pretty significant shift in the company, as well,” he said.
[In April Kellogg’s hired Steven Sterling from PepsiCo, as senior vice president, global supply chain.]
“So we are making progress, and I think our supply chain has done a tremendous job over the last couple of years to mitigate some of these risks and get us back on the right path,” said Bryant.
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