Kraft Heinz AI ‘beacon’ helps forecast demand for supply chain

• Food suppliers often face unpredictable demands from their customers.
• Kraft Heinz uses its AI-based software, called Lighthouse, to help it anticipate and adapt to these changes in demand.
• This article is part of “The Future of Supply-Chain Management,” a series on companies’ manufacturing and distribution strategies.

This month, Kraft Heinz introduced two flavors of mac and cheese, jalapeño and ranch, to retailers nationwide.

To plan deliveries of new products like these, Kraft relies on its sales team members’ demand forecasts, which are informed by logistics reports and retail sales data.

But if, for example, demand for the new mac and cheese happened to be stronger than anticipated in the Northeast, or a big-box retailer like Walmart ordered more cases than Kraft Heinz expected, employees at various points of the supply chain should adjust quickly.

Those employees would have a few options. They might move boxes of macaroni and cheese from a distribution center in another part of the country, for example, or adjust the factory’s production schedule to make more boxes.

Increasingly, they can consult Kraft Heinz’s Lighthouse, a software platform that uses algorithms and proprietary data from suppliers, factories and distribution centers to plan product demand and recommend how to manage supply chain disruptions on journey

Investing in supply chain resilience

Kraft Heinz, whose more than 200 brands include Lunchables, Kool-Aid and Jell-O, collected scattered supply chain data from various sources and pooled it, starting with the farms that produce the materials needed to make spices and other packaged products. and passing through factories, distribution centers, trucks and stores.

“We’re not fully autonomous yet,” Helen Davis, senior vice president and head of North American operations, told Business Insider. But the goal is for Kraft Heinz’s logistics experts, manufacturing employees, and supply chain and operations leaders to receive technology-based recommendations to meet demand and avoid service disruptions. The North Star vision that Kraft Heinz is working on is to create a self-contained, fully autonomous supply chain, Davis says.

Changes in product demand are quite common in food manufacturing because retailers such as grocery stores frequently change their order sizes. The hope is that with artificial intelligence, Kraft Heinz employees can recognize patterns and precisely address these fluctuations in demand, boosting sales.

For example, demand for pantry items spiked during the pandemic as consumers stayed home and stocked up. For years, food producers were in a strong enough position to raise prices even beyond what was necessary to absorb inflationary costs, boosting their profits. More recently, the price-raising power of producers has declined.

“Value is most important now to the consumer,” Carlos Abrams-Rivera, CEO of Kraft Heinz, told investors during the company’s second-quarter conference call in July.

Kraft Heinz’s net sales fell year-on-year in the first two quarters of 2024. Revenues declined at many large food companies, including WK ​​Kellogg, General Mills and Mondelez, as volumes fall as consumers have withdrawn almost three years of steady activity. price increases.

Major food companies want to use AI to streamline their supply chains

The pandemic has caused massive supply chain disruptions for food producers, from the closure of meat processing plants to sudden increases in demand for self-sustaining products, leading to greater competition for raw materials and packaging materials. In the wake of the mess, Kraft Heinz and its rivals began investing more in their supply chain technology.

Several large packaged food companies, including Coca-Cola and Conagra, have announced supply chain projects in recent years — many involving artificial intelligence — aimed at increasing efficiency.

Last year, Kraft Heinz said it added $30 million to sales by applying AI and Lighthouse to its supply functions, including using the technology to preemptively signal when service may be interrupted. Next, it hopes to leverage the retailer’s demand forecasting technology.

Davis said Kraft Heinz uses data from large retailers that fulfill online orders to provide food companies with more frequent updates on the availability of packaged food products.

Working with Microsoft to simplify factories

Kraft Heinz has sought to remain dominant in food manufacturing, in part by acquiring numerous brands over the years.

Due in part to its history of acquiring other brands, many of Kraft Heinz’s factories used different industrial computers, assembly lines and machines. Over several years, it extracted data from its various manufacturing systems, determined which data would be most useful for supply chain recommendations and demand forecasting, and put it into a centralized system, Lighthouse, which launched it in 2022 and uses it in the North. America and Europe.

Lighthouse pulls data from software including Intenseeye, a workplace safety tool, and ST-One, which tracks inputs from sensors attached to manufacturing systems in North America, Europe and Brazil.

Kraft Heinz uses Microsoft Azure’s cloud platform as it brings all data and analytics together in one house. The company also worked with Microsoft on a new generative AI tool called KraftGPT, which employees use as a type of “Ask Me Anything” app.

Creating a more autonomous workflow

Gustavo Gotelip, vice president and head of supply chain operations for Kraft Heinz’s foodservice and ingredients divisions, told BI that the company’s investments in data collection have led it to retrain production teams.

Gotelip added that the company is hiring and training more data and automation engineers and robotics experts, though he declined to expand further.

Kraft Heinz says its investments in automation and AI are not meant to replace its workforce. A representative said the company saw the technology investment as a “co-pilot,” using technology to make more informed business decisions in manufacturing, supply chain and logistics.

Davis said it’s been easier to onboard talent because Lighthouse provides employees with instructions to manage disruptions in demand.

“It’s almost like you can take a person from day one and make them as good as a person who’s been there for 10 years,” Davis said. — Because the system tells you exactly what to do.