September 1, 2009

Transportation Overview

Leveraging Scale & Creating

Sustainable Advantage

Michael Cole

Director Transportation Kraft Foods

3

Today’s Discussion

• Company/Network Overview

• Project MOST (OTM)– Background– Transformation– Engineered Cooperative Routing– Looking Forward– Summary

• Yard Management System (YMS) at Kraft– Driving Factors– Key Considerations– Current Install Base– Our Optimal Solution– New Uses- “Fast-Track” Driver Tracking– Benefits

4

Our Higher Purpose

5

Our Positioning

Here’s how we’ll make today delicious:

At Kraft Foods delicious is our difference!

– We begin with our consumers.

– We make delicious foods you can feel good about.

– We believe we can make a delicious difference, everywhere.

6

Fast Facts

2008

$41.9 billion in revenue

Sales in approximately 150 countries

Operations in more than 70 countries

Approximately 98,000 employees

Nearly $100 million in charitable contributions

7

9 Brands with more than $1 billion in revenue

50+ Brands with more than $100 million in revenue

40+ Brands over 100 years old

An Amazing Brand Portfolio

8

Kraft network locations and high level costs

Plant Store51,000

Cust DC9,000

Frozen6

Branch332

MC8

RTD5

SA Buffer18

Buffer38

OSS15

Transportation Planning and Execution - $1.2B

Upstream Logistics Execution - $0.7B

9

Fullerton

San Leandro

Tulare

Fresno - Planters

Modesto

Jonesboro

Houston

Garland

Ft. Smith

Jacksonville

Champaign

Naperville

Lehigh Valley

Walton

Campbell

Avon

Rochelle

Suffolk

Coshocton

Kirksville

ColumbiaSpringfield

Mason City Davenport

New Ulm

Albany Beaver

Dam

Wausau

Madison

Woodstock

Battle

Creek

KendallvilleLowville

Dover

Newberry

- Hot Dogs, Cold Cuts,

Deli Meats &

LunchablesSandwich & recipe

cheese, Handi-Snacks

- Hot Dogs & Cold Cuts

Spray cheese

- cheese

- Cream cheese

- Pickles

Cereal

Marshmallows &

caramels

Dairy powder & cheese

Cream cheese

Cottage cheese

& sour cream

Sandwich cheese,

A1, Grey Poupon

- Bacon

Planters

- Cereal & Biscuit

Pourables &

cheese

Turkey, Cold Cuts &

Turkey Bacon

- CoffeeCereal

Dry & oil

roasted

peanuts &

Tree NutsCoffee, rice

RTD, PSD's,

Dressings,

Sauces & Mayo

- Cream cheese,

DinnersHot dogs

Ham & bacon

Lunchables

Dairy powders

Cereal -

Coffee (Ground, GFIC & Soft Pods)

RTE Shelf-Stable Pudding

Jell-O Lunchables Pudding,

Jell-O Refrigerated Snacks

and RTE Jell-O

Ontario

Aurora

Ft. Worth

Bethlehem

Norcross

Stockton

Columbus

Fullerton

San Leandro

Tulare

Fresno - Planters

Modesto

Jonesboro

Houston

Garland

Ft. Smith

Jacksonville

Champaign

Naperville

Lehigh Valley

Walton

Campbell

Avon

Rochelle

Suffolk

Coshocton

Kirksville

ColumbiaSpringfield

Mason City Davenport

New Ulm

Albany Beaver

Dam

Wausau

Madison

Woodstock

Battle

Creek

KendallvilleLowville

Dover

NewberryNewberry

- Hot Dogs, Cold Cuts,

Deli Meats &

LunchablesSandwich & recipe

cheese, Handi-Snacks

- Hot Dogs & Cold Cuts

Spray cheese

- cheese

- Cream cheese

- Pickles

Cereal

Marshmallows &

caramels

Dairy powder & cheese

Cream cheese

Cottage cheese

& sour cream

Sandwich cheese,

A1, Grey Poupon

- Bacon

Planters

- Cereal & Biscuit

Pourables &

cheese

Turkey, Cold Cuts &

Turkey Bacon

- CoffeeCereal

Dry & oil

roasted

peanuts &

Tree NutsCoffee, rice

RTD, PSD's,

Dressings,

Sauces & Mayo

- Cream cheese,

DinnersHot dogs

Ham & bacon

Lunchables

Dairy powders

Cereal -

Coffee (Ground, GFIC & Soft Pods)

RTE Shelf-Stable Pudding

Jell-O Lunchables Pudding,

Jell-O Refrigerated Snacks

and RTE Jell-O

Ontario

Aurora

Ft. Worth

Bethlehem

Norcross

Stockton

Columbus

Kraft Manufacturing and Distribution Locations

10

US Distribution Networks

Dry

Plants

Ref/Frozen

Plants

RTD

Plants

CW, Boca

SBD

Pizza

Plants

Biscuit

Plants

3 PL Retail

Frozen DC’s

Frozen

Branches

Dry

Branches

DistributorChurney

Plants

Custo

mer W

arehouse

Custo

mer S

tore

Dry MC

5

Ref/Frozen MC

5

FS

Dry

Plants

Ref/Frozen

Plants

RTD

Plants

CW, Boca

SBD

Pizza

Plants

Biscuit

Plants

3 PL Retail

Frozen DC’s

Frozen

Branches

Dry

Branches

DistributorChurney

Plants

Custo

mer W

arehouse

Custo

mer S

tore

Dry MC

5

Ref/Frozen MC

5

FS

L o c a t io n s C A W L o a d s # o f L a n e s

C u s t o m e r

D C 's

D P S 3 6 1 , 7 2 5 , 5 1 8 ,8 5 4 4 2 ,1 2 8 1 ,2 4 4 4 5 2

M ix in g C e n te r s 7 8 , 0 0 8 , 2 6 2 ,4 6 9 2 5 5 ,7 7 7 5 ,2 0 5 3 ,4 2 6

R T D 5 3 , 1 3 2 , 7 9 2 ,0 4 2 7 5 ,6 8 8 1 ,9 2 0 9 9 2 D r y B r a n c h e s * 9 9 2 , 3 1 2 , 1 8 6 ,4 0 9 5 2 ,5 7 3 7 6 5 n /a

F r o z e n B r a n c h e s * 2 4 5 7 5 4 , 8 0 3 ,6 1 5 2 4 ,2 0 7 6 3 2 n /a

L a n e s = O r ig in t o D e s t in a t io n ( c o m b in e s T e m p R e q u ire m e n ts a n d M o d e s )

* D r y a n d F ro z e n D a ta is S h ip m e n ts I n t o t h e B ra n c h e s , o t h e rs l in e s r e p re s e n t s h ip m e n t s to c u s t o m e r s

11

US Inbound Networks

Prepaid

Suppliers(Supplier Controlled

Freight)

Aprox. 500 suppliers

Kraft

PlantsS

up

plier S

torag

eCollect

Suppliers(Kraft Controlled

Freight)

Over 400 suppliers

FullTruckload

LTL

Inter-modal

Railroad

Other

FullTruckload

LTL

Inter-modal

Railroad

Other

Kraft

Re-Packers

Kraft

External

Manufacturers

Kraft R

&P

Sto

rage

136M Loads4,230MM Lbs

3M Loads103MM Lbs

31M Loads127MM Lbs

3M Loads420MM Lbs

2M Loads3MM Lbs

94M Loads3,665MM Lbs

2M Loads163MM Lbs

5M Loads39MM Lbs

7M Loads1,075MM Lbs

0.5M Loads1.4MM Lbs

Dry

114M Loads

2,460MM Lbs

Refer

61M Loads

2,422MM Lbs

Dry

103M Loads

4,709MM Lbs

Refer

5M Loads

234MM Lbs

NOTE: Represents annual volume in terms of loads and gross weight

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At $1.2B, Transportation is the largestcomponent of supply chain spend…

Scale

• 920,000 Annual shipments (64% temp controlled)

• 400+ Inventory locations/ 3,800 customer ship to locations (Excludes DSD)

• 5 Protection classes (dry, refer, protected, conditioned, frozen)

• 25,800 Lanes (origin, destcity/ST, prot, mode)

• 6 Modes (truckload, intermodal, LTL, air, rail, backhaul)

• 285 Carriers used however the top 30 carriers handle 73% of the volume

• Top supplier (Stevens Transport) accounts for 12% of the spend. Kraft is their largest customer and accounts for ~15% of their revenue

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Transportation relationships with carriers and customers optimize cost and speed to market for Kraft…

Value AddedOptimize joint networks with customers to provide savings and growth

Leverage status as “shipper of choice” to optimize service and efficiencySpeed to market by managing relationships, business practice standardization

What We Do

Centralized Transportation Management from Madison, WI

Develop routing guides, select carriers, and monitor compliance

Develop partnerships to create level of “ownership” within the providers

CarrierStrategy

Governance/oversightrelationship mgmtsupplier selection

Industry Leverage & Customer Collaboration

Joint network optimization engineered freight

EPA Smartway size & weight

Network Execution & Continuous Improve

Trans technology cooperative routing

inbound freightfunctional alignment

OrganizationalDevelopment

Toolscommunication

training

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We often forget how large we are.

• Kraft’s total warehouse square footage of 19.5MM is equal to:

– 447 acres

– Half of Central Park in NYC

– 340 football fields

• Mileage driven of 550MM miles is equal to:

– 15 trips to Mars

– 69,500 trips around the world

• 809k loads shipped would equal:

– Trucks parked in a line would stretch 11,500 miles

– Fill four lanes of highway from NYC to San Francisco

• Kraft’s shipments consumed 98MM gallons of diesel fuel

– Could heat 200,000 homes

– Half day supply for entire US

Transportation is largely outsourced, and we continue to seek opportunities to reduce number of suppliers

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Outsourced 92% of our transportation spend…private fleet represents ~8% of our spend (13% of the loads)

$23MM

$21MM

$2MM

$106MM

$106MM

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

$750$61MM

Customer Pick Up

$620MM

$748MM

Total

Intermodal

TL

LTL

DedicatedFleet

$57MM

Private Fleet*

$49MM

$49MM

$58MM $61MM

$453MM

$580MM

Common Carrier

Source: Kraft Data, A.T. Kearney AnalysisPrivate fleet excludes data for Pizza DSD and Biscuit DSD fleets

77%

7%

8%

8%

xx% = Percentage of total line haul spend

Line Haul Spend in $MM

1

Outsourced 92% of our transportation spend…private fleet represents ~8% of our spend (13% of the loads)

$23MM

$21MM

$2MM

$106MM

$106MM

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

$750$61MM

Customer Pick Up

$620MM

$748MM

Total

Intermodal

TL

LTL

DedicatedFleet

$57MM

Private Fleet*

$49MM

$49MM

$58MM $61MM

$453MM

$580MM

Common Carrier

Source: Kraft Data, A.T. Kearney AnalysisPrivate fleet excludes data for Pizza DSD and Biscuit DSD fleets

77%

7%

8%

8%

xx% = Percentage of total line haul spend

Line Haul Spend in $MM

1

16

Project MOST

17

Project MOST

Management of Organized Sustainable Transportation

• Reduce Cost

• Improve Service

• Contribute to Kraft’s Sustainability Efforts

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Transformation of the Transportation Focus

Leveraging Scale & Creating a Sustainable Advantage

Largely Transactional -------------------------------> Strategically Influential

• Managing Transportation cost is a larger concern for Kraft and our customers than ever before

• Our new capabilities within MOST offer internal productivity improvements and also opportunities to build customer relationships, delivering value in new ways

• Joint network visibility and analysis will assist in optimizing each other’s fleet assets

Enabler for Profitable Growth

Increased Supply Chain

Efficiency

Strategic Collaborative

OpportunityAssessment & Implementation

One Way – Non Collaborative Freight

Network

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Why Customers Deploy OTMBest Practices & Continuous Improvement

• Reduce costs and deliver detailed cost accounting

• Increase operations efficiency through automation

• Integrate logistics throughout the enterprise

• Logistics collaboration across all trading partners

• Improve visibility of inventory globally

• Single source of information & process control

• Increase environmental sustainability

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Project MOST: Management of Organized Sustainable Transportation

Background

• Kraft replaced the legacy transportation tool in 2006

– Partnership with Oracle to create new capabilities

– Find combinations of shipments that keep a truck loaded and moving

– Automate the execution of the shipments with new software

How It Works

• Network opportunities identified through analysis of network density and frequency

• Software segregates the shipments for priority planning – “Cooperative Routes”

• Shipments are sent to carriers via EDI for vendor execution

Benefits

• Enables the creation of an engineered network by positioning carriers in the optimal location for daily execution.

• Reduced carbon footprint: reduced empty miles

• Increased predictability for carriers enabling quality of life improvements that heavily influence driver availability

• OTM provides an integrated, single-platform solution for all areas of Transportation.

21

Engineered Transportation Network Example

Fort Worth, TX

Garland, TX

ColumbiaCity, IN

Groveport, OH

Loop Detail:

Leg 1: Pickup: Columbia City, IN on Monday

Deliver: Fort Worth, TX on Wednesday

Leg 2: Pickup: Garland, TX on Wednesday

Deliver: Groveport, OH on Thursday

Oracle Transportation Management (OTM) includes a “Cooperative Route” (CR) tool which identifies repetitive loops in the network by Day of Week. Each leg of a loop found in the CR tool is specific to a day of the week.

22

Cooperative Routing with ExecutionOverview

The Execution of Cooperative Routes (XCR) system will allow Kraft to execute routes in Oracle Transportation Management (OTM)

• The dynamic nature of XCR allows the system to select alternative options if the desired option is not available.

Location A

Location B

Dynamic Matching

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Validated Areas of TMS Savings

BENEFIT AREA

PERCENTAGE OF SAVINGS ON

CONTROLLABLE FREIGHT COSTS

• Mode Shift Optimization

• Streamlining Operations

• Central Load Control/Core Carrier Program

• Dedicated Fleet Continuous Moves

• Order Consolidations

• Optimal Carrier Selection

• Freight Settlement

• Replacing Older, Outdated IT Systems

• Reduced IT Integrations & Maintenance

• Improved Customer Service

� 7-30%

� 2-5%

� 5-10%

� 4-8%

� 1-2%

� 3-8%

� 2-6%

� Varies per company

� Varies per company

� Varies per company

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Looking Forward…

Project MOST lays the foundation for future opportunities:

• Leverage Scale

– Inbound Raw & Pack onto OTM. Creating additional benefits, including improved loop opportunities by adding more lanes and reducing more empty miles

– Global Platform Capability. Can use same across the world, leverage superior tool, while adhering to local needs.

– OTM “Manual” solution. Provide Transportation Optimization and visibility to areas of Kraft that are not highly integrated.

• End-to-End Management

– Procurement Optimization. Manage all pieces of the Transportation cycle in an “end to end” tool.

– Private Fleet Optimization. Significant benefit opportunity, as loads are currently “manually optimized”. Breakthrough thinking of how to integrate private fleet and common carrier priorities.

• Transformation

– Kraft/Customer Network Optimization. Partner with key customers to optimize our networks together

– Forecasting. Being able to project costs to business units, capacity requirements to carriers, risk points in network and further enhance discussions with business partners via a forward looking mind-set.

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Summary…

• MOST will over deliver on the original savings projections

• Industry leading capabilities better position Kraft to effectively manage our transportation spend in either a seller or a buyer market

• MOST helps us deliver a more sustainable transportation solution by reducing empty miles and improving the efficiencies of our carriers

• Creates new areas of collaboration with our customers

• Provides us with the simulation capabilities to properly respond to changes in the market place and within our company

• Kraft has driven change in the Transportation Industry to become the “shipper of choice” . MOST continues that industry leading change.

26

Yard Management

at Kraft

27

The Supply Chain “Last Mile” – The Yard

• Mixing center and plant yards are an integral part of the transportation network - delays occurred in the yard impact the overall efficiency

• Manual processes lead to lack of visibility and actionable information

Warehouse/

Plant

Yard

Distribution Center

/Plant

Trailers

Yard Truck

28

Our Driving Factors to Implementa YMS

� Need for better yard tracking

� Lack of visibility for Load Control Center

� Time consuming yard checks

� Unproductive administrative time

� Believed cost savings in better management

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Key Considerations in Implementing a YMS

� Yard size and distance

� Current detention spend

� System connectivity capabilities

� Guard shack configuration

� 3PL locations

� Security & spotting contracts

� Yard definition

30

Current Kraft PINC Install Base

Stockton MC

Go-Live: 2006

Ontario MC

Go-Live: 2009

Ft. Worth MC

Go-Live: 2008

Aurora MC

Go-Live: 2008

Morris RDC

Go-Live: 2008

Bethlehem MC

Go-Live: 2008

Columbus MC

Go-Live: 2007

31

Our YMS Solution

Yard Hound™

32

YMS Solution Overview

• Yard Hound is a suite of hardware and software system modules providing real-time information on all yard activities

– Asset status, location, and reefer temperature and fuel level

– Yard truck directives, work history, utilization statistics

– Alerts, reports, performance analysis, and yard checks

• No infrastructure needed

– Passive-RFID based tags attached to assets of interest

– GPS-enabled tracking units installed on yard trucks

– Asset locationing and yard management software running on PINC-hosted servers in the backend to receive, analyze and present information to the users over web portals

33

Real-Time Visibility Enabled Yard Management

Automated, real-time

asset location, status and inventory

tracking using RFID and wireless

technologies

Web-based SW application and

GUI for communicating

real-time information

among corporate and 3rd party users

Performance analytics and

reports enabling business

process and operational efficiency

improvement

Increased Asset

Productivity

Optimized Asset

Management

Improved Asset

Visibility

34

Gate Process for 3rd Party Carrier Assets

1. Scan Tag

2. Enter asset information via PINC application interface

• Use a PC or handheld reader

• Fields are customizable

3. Affix tag on trailer with magnetic mounting

35

Real-Time Asset Inventory Visibility Shared Among All Users

• Automatic electronic records for all in/outbound trailers with complete asset history replacing manual logs

• Expedite in/out gate processes to reduce truck queue and idling time at the gate with increased data accuracy

• Real-time updates of database through web-based application accessible 24/7 on site or remotely, allowing all users to gain and share the same visibility (single source of the truth)

36

Real-Time Asset Location Information Enables Optimized Yard Moves

• Passive RFID tags on trailers and tractors as asset IDs

• Leveraging existing yard processes – GPS-enabled RFID readers installed on the yard trucks continuously pinging the trailers while performing normal duties around the yard

• Intelligent algorithms in the server calculates trailer location and presents the information on a virtual map of the facility via a web-based SW application

37

Real-Time Yard Truck Tracking

Instant status on Yard Trucks: - Current Speed- Direction - Position- Trailer ID

Up-to-the second facility map with yard truck path history

KRFT-8453

KRFT-8453

38

Productivity Analytics:Yard Truck Utilization Statistics

Move TimeDrive TimeIdle TimeOff Time

Yard truck path history

39

Real-Time Yard Resource Management

• Traffic managers communicate with yard truck drivers through touch-screen monitors in cabs

• Driver receives consolidated map-based move assignments from all traffic managers

• “Distances to assets” information updated continuously in real-time for individual drivers

• Leverage driver input to provide– End-of-move confirmation (verified

automatically by the RTLS)

– Exceptions

– Trailer load status

40

Real-Time Asset Visibility for Carriers and CPUs: Yard Hound Carrier View

• Made available to Kraft’s carrier partners – 24 carriers signed up to-date and counting

• Online portals for carriers to view their on-site fleet status/inventory, and historical records

• Carriers can set and receive notification/alerts, and make dock appointments

• Benefits

– Streamlined communication

– Improved vendor service

– Eliminated yard checks for carriers at our facilities

– Expedited carrier fleet check-in/ check-out with permanently tagged assets

41

New Ideas to Leverage the YMS -Fast-Track Driver Tracking

Driver’s information capturedvia a Paper Log from

Driver’s License:

• Driver Name• Class of License

• License Expiration Date• License State

Driver’s information capturedvia RFID tag on Driver Badge

with pre-loaded License Image:

• Driver Name• Class of License

• License Expiration Date• License State

• Driver Badge #

Today Tomorrow

42

Collective Database of Drivers and Fleet Assets

• Driver’s Information associated to the RFID tag in PINC database similar to other transportation assets

• Can include information of carrier and CPU fleets to enable fast-tracking of trading partner assets– Reduce administrative

time

– Enhance collaboration and customer/vendor relationship

43

Scanned badge will ping database and provide Driver Information and License Image

44

Red or Green Light to Confirm Attributes Meet or Miss Requirements

MATCH - Proceed

45

YMS Benefits to Date – Productivity Gains via Process Change Enabled by Visibility

• Decreased Administrative Time– Eliminated daily manual yard checks– Increasing carrier utilization of web portals and permanent fleet tagging – Researching detention– Implementing fast-track

• Asset Reduction– Reduced yard trucks through improved efficiency & resource sharing within campus– Eliminated need for overflow lot

• Spotting Opportunities– Able to monitor average moves/hour– Detailed tracking of spotter drive, move, idle and down time– Optimized moves – shorter move distance/higher number of moves per hour– Sustainable “green” yard trucks – reduced idling and search/drive miles

• Real Time Visibility and Collaboration– Sites– Carriers– Load Control Center– Customers

46

Q & A

47

THANK YOU!!!!