Kellogg`s Cereal Production Process

exercise 1-429-164
June 2, 2011
Kellogg’s Cereal Production Process
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John A. Bryant, chief executive officer of Kellogg Company, scans the production reports lying on his
new desk in the company’s corporate headquarters in Battle Creek, Michigan. On January 2, 2011, Bryant
had been named CEO of Kellogg, which produced $12.4 billion in net sales worldwide, making it one of the
largest cereal companies in the world.1 Though he has years of industry experience, Bryant is trying to gain
a detailed understanding of the company’s cereal production process in preparation for his meeting with the
board of directors the following week.
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One issue in particular concerns him. In the reports from various factories, he is finding an issue
with inefficient production flows for the popular Raisin Bran and Frosted Flakes cereals. Bryant has hired
a consultant to investigate the root cause of the production line’s inefficiency, and the consultant has
concluded that the packaging lines sometimes are being starved of cereal. This inefficiency in the cereal
production process is costing the Kellogg Company thousands of dollars every day in lost revenue. The board
of directors will surely bring up this topic, so Bryant knows that he must create a viable solution before his
meeting with the board next week.
The consultant knows that the key to streamlining the factories’ troubled production process is to
determine the optimal number of hours that one brand of cereal should be run before switching to another
brand. Bryant knows that if the consultant can determine this figure, Bryant will be able to ensure a smooth,
uninterrupted flow of delicious cereal coming from his factories.
Birth of the Kellogg Company DO
The cereal industry in the US has its roots in the practices and values of the early American 7th Day
Adventists. In 1866, the Adventists founded the Battle Creek Sanitarium, a hospital and health spa, where
wealthy patients were fed a steady vegetarian diet, including many grain-based foods.2 One of these was
the wheat flake, an invention of the superintendent, Dr. John Harvey Kellogg. In 1906, Dr. Kellogg’s brother,
William Keith Kellogg, noticed that these flakes were gaining popularity among the sanitarium’s guests,
prompting him to build the first flakes factory to serve the growing demand.3 This factory would later serve
as the foundation for the Kellogg Company’s international operations.
Published by GlobaLens, a division of the William Davidson Institute at the University of Michigan.
©2011 William Davidson Institute. Research Associates John L. Parker and Nilima Achwal developed this exercise under
the supervision of Professor Izak Duenyas, the John Psarouthakis Professor of Manufacturing Management at the
University of Michigan’s Ross School of Business.
Unauthorized reproduction and distribution is an infringement of copyright. Please contact us for permissions: [email protected] or 734-615-9553.
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From its first 44 employees in Battle Creek in 1906, Kellogg grew to 31,000 employees in 18 countries
by 2010,4 manufacturing over 1.7 billion pounds of food in its Morning Food manufacturing facilities alone.
The Kellogg brand was a recognized name in 180 countries, becoming the highest-ranking global brand
among packaged food manufacturers. International cereal and snack brands accounted for more than a
quarter of its $12.4 billion in net sales in 2010.5
Besides the cereal line Kellogg’s, Kellogg Company touted many other popular brands, including Keebler,
Eggo, Cheez-It, Nutri-Grain, Famous Amos, Morningstar Farm, and healthy snack line Kashi.6 Some brands
were almost ubiquitous in the US; in 2010, two out of every three US families with children consumed PopTarts.7 Throughout the years, Kellogg Company sought to stay true to its core values of nutrition, health,
and quality, set down by its founder William Keith Kellogg over a century ago.
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Kellogg’s Cereal Production Process The Kellogg’s cereal production process used one cereal line to process two brands of cereal: wheatbased Raisin Bran and corn-based Frosted Flakes. The line processed cereal in two stages: flake prepping
and cooking-packaging.
Stage 1: Flake Prepping
The flake prepping stage began when raw corn grains or wheat flakes, depending on the cereal, entered
a large, rotating pressure cooker, which used a screw to grind the raw materials into a flaky mash. Next, the
mash entered a drying oven to remove excess moisture. Large, metal rollers then crushed the mash into thin
flakes, which were ready for the cooking-packaging stage. The steps for stage one can be seen in Figure 1.
Figure 1
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Stage 1: Flake Prepping
Source: Made How
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Stage 2: Cooking-Packaging
In the cooking-packaging phase, the prepped flakes entered a cereal cooker, at a rate of four tons of
cereal per hour, where they were baked until turning golden-brown. Next, the baked flakes entered a coating
drum that sprayed sugar and vitamins onto the flakes; the coating drum could process four tons of cereal
per hour.8
Depending on which brand of cereal was being run, the cereal flakes entered one of two large hoppers
that, in turn, fed a packaging line dedicated to that brand of cereal (see Figure 2). Thus, each brand of
cereal had a dedicated hopper and packaging line. The packaging line was the last stage in the cereal
production line and could package cereal at a rate of 1.5 tons per hour.9
Figure 2
Source: Baker Perkins
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Stage 2: Cooking-Packaging
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Set-Up Time Between Runs
The same cereal cooker and coating drum were used for both brands of cereal, but these two machines
could process only one brand of cereal during a given run. After processing one brand of cereal for eight
hours, the cereal cooker and coating drum were shut down, rigorously cleaned, and set up to produce the
second brand of cereal. This precaution took four hours and ensured that there was no cross-contamination
of cereal, which could be dangerous, even fatal, for consumers with allergies. Afterward, the production
process resumed, running for eight hours with the second brand of cereal.
While the cereal cooker and coating drum were shut down for cleaning, and while Frosted Flakes cereal
was being run, Raisin Bran’s packaging line would continue operating as long as there was cereal in its
hopper. Similarly, the packaging line for Frosted Flakes would continue operating while Raisin Bran was
being run or while the cooker and coating drum were off. However, if a hopper was empty, its packaging
line would shut down.
The consultant realized that if Bryant extended the production time for both cereals, he could fill the
hoppers with enough cereal so that the packaging lines would not starve at any point. To do this, the
consultant would need to determine the optimal number of hours to run the cereal cooker and coating drum
in order to produce the optimal amount of cereal in a run. If he could determine this value, Bryant knew
that the plant’s production yield would increase, saving the Kellogg Company thousands of dollars of lost
revenue every day.
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However, the consultant warned Bryant that extending the production time would cause the hoppers to
carry more inventory. Surely, Bryant’s board would not be happy to see inventory levels rise. Bryant knew
he needed the consultant’s help to address this issue.
Questions 1.If production time for either type of cereal is indeed eight hours, will the packaging lines work
continuously at the rate of 1.5 tons/hour or will they be starved? Explain.
2.In order for the packaging lines to work at the constant pace of 1.5 tons/hour without ever being
starved, what should the production time for each product be? How many tons of cereal should
each hopper be able to store?
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3.The consultant soon informs Bryant that cutting the setup time can lead to smaller production
times for each product. If the Kellogg Company really aims on having eight-hour production runs
for each product without ever starving the packaging lines of cereal, to what duration does the
setup time need to be improved?
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Exhibits Exhibit 1
Source: Evan-Amos
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Raisin Bran and Frosted Flakes boxes
Exhibit 2
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US Cereal Sales for Leading Cereal Companies 2009 ($MM)
Source: Information Resources, Inc., InfoScan Reviews
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Exhibit 3
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US Cereal Sales across Kellogg’s Cereal Brands 2008 ($MM)i
Source: Information Resources, Inc., InfoScan Reviews
Exhibit 4
The Ten Top-Selling Cereals in the US 2009 ($MM)
Brand
Honey Nut Cheerios
Cheerios
Post Honey Bunches of Oats
Special K (all varieties)
Frosted Flakes
Frosted Mini Wheats
Cinnamon Toast Crunch
Lucky Charms
Rice Krispies
Froot Loops
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Company
General Mills
General Mills
Ralcorp Holdings
Kellogg Co.
Kellogg Co.
Kellogg Co.
General Mills
General Mills
Kellogg Co.
Kellogg Co.
Revenue
339
319
310
238
233
198
175
153
140
136
Source: Mintel International Group Limited
This graph has omitted the category “Other” in order to clearly demonstrate brand name sales of Kellogg’s cereals. The “Other” category contributed
$792MM to 2008 US cereal sales.
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Exhibit 5
Source: Mintel International Group Limited
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What People Ate for Breakfast in the US 2008 ($MM)
Category Examples
Bread, bagels, English muffins, rolls, buns,
croissants, pastries, pastry dough, and biscuits.
Cereal
Hot cereal: oatmeal, ready-to-eat-cereal.
Cold cereal: cold breakfast cereals.
Sweet Breakfast Breads
& Pastries
Doughnuts, muffins, coffee cakes, toaster
pastries and tarts, Danishes, and pastries.
Eggs
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Breakfast Breads
Yogurt
Breakfast Meats
Bacon and breakfast sausage.
Waffles/Pancakes
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Cereal Bars
Other
Dried, frozen, and instant breakfast foods.
Drinkable Breakfast
Foods
Powdered breakfast drink and refrigerated yogurt
drinks.
Breakfast Entrées
Source: Mintel International Group Limited
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Endnotes Kellogg Co. “2010 Annual Report.” Battle Creek, Michigan. Kellogg Company, 2010. Web. 11 Mar 2011. <http://files.shareholder.
com/downloads/K/1231507657x0x448599/a9b46c48-9b3b-41d4-9350-e902636df788/kelloggs_2010_ar.pdf>.
2
Schneider, Louise E. “Battle Creek Sanitarium, Early Health Spa.” diet.com, 2011. Web. 17 Mar 2011. <http://www.diet.com/g/
battle-creek-sanitarium-early-health-spa>; Discovery Channel. “How It’s Made: Cereal Video.” Youtube.com, Discovery Channel,
2009. Web. 11 Mar 2011. <http://www.youtube.com/watch?v=-DtpYcxnS4M>.
3
Battle Creek/Calhoun County: Convention & Visitors Bureau. “History of the Battle Creek Cereal Company.” Battle Creek Visitors
website, 2011. Web. 14 Mar 2011. <http://www.battlecreekvisitors.org/pdfs/History_Cereal_Industry.pdf>.
4
Kellogg Co. “About Us.” Kellogg’s. Kellogg Company website, 2011. Web. 14 Mar 2011. <http://www.kelloggcompany.com/
company.aspx?id=32>.
5
Kellogg, 2010 Annual Report.
6
Kellogg, “About Us.”
7
Kellogg, 2010 Annual Report.
8
Interview with Baker Perkins machinery staff. 17 Mar 2011.
9
Made How. “How Products Are Made; Volume 3.” Made How website, 2011. Web. 3 Mar 2011. <http://www.madehow.com/
Volume-3/Cereal.html>; Discovery Channel. “How It’s Made: Cereal Video.” Discovery Channel website, 2009. Web. 11 Mar 2011.
<http://www.youtube.com/watch?v=-DtpYcxnS4M>.
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Notes 9
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Notes 10
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Notes 11