By Jennifer Toomey, Senior Director, Cloud Business Group, Oracle
When food giants Heinz Co. and Kraft Foods were merged by 3G Capital, the clock on return-on-investment started ticking immediately. The merged companies had eight $1 billion-plus legacy brands between them, and the pressure was on to quickly realize value through a global cost-management initiative based on zero-based budgeting (ZBB).
Fortunately, the company had Oracle as a partner. Both ZBB and Oracle have been around since the 1970s, and both have evolved over the decades to become much more than they once were.
ZBB used to have the reputation of being time-consuming and ultra-focused on cutting costs at the expense of needed reinvestment. Today, Kraft Heinz and other Oracle customers are using ZBB to more strategically budget spending both across the enterprise and within individual lines of business. The new version of ZBB isn’t just about cost-cutting, it’s about reinvesting the savings. Done right, ZBB can prove to be a highly strategic move that helps companies make smarter investment decisions leading to profitable growth. Advances in new technology, such as cloud, help enable this modern approach to zero-based budgeting.
Oracle Enterprise Performance Management (EPM) Cloud enables this new zero-based budgeting with a proven and scalable solution that provides visibility into drivers of cost and profitability, promotes accountability through all levels of the organization, and helps drive smarter investment decisions.
Unique differentiators include the ability to:
Oracle Cloud solutions also can ramp up quickly to meet tight timelines and spur fast ROI. That’s a big reason Kraft Heinz chose to deploy Oracle Planning and Budgeting Cloud, part of the Oracle EPM Cloud suite.
“When we merged with Kraft, we had to roll Oracle Planning and Budgeting Cloud out to more than 600 new users in less than two months to meet our budgeting timeframe,” said Julian Sherwin, Head of Zero Based Budgeting for The Kraft Heinz Company. “Oracle provided the flexibility and scalability we needed to achieve our goal.”
The EPM solutions available in the Oracle Cloud make a winning combination with the new ZBB. They fix a number of problems that have been associated with ZBB in the past, many of which happened because ZBB was perhaps an idea ahead of its time.
ZBB was invented in a paper-based world that lacked effective tools for gathering the vast amount of data needed for accurate zero-based planning and budgeting decisions. Desktop computers and server-based back-office software helped, but ZBB was still a heavy lift until robust cloud-based solutions like Oracle’s evolved to add:
ZBB can be a powerful way to reallocate or eliminate costs to improve business performance. With the right tools, ZBB can be a flexible and agile process that fits around any entity with a budget. It’s a focused, bottoms-up approach to budgeting that has the potential for big enterprise impact.
Another of Oracle’s customers in the global foods brand business uses ZBB to maintain competitive operating margins by giving employees the processes and tools to participate in a cost-conscious culture. They focus on optimizing finance, accounting and order-to-cash processes. The new cost-conscious operating model was up and running in three months. In the first year using the model, the company saved US$350 million. The company aims to save US$1 billion over three years.
Kraft Heinz’s ZBB initiative produced impressive results as well, and a record of near-industry-leading EBITDA margins. Getting there started with Kraft Heinz identifying the need to replace an error-prone Microsoft Excel and Access-based budgeting solution that didn’t effectively scale to 1,500 users in different countries. This challenge had to be solved before ZBB could reach the full potential of its benefits. Ultimately, the company implemented Oracle EPM Cloud solutions across each department worldwide.
Kraft Heinz continues to use ZBB for strategic management of spending; their Oracle EPM Cloud solution enables:
How did these companies achieve such great results? They leveraged capabilities that are part of Oracle EPM Cloud such as:
Oracle EPM Cloud solutions are also extremely scalable and provide a single version of the truth for operational data, so that ZBB can be a collaborative and effective process that promotes personal ownership on the individual level. This improves engagement and accountability.
However, ZBB isn’t just for making big changes at large companies. It can be successful in any size organization with the right practices and tools, providing higher levels of visibility and driving smarter investment decisions.
Harvard Business Review published an article that encourages organizations to take an ambitious and rigorous approach to ZBB: “Companies must attack costs not just within organizational silos, but those that reside at the intersection of functions as well, bringing into scope a whole range of costs not addressed in typical ZBB implementations.”
The article cites companies discovering places to reduce costs that had not been considered before. To make such discoveries, though, organizations need to make it easy to recognize opportunities and act quickly. In a modern enterprise, those capabilities can be enabled by the right technology choices.