A cereal company with a data issue
The Kellogg Company operates in 180 countries, providing ready-to-eat cereals and other food products with brands including Froot Loops, Frosted Flakes, Special K, Rice Krispies, Pop Tarts, Eggo Waffles, Nutri-Grain Bars and Corn Flakes. Margins are tight in the ready-to-eat cereal industry, and for a company like Kellogg, approximately one-third of its annual revenue is spent on promotional costs or trade spend – including every dollar spent on coupons and special offers, promotions for special pricing, sponsorships, even the location each brand occupies on the grocery store shelf, according to a case study provided by Kellogg’s. The company needed to move away from its traditional on-premises infrastructure and chose to move to Amazon Web Services cloud to run the required data analytics for its marketing efforts.
“Any improvements we make to trade spend go straight to our bottom line,” said Stover McIlwain, senior director of information technology infrastructure engineering at Kellogg. “If we improve trade spend by just 1%, that’s $50 million.”
Looking for a solution to aging infrastructure
The company keeps a close eye on its trade spending, analyzing large volumes of data and running complex simulations to predict which promotional activities will be the most effective. Kellogg had been using a traditional relational database on premises for data analysis and modeling, but by 2013 that solution was no longer keeping up with the pace of demand. Each day, Kellogg needed to run dozens of complex data simulations on things like TV ad spend, digital marketing, coupon campaigns and other promotions, sales commissions, display and shelving costs; but its system only had the capacity to run one simulation a day.
“Margins are very tight in our industry, and even slight changes in trade spend can swing market share,” McIlwain said. “Revenue growth is flat in some of our categories, so we need to be very agile to stay competitive. We needed to eliminate waste and invest more in the trade spend that drives faster time to market and greater revenue.”
An Amazon Web Services and SAP solution
Kellogg needed a solution that could accommodate terabytes of data, scale according to infrastructure needs and stay within its budget. The company became interested in an SAP solution called Accelerated Trade Promotion Planning, which is powered by SAP HANA, SAP’s in-memory database technology platform. Amazon Web Services offered a fully SAP-certified HANA environment on a public cloud platform. Because SAP works on the AWS Cloud, the company figured it could achieve the speed, performance and agility it required without making a significant investment in physical hardware. Kellogg decided to start immediately with test and development environments for its U.S. operations.
Expanding data analytics capabilities
The company is now running the SAP Accelerated Trade Promotion Management solution, powered by SAP HANA and leveraging multiple AWS instance types for both the SAP application and HANA database layers. These Amazon Elastic Compute Cloud instances process 16 TB of sales data weekly from promotions in the U.S., modeling dozens of data simulations a day.
The company also uses Amazon Virtual Private Cloud, which is connected directly to the Kellogg data centers to allow access to SAP TPM directly for employees who are on the company network. Kellogg uses Amazon CloudWatch for monitoring, which helps the company allocate costs to each department based on their individual infrastructure use.
“CloudWatch helps our people make better decisions around the capacity they need so that they can avoid waste,” McIlwain said. “We were never able to do that with our on premises infrastructure. AWS breaks down usage and cost to such a granular level that we can identify which costs come from which department, like a toll model.”
Kellogg estimates that it will save close to$1 million in software, hardware and maintenance over the next five years by using AWS in its test and development environments.
“Using AWS saves us more than $900,000 and lets us run dozens of data simulations a day so we can reduce trade spend. It’s a win-win, and a pretty compelling business case for moving to the cloud,” McIlwain said.
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By using AWS, the company also is able to be more agile. Instead of having to wait 30 days to make changes to its trade spend analysis system, the company can spin up instances immediately to perform the necessary data simulations.
“The speed and agility that using AWS gives us lets us develop and deliver business services much more quickly than before so that we can keep one step ahead of the market. Our staff can deploy instances 90 percent faster than with our previous on-premises solution,” McIlwain says. “The AWS Cloud drives a lot of business benefits for Kellogg.” Kellogg engineers liked the accessibility and familiarity of the AWS platform, which enabled them to easily apply their existing knowledge and infrastructure skills to the AWS Cloud. In addition, by using AWS, the IT team’s internal customers can now self-fund IT projects – saving the IT team from having to budget for projects from other departments and driving more efficient use of resources.
