The industrial supply services agreement between Strategic Distribution, a leading provider of MRO supply chain management services, and Kraft Foods North America, is to be terminated.
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The two companies have for some time been discussing certain changes to the services agreement that were intended to reduce SDI’s working capital commitment and make the agreement mutually beneficial. As a result of the inability of the parties to reach a revised agreement, SDI and Kraft have decided to terminate the relationship prior to the current contract expiration of August 2003.
During the Q2 of 2002, SDI will sell its Kraft inventory to Kraft at normal selling prices. SDI expects to transition all storerooms to Kraft during the Q3 and Q4 of 2002. Over the next thirty days, SDI and Kraft expect to finalise a transition plan that will, among other things, provide the affected workforce with information concerning employment opportunities with SDI and Kraft. SDI plans to reduce its operating costs as it transitions the storerooms to Kraft over the next six months.
SDI’s 2001 Kraft revenues were US$86.1m and accounts receivable and inventory related to the Kraft supply agreement were US$12.2m and US$21.4m respectively, at 31 December 2001.
R.C. Whitaker, president and CEO of Strategic Distribution stated: “This action is a continuation of our overall effort to improve the profitability of our contracts. It is disappointing that such a large part of our sales base was affected, but our discussions to amend our contract with Kraft were not fruitful. The working capital requirements and margins of the Kraft contract proved uneconomical for us.
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By GlobalData“We mutually agreed that we should spend the next several months providing for an orderly transfer of MRO management back to Kraft’s plants.”
