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Top 5 challenges food manufacturers are overcoming to deliver better cost planning

Posted by minteclimited on Jul 30, 2019 9:28:39 AM

The food market is highly competitive, and reputation is everything. For food manufacturers cost planning is critical because it provides a solid overview of what is happening in the market.

But with suppliers often wanting to provide manufacturers and distributors with their own view on prices and costs, it can be difficult to get an independent view of the market. This often makes it difficult for manufacturer and distributors to evidence any resulting price changes to their customers.

Typically, manufacturers and distributors deal with thousands of product lines, made from hundreds of different commodity types, food ingredients and packaging types (often costing as much or than many of the ingredients). As such they require global price data and market insight, that can be integrated into their proprietary systems and combined with their own data. This can then provide the bespoke intelligence they need for more effective negotiations with suppliers and provide greater confidence with respect to purchasing decisions. This data and analysis can also be used for developing an efficient purchasing policy as well as informing future strategy.

1.       

Being able to evidence price changes to customers.

2.       

Buying raw materials at the best price to counter competitive threats so as to maximize margins.

3.       

Independently verify supplier prices through market prices benchmarking.

4.       

Negotiating the best prices for products and raw materials.

5.       

Identify opportunities to reduce costs and improve margins.

Top 5 cost management challenges facing food manufacturers and distributors.

Manufacturers are also looking to develop “should” cost models to help them achieve effective cost management. Cost models are a way of helping them to drive greater efficiencies, especially when they are often managing large and complex product portfolios.

Having fast access to data on price movements affecting the raw material they buy as well as additional contextual information and insight, including commodity indexes, provides them with the ability to build custom cost models. This type of analysis can be an invaluable tool for the procurement team, supporting a wide range of activities from top-line communication and reporting to market-based or cost-model negotiations. All of which help to better control costs, support more effective processes and help mitigate risk.

And it would appear that this data-driven approach to procurement is delivering a measurable return on investment for organisations. According to the Pulse of Procurement 2015 report published by Zycus, organisations with sophisticated procurement technology and supply analytics are likely to save 3% more per year on procurement spend compared to those who do not use similar technology. Conservatively, this would suggest that organisations saving only  1%  on total purchasing spend of 25 million could achieve savings of more than 250 thousand.

Learn more about how food manufacturer and distributors are implementing data-driven strategies to achieve improvements and deliver a return on investment. 

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Topics: procurement

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