Food & Beverage CPG
Food and Beverage CPG companies need effective procurement practices to improve their bottom line and gain a competitive edge.
That’s where we can help.
Most businesses are ready to put 2020 in the rearview mirror. It has been a year marred by COVID and many leaders are eagerly putting together 2021 plans with the hopes of a greater sense of predictability and consistency. While it is important to plan ahead, it is critical to learn from 2020 and recognize that consumer preferences and decisions are not going to return to a pre-COVID era. Within the CPG Food & Beverage space, companies are facing a myriad of never before seen challenges. Panic buying stretched and disrupted supply chains and dramatically increased time at home changed how consumers engage with businesses. If 2020 has taught us anything, it is that companies that adapt quickly perform best.
With all of these 2021 plans being put together, category strategies are quickly changing and decisions are often being made in a siloed manner. One area that is often overlooked during this process is the strategic influence of a high functioning Procurement team. Too often Procurement is an afterthought as the business functions change strategies and award suppliers business. Instead of putting T&C’s in place, it is time for Procurement to get off the sideline. Category strategies that do not have a strong Procurement influence regularly leave 10% savings on the table. Companies cannot afford that right now. With so much change, Procurement needs to partner with the business and collaboratively help usher in the future and drive long-term value.
Areas for Immediate Bottom-Line Impact
Many CPG – Food and Beverage companies are making shifts in the following spend areas and should utilize Procurement to ensure they are achieving the best total cost of ownership:
- Logistics / Transportation: One of CPG – Food and Beverage companies most significant non-product cost is logistics – typically representing 10% of total spend. Transportation has had an erratic few years and continues to rapidly adjust to everchanging demand. Omnichannel sales strategies have been a great way to reach customers, but strain supply chains. To ensure product is in the right at the right time, all modes of logistics need to be working in harmony. Many of these modes need to be sourced annually to understand supplier networks, drive the lowest rates, safeguard service levels, and mitigate load rejections.
- Packaging: CPG companies are listening to their consumers. Every major CPG company has sustainable packaging commitments. For a category that averages 8% of a company’s spend, the strategies to implement these commitments can have a serious impact on the bottom-line. Packaging suppliers are responding in kind with constant innovation and more sustainable offerings. Constant stewardship between procurement, operations, and the supplier is the best way to achieve 2-4% total cost of ownership savings while still driving more sustainable packaging.
- Marketing: The shift to remote work and life has resulted in increased consumption of over-the-top (OTT) / streaming media and social media. Marketers are responding to this shift by reallocating their media investment accordingly. Consumers are craving connection; campaigns need to be specific, personal, relevant to local markets, and able to be adapted efficiently. Procurement should support marketing and its agency partners in adapting to these changes, and ensure that current agreements and compensation structures allow for flexibility. More broadly, Procurement should be reviewing agency agreements and examining scopes to ensure the organization is maximizing its return on its marketing budget.
- IT: Now more than ever, IT Leaders can tap into a connected, global market of IT talent to deliver projects on their strategic roadmap. Market demand has rebounded, and availability is now constrained across many programming skillsets. In this environment, a thoughtful IT labor procurement strategy is critical. To secure the right talent and optimize budgetary investments, CPG Food & Beverage companies should carefully select the right delivery model, with an emphasis on outcome-based and performance-based compensation, and optimize the resource structure, with a focus on appropriately blending in nearshore and offshore labor.
- Renewable Energy: With increasing pressure on suppliers from major retailers, like Walmart’s Project Gigaton, having a Least-Cost Sustainability Roadmap is essential. The team should develop renewable energy strategies that minimize costs and generate returns based on sourcing expertise and constantly be monitoring market for advantageous financing options to optimize the financial performance of the investment. For those on the cutting edge, activity regarding circular economic models are beginning to accelerate.
- Personal Protective Equipment (PPE): Measures to protect team members from COVID-19 made the PPE demand surge like never before. At first businesses paid any price to obtain PPE, but now the demand has stabilized, and supply has expanded. Increased PPE will be the new normal, so Procurement should partner with EHS for to plan long-term requirements and ensure continuity of supply.
CASE STUDY: $6B Consumer Packaged Goods Holding Company
A ready-to-eat food manufacturer that produces household name brand products selected Insight Sourcing Group to drive $19 million in EBITDA impact and establish best-in-class procurement capabilities.
KEY METRICS & SOLUTIONS DEPLOYED
Insight Sourcing Group introduced spend visibility and developed a targeted roadmap for $500M+ in annual spend through its SpendHQ solution
Identified 20+ categories for immediate opportunity and executed projects resulting in $19M+ in annual savings on ~$200M in spend
Implemented performance management practices across all sourcing projects to ensure value capture and supplier compliance via Insight Analytics
ADDITIONAL VALUE DELIVERED
- Our firm supported M&A due diligence and synergy identification for a potential acquisition
- Our integrated value proposition aided the client from inception to ongoing management by starting with spend visibility (SpendHQ) to identify areas of opportunity, then executed projects to drive substantial savings, demonstrating and guiding ongoing practices, and ensuring savings are realized through ongoing category management (Insight Analytics).
Is Your Procurement Team World-Class?
By proactively addressing costs, a world class Procurement organization will consistently capture 10-15% savings or more per spend category, results that drive meaningful improvement to your company’s profits. Ask yourself: is your Procurement team world-class? Insight Sourcing Group brings world class procurement to your doorstep. As North America’s premier procurement consulting firm, we are focused exclusively on spend optimization and procurement excellence, and our mission is to drive maximum value for every dollar our clients spend. Food & Beverage CPG clients throughout the country have taken advantage of our unmatched breadth of expertise to achieve results like those highlighted above. Let’s discuss how Insight Sourcing Group can make your procurement objectives a reality.