Procurement Cost Savings for a Food Manufacturer

Introduction

Assessments of supplier contracts and a SKU rationalization leads to significant savings.

Manufacturing & Media Service

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Challenge

A third-party, outsourced study conducted for a multi-million, national food manufacturer identified potential savings opportunities by renegotiating supplier contracts and a SKU rationalization. The manufacturer did not have resources in house to execute this project and did not want to pay the fees of traditional consultants.

Solution

Patina assigned two Professionals with sourcing expertise in food manufacturing to lead projects for the company’s ingredient and packaging categories. Specifications were needed for all materials. Many had to be created. Request for Proposals (RFPs) were sent to incumbent and industry leading vendors. The Patina team negotiated pricing, ran production tests, selected final suppliers, and managed the cutover plan.

A Patina Professional initiated a second project to review adjusting specifications for savings. Working with the suppliers, there were several notable outcomes – packaging designs were updated, new materials were incorporated, and ingredients were substituted to drive additional savings (for example: powder versions vs. liquid versions of the same ingredient). The Patina professional worked with the Sales team to quantify customer benefits so that savings could be realized.

Outcomes

New contracts realized $4.4 million in annual savings after initial bids. Specification changes added an additional $3.5 million in annual savings by changing packaging designs, moving to ingredient suppliers with slightly different products, and swapping similar ingredients. The manufacturer’s customers were supportive of changes due to sustainability benefits, usability of new package designs, and improved product taste and quality.


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