CASE STUDY

Cost-Saving Opportunities in the Retail and CPG Industry | SpendEdge

Apr 9, 2021

What is the importance of cost-saving opportunities in the retail and CPG industry?

Identifying and capitalizing on cost-saving opportunities has become an undeniable necessity for companies in the growing B2B work environment. As companies aim to grow, expand, or keep pace with industry developments, procurement, sourcing, and management teams strive to significantly reduce costs, increase savings, improve productivity, and maintain supply chain efficiency. Improving a company’s bottom line and cash flow is imperative to successful and sustainable growth in any industry. In the consumer goods industry, the dynamic and ever-changing nature of the market has led to an increasing need for proper cost-saving strategies, and stakeholders find themselves searching for unencumbered cost-saving opportunities and efficient best practices along the supply chain. Some of the highest costs are incurred due to a lack of coordination or collaboration, continuous logistics and transportation expenses, supplier relationships, and contract changes. The growing consumer goods industry presents stakeholders and companies with substantial cost-saving opportunities, but appropriately identifying, planning, and executing cost-saving opportunities can be extremely challenging.

Five major steps for cost saving opportunities in the retail and CPG sector

Streamlining Processes: One of the most significant challenges in any company or industry is the lack of clarity, centralization, and streamlining. When companies expand, their supply chains become increasingly complex. A lack of proper organization can lead to data loss, unnecessary complexities, business relationship challenges, delays and failures, and overages or shortages. Consequently, these issues lead to high costs for companies, such as recovering data, making additional purchase orders or other issues due to lost data, lowered customer satisfaction due to delayed production, supplier conflict because of inefficiency, and unnecessary expenses. To avoid these unnecessary costs, companies must develop or purchase centralized software, ensure communication between departments, maintain clarity regarding roles, responsibilities, and targets, and promote streamlined processes.

Collaborative Departments: Confusion, lack of coordination, or inability to collaborate between the various departments or partners along the supply chain can lead to many challenges for any company. If sourcing and procurement fail to cooperate, established partners and company needs can mismatch, leading to significant losses, failure to meet targets, stakeholder attention, and customer dissatisfaction. Similarly, contract management, supplier relationship management, supply chain management, sales, marketing, procurement, and sourcing must work collaboratively to create a clear, efficient, and cost-effective supply chain. To mitigate the risk of unnecessary losses caused by organizational shortcomings, companies must ensure they establish strong communication networks between departments and partners, enable collaborative target-planning, capitalize on major cost-saving opportunities, and maintain utmost clarity among managers and stakeholders.

Transportation Challenges: Depending on the operation area, offerings, and strategies, companies often spend a substantial amount in acquiring efficient, reliable, inexpensive, and worthwhile transportation, and failure to gain the required facilities leads to significant losses. As the economies and companies expand, there is a more widespread need for transportation. Still, many companies fail to plan and establish effective transportation strategies, leading to partnership challenges, loss of product or shipment, fraudulent deals, and unnecessary expenses. Companies must do their due diligence regarding transportation losses, costs incurred by transportation companies, highway toll, permit, and other necessary costs, and enter contracts with fact-based negotiations. For some companies, major transport partnerships are not required, in which case, it is crucial to identify short-term cost-saving opportunities that serve the illustrative purpose and utilize tools that incur the least cost but offer the highest value.

Inventory Management: Efficiently managing stock is crucial to minimizing costs, errors, and dissatisfied customers daily for all companies. Companies can face various challenges when it comes to inventory, including tracking errors, shortages, over-stocking, and incorrect stock picks, leading to significant losses within the warehouses and for the company. To prepare for potential inventory challenges and maintain efficiency, companies should establish a clear procurement plan and develop a robust contingency strategy for when failures or challenges occur. This department is also responsible for mitigating the possibility of product theft, contamination, or spoilage for perishables and ensuring proper coordination with all supply, transportation, storage, and sales partners. There are many cost-saving opportunities in this section of the supply chain, and companies must capitalize on it by developing strong, data-driven strategies.

Supplier Management: Companies and stakeholders are becoming increasingly aware of the crucial, unparalleled role of suppliers in the supply chain’s long-term success and any organizational initiative. Therefore, ensuring all negotiations, contracts, and executions are carefully scrutinized and flawlessly executed has become necessary. However, various cost-saving opportunities can go unidentified in the supplier management department, including identifying and partnering with multiple suppliers, investing in cooperative and centralized software for clear communication, accepting supplier opinion during ideation, and due diligence before negotiation. Companies can also reduce unnecessary costs by focusing on reviews, proper compliance, encouraging alteration and changes to partnerships, and staying a step ahead of potential changes within partnerships due to external factors.

The current market landscape for the retail and CPG industry has evolved in a major way and it is essential for leading players to maximize cost saving opportunities to stay ahead from the competition. Request a FREE proposal to gain deep insights on how solutions offered by our procurement experts at SpendEdge can help you align your business objectives with procurement goals.

Success Story

The consumer goods industry has witnessed exponential changes over the recent decade. Many companies struggle to identify the best approaches to reducing costs, mitigating supply chain complexities, and promoting overall efficiency. A renowned consumer goods retailer in Europe faced a sudden decline in savings and struggled to identify the reason for the substantial rise in costs across departments. After stakeholders expressed significant concern, the supply chain management department collaborated with SpendEdge and leveraged our experts’ insights and suggestions regarding cost-saving opportunities within the company. With our unparalleled inputs, the company successfully implemented new transportation, inventory, and supplier management strategies and identified problem areas within their processes and communication systems. By investing in collaborative, centralized software, improved communication systems, and long-term cost-reduction plans, the company significantly reduced costs, recovered savings, and improved overall efficiency.

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