Category Management Helps A Flexible Packaging Manufacturer Realize $18 Million in Savings
Overview of the Flexible Packaging Industry Typically, flexible packaging is a non-rigid method of packaging, and flexible products are made from flexible materials such as aluminum, plastic, and paper. The recent increase in the demand for healthcare, household, cosmetics and toiletries, food and beverages, sporting goods and other agricultural products industries is expected to drive […]READ MORE >>
Overview of the Flexible Packaging Industry
Typically, flexible packaging is a non-rigid method of packaging, and flexible products are made from flexible materials such as aluminum, plastic, and paper.
The recent increase in the demand for healthcare, household, cosmetics and toiletries, food and beverages, sporting goods and other agricultural products industries is expected to drive the industry’s growth. Also, the shift in trends towards convenient packaging due to lightweight characteristics and ease of use may propel the growth of flexible packaging. Moreover, manufacturers are moving toward flexible packaging materials as it creates less waste due to lower utilization of crude materials and requires less storage room along with comfortable transport.
However, the growth of the flexible packaging industry is expected to be influenced by a few factors. These factors include:
- Rising cost of raw materials: Plastic, paper, films, paperboard, resins, and adhesives are some of the standard raw materials used by the flexible packaging companies. In recent times, the flexible packaging industry has been affected by increasing prices of such raw materials. For instance, the increasing costs for polypropylene, used in bottles, packaging films, and resins have been on the rise owing to reduced supply for the materials.
- Sustainability challenges: To improve packaging sustainability, flexible packaging companies have to account for designs which consider environmental issues and reduction of greenhouse gas and water footprints. Flexible packaging disposal and recycling methods can prove to be very costly as it consumes a significant amount of energy and water and creates emissions.
Many such factors are compelling flexible packaging industry firms to leverage the use of category management solutions.
The Business Challenge and Journey
The client, a leading flexible packaging manufacturer with multiple manufacturing units spread across the globe, wanted to conduct a systematic analysis of sales performance, profitability, and customer metrics. This was because the client had had trouble in achieving growth and addressing margin problems. Moreover, the flexible packaging manufacturer wanted to implement a best-of-breed category performance improvement process to categories, a part of which involved devising a new approach to negotiating with key suppliers.
The category management experts at SpendEdge tailored a wide-ranging research methodology to help the client improve sales and margins and change the basis for negotiations with suppliers. The research approach included primary and secondary research coupled with qualitative and quantitative data collection methods.
During the course of this category management engagement, the client analyzed the full value-chain to understand the full breakdown of costs for a designated category and identified effective pricing strategies. The client also established an internal center of excellence with formal methodologies, tools, and training for knowledge transfer to the suppliers.
Key questions answered in this category management engagementThe Results
The category management engagement helped the flexible packaging client identify significant savings potential—$10 million in the first three months because of full value chain analysis and $18 million recognized from improved category management. Additionally, on the supply chain side, savings ran between 2% – 11%, which helped the client switch to a pull inventory approach.