Global FMCG Packaging Market Overview
The global FMCG packaging market is expected to grow at a CAGR of about 4.2%. These numbers will be primarily achieved through slight growth in developed markets and stronger growth within emerging markets. However, such growth trends present additional challenges for procurement teams. They are tasked with evaluating the geographical balance needed between their production facilities and suppliers’ production facilities. Segments of the packaging industry prefer local sourcing strategies, whereas others look for more regional or global strategies. This makes it critical for companies to evaluate the possibilities surrounding these options.
Business Challenges Faced
The client is a renowned FMCG company with operations spread across 15 countries whose major products rely on packaging to support numerous functions throughout the supply chain. But packaging became one of the challenging areas of spend for the procurement team due to factors such as brand equity, product protection, product quality, customer behavior, and supply chain. The company started to find it difficult to embrace such complexities and implement strategic sourcing approaches to the sourcing of packaging that could help them realize significant cost savings and supply chain efficiencies. The company, therefore, decided to collaborate with SpendEdge to develop an effective packaging sourcing strategy and gain an advantage in the extremely competitive marketplace.
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Our Research Approach
Considering growth trends in developed and emerging markets, the experts at SpendEdge identified three key practices to develop an effective packaging sourcing strategy. These practices involved spend aggregation, supplier evaluation, and total cost optimization.
To tackle spend aggregation, the team provided in-depth information that could help the client increase their spend volume and improve leverage across the supply base. They pulled spend together locally, regionally and globally, thereby providing a strong opportunity to improve spending leverage.
Critical to any packaging sourcing strategy is the ability to evaluate suppliers. The experts identified data elements that were crucial for the selection of best suppliers and collected information in areas such as business profile, growth strategies costs, packaging technologies, manufacturing capabilities, and distribution capabilities. This advanced supplier data collection helped the client in the evaluation of suppliers and the alignment of their capabilities with the packaging sourcing strategy.
The experts also explored the other price and non-price factors such as lead times, capacities, supply continuity planning, quality and price stability that could impact the product, supply chain, and overall packaging strategy.
With the right packaging sourcing strategy, the client was able to embrace the complexity of packaging procurement, and benefit from introducing supplier innovation and a broader evaluation of total value. It was also able to realize savings of $15 million in packaging spend annually.
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Tips to Create an Effective Packaging Sourcing Strategy