CASE STUDY

Supply Market Intelligence Helped a Processed Foods Manufacturer to Address Commodity-price Volatility and Save $15 Million

Nov 27, 2019

Processed Foods Industry Overview 

Over 50 percent of the American diet consists of highly processed food items. The industry loosely tracks underlying demographic trends such as income growth and population and generates revenue from the sale of food to a whole host of consumers. It has proved its ability by delivering positive investment returns consistently. In fact, over the past few years, the processed foods industry in the US has delivered high single-digit annual total returns with much less volatility than the broader market indexes.  

Business Challenges Faced

Rising competition from private label companies and value-conscious purchasing from consumers was creating downward pressure on prices of processed food items. The manufacturer was finding it hard to keep up with new trends, demand volatility, portfolio complexity, and development costs. Raw material prices which accounted for over 70% of direct material costs were becoming more volatile and impacting the major operations of the company. The client, therefore, decided to collaborate with SpendEdge to perform supply market intelligence study and gain real-time insights to address increasing volatility and improve the competitiveness of their organization. 

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Our Research Approach 

To address this situation, the experts conducted a comprehensive supply market intelligence study, that provided insights into core elements of market trends, commodity pricing, global capacity, government and regulatory norms impacting the sourcing process. They also offered insights into economic trends that could impact the organization’s supply chain. 

With the help of supply market intelligence report and insights, the client determined the best framework for strategic, leverage, routine and bottleneck categories. Data coupled with market insights enabled the client to integrate cost modeling as a key capability within supply market intelligence. This provided input to budgeting activities and supplier switching decisions. SpendEdge’s recommendation to utilize supply market intelligence throughout the sourcing lifecycle also enabled the client to gain valuable insights at various stages of sourcing including strategy development, supplier identification, negotiation and contracting. This promoted a greater understanding of the supply market and helped them gain a competitive advantage.  

Engagement Outcome  

The supply market intelligence solution offered helped the client to reduce exposure to commodity-price volatility and save $15 million in a span of three months. It also enabled the client to look beyond their direct suppliers and build up their understanding of the role of different players across the whole value chain.

A comprehensive supply market intelligence study is crucial for companies to minimize exposure to commodity price volatility and reduce costs. Subscribe now to access accurate supply market insights from our procurement experts. 

Importance of Supply Market Intelligence 

  • Enables companies to understand the market in which the supplier operates. 
  • Reduces risk-intensive events involving suppliers and markets. 
  • Forecasts global price levels, market trends, supplier quality, and delivery.
  • Identifies key resources needed to vet for quality and accuracy.

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