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Food and Beverage Have a Lot to Chew On With Strategic Sourcing

Date posted: Aug 2, 2022
Estimated read: 5 min
Author: David McMinn

The food and beverage industry was one of the first adopters of strategic sourcing technology and continues to push the envelope in innovative uses of everything from spend analysis to e-auctions and supplier performance management. Strategic sourcing software is well suited to address supply chain challenges in the food and beverage industry. Here are some actionable tactics you can use in your organization.

Supplier Risk & Performance Management

Challenge:

The typical large food company will have tens of thousands of suppliers spread around the world, and any shock to the global supply chain can impact operations. When this happens, you need to be able to react quickly to find out which suppliers are impacted and communicate with the right people to fix the problem.

Best Practice:

Implement an automated supplier performance management platform. Communicate efficiently and respond to events much faster than digging through files in search of contact information to email one-on-messages. For instance, have suppliers maintain their own records and contact all sweetener suppliers at once with the click of a button.

Commodity Price Fluctuations

Challenge:

Turmoil in the commodities markets can undo much of the good work and planning done by food and beverage commodity teams. With these purchases constituting one of the top two cost centers for a typical food company (along with labor), keeping a lid on pricing can be the difference between profit and loss.

Best Practice:

There is always a need for spot purchases in commodities either due to changes in demand or supply chain events. eAuctions are an ideal solution for spot purchases in commodities because these buys have good specifications, a competitive supply base, and the platform can incorporate multiple non-price variables such as freight, currencies, quality and taxes. Best of all, you might be able to take advantage of some bargains.

Complex Global Supply Chains

Challenge:

Getting the right product at the right place at the right time is a perennial challenge in the food and beverage industry. There is constant tension between the flexibility of small, local suppliers and the economies of scale associated with using larger entities. As you use more and more suppliers, it gets increasingly difficult to make sure they understand how you do business and what you expect from them.

Best Practice:

Implement a robust spend analysis program to understand where your spend is going and where to make improvements. Key value drivers with spend analysis include Purchase Price Variance (PPV) to identify where you’re spending different amounts for the same item and aggregation opportunities where it would make sense to increase volume to achieve pricing discounts. While much of day-to-day supply chain management occurs outside what is typically considered the “strategic sourcing” realm, suppliers are paying the most attention when they’re trying to win your business the first time. Make sure you use your eRFX process to properly set expectations starting with the initial RFI through negotiations.

Sustainability

Challenge:

Sustainability is constantly in the headlines these days because consumers are demanding it with their purchasing power. They are devoting an ever-increasing share of their purchases to companies that follow sustainable practices, including their supply chains.

Best Practice:

While you might have the very best of intentions when it comes to sustainability, it can be difficult to communicate this to your supply base both before and after you’ve made an award. In addition, your sustainability practices and expectations are changing with blinding speed as the market changes. The RFP your buyer ran two years ago probably doesn’t have your most current information. And your current suppliers don’t wake up in the morning wondering whether you’ve instituting a new policy that will change By enforcing use of approved templates through an eRFX solution, you can make sure that all bidders are receiving the most current, accurate information. Setting expectations early and measuring compliance down the road is key to success here.

Regulatory Compliance

Challenge:

Small changes in regulations can create big headaches for procurement and finance teams. For example, the United States has different food labeling standards by state which means you could conceivably need to manage fifty different food label and ingredient programs. Pair this with your tens of thousands of suppliers all over the world, and there’s no way you’ll be able to manage it from a spreadsheet.

Best Practice:

A strong supplier performance management platform will allow you to track all your supplier profiles, certifications, ingredient lists and contact information in a single repository. If a state makes a change that impacts your operations, you’ll be able to quickly identify and contact the suppliers involved and communicate to them what needs to happen. Best of all, the system will track the responses and submissions for you so you don’t need to remember who’s complied and who hasn’t.

Collaboration on New Products

Challenge:

Food and beverage companies are focused on bringing new products to market that will enable them to capture market share and increase incremental sales. However, it’s nearly impossible to develop new products without the involvement of your suppliers. They need to be involved early and often to get the best result.

Best Practice:

Some of the best ideas are going to come from your suppliers. However, there are two key challenges associated with capturing the best ideas from your suppliers. First, we hear frequently that much of the meeting time that a salesperson gets with a buyer is spent on administrative tasks (e.g. information updates, certifications) that could be better managed through a comprehensive supplier management platform. Second, suppliers need to understand your product development process and how they can best contribute. Make sure you’re effectively communicating this process through your platform and incorporating them through a structured project management system. This will also allow you to see where the new product process stands and where you might have problems down the line.

A strategic sourcing platform can go a long way toward helping your organization meet its goals. For more information on how Scanmarket can help your food and beverage company meet its goals, contact us at www.scanmarket.com.

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About the author

David McMinn
VP North American Operations

David McMinn is responsible for Scanmarket's North America Sales and Operations. David started his career with AutoZone where he spent 14 years in various roles from operating stores to leading the Sourcing department. Then he spent 5 years at Office Depot as VP of Sourcing and 2 years each at Office Max and Unisource as VP of Sourcing. David was also a partner with a start-up company, Manage Mobility for 13 years, before selling to Peak-Ryzex, here he served as SVP North American Operations.

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