Sourcing in The Food Industry: The Secret Recipe for Success
The food industry has been influenced by various trends in recent times. This calls for the players in the industry to be on their toes to watch out for these changes and adapt accordingly. If you go through the revenue data of the food industry for the past decade, you will find a noticeable decline […]
The food industry has been influenced by various trends in recent times. This calls for the players in the industry to be on their toes to watch out for these changes and adapt accordingly. If you go through the revenue data of the food industry for the past decade, you will find a noticeable decline in the profits. What could be the reason for this you wonder? Increasing competition from private label players, growing trend of value and price-conscious customers, more number of discounters in the market, etc. are some of the few reasons that have been adding salt to the already wounded profit margins in the food industry. The only way companies in the food industry can increase their profits in the existing market situation is to transform the way they specify, source, and manage the supply of raw materials, which will eventually help them to cut costs, meet the changing consumer preferences, and manage risks efficiently. So how can companies efficiently alter their sourcing strategies and gain better business efficiency? Gear up as we reveal the secret formula:
Adopt Flexible Sourcing Techniques
We have seen a steep fall in commodity prices over the past few years. Therefore, it is essential for players in the food industry to formulate flexible sourcing plans to determine the cheapest and most cost-effective medium of sourcing products to widen the profit margins. A large number of food industry companies are also resorting to ‘clean-sheet cost modeling’ techniques, which allows them to build a comprehensive idea of the cost drivers of existing potential suppliers. Food industry clients can benefit from this as it will enable them to determine effective negotiation strategies that will prove to be the most cost-effective for them.
Keep an Eye on Changes Around You
Due to the extremely volatile and dynamic market conditions, food industry companies have to make a note of these three techniques to thrive in the long run:
- Identify the different variables that affect pricing and demand.This will help businesses to improve their forecasting abilities and formulate better sourcing policies
- Make changes in the product mix and supply chains based on the forecasts
- Use the data from forecasting to hedge against future price fluctuations
Optimize Product Specifications
Food industry companies can leverage ‘Design-to-Value’ techniques to understand which features of their products make maximum impact on their customers. How can food retailers benefit from this you wonder? Identifying consumer tastes and preferences creates an opportunity for companies to make necessary alterations in specifications and reduce costs significantly. Companies can simultaneously increase product value by optimizing their product specifications as per customer demands.