Enhanced procurement intelligence: The key to combating narrow margins in the CPG industry

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Consumer Packaged Goods is an industry of very fine margins, and very small changes can make a very big difference. Reducing 5-6 potato chips from a bag can save a company millions (cutting half an ounce from Lay’s flavoured chips bags saved PepsiCo an estimated $50 million)1. But reduce an extra ounce and upset the consumer; and you are looking at a sharp drop in sales and revenue, eventually turning potential multi-million profits into multi-million losses.

Such high-stake questions require intelligence and data-driven insights. Correct utilisation of data can help companies underpin every decision and tackle today’s challenges head-on; mismanage it and problems could be compounded. This is the kind of intelligence, effective use of data and valuable insights that The Smart Cube has been providing to its clients for 15 years.

We have recently launched new tailored solutions for the sector – Category Excellence, Commodity Volatility, Supply Chain Analytics, Supplier Engagement, Product Analytics and Concept Lab – which we deliver through a unique fusion of talent, tech and tools. Talent comes in the form of specialists with extensive sector experience and understanding. Tech and tools come through Amplifi, our organisational intelligence platform, which contains a wealth of knowledge capital, cutting-edge tools, and advanced analytics, which are leveraged by our specialists to deliver client work.

In 2016, while working with a large global hamburger chain, we accurately predicted an increase in beef prices for the subsequent year. Based on the forecast for different geographies, we recommended the exact volume of beef they should procure, when they should procure it, and the suppliers they should select. Our Commodity Volatility solution goes a step further, and provides real-time commodity price forecasts. This insight empowers businesses to conduct more informed budget planning, and supports better buying decisions and hedging strategies. Our current forecasts suggest beef prices will surge this year. To a hamburger chain for which beef is the largest category, constituting almost half of its direct category spend, this near real-time and accurate information will help the company prepare for this change, and minimise the potential impact on its bottom-line by proactively looking at alternate suppliers and entering contract renegotiations.

Our Category Excellence solution is being used by several global CPG manufacturers for support in their direct ingredients categories, encompassing products from dairy, flour, sugars and fats, to enzymes, emulsifiers, colours and flavours. The category managers now have complete visibility into supply-demand, price outlook, supplier risk, innovations, cost inputs and implications, and industry updates – all through a one-stop-shop solution, delivered in near-real-time. The clients are benefiting from this contextual intelligence in the form of better sourcing decisions and overall procurement efficiency.

Click here to find out about all the categories we specialise in.

Consider another example of our engagement with a global spirits manufacturer. The client’s spend structure was very complex; it wanted to gain higher visibility of its global spend data and identify global savings opportunities for different categories. The Smart Cube carefully cleansed and categorised the spend data, developed an intelligent spend cube that recommended cost-saving opportunities. The spend cube also recommended strategies to reduce cost, such as identifying low-cost alternative suppliers wherever applicable.

What we see in the CPG sector, is that procurement teams do not face problems getting access to data. Information is available aplenty. What they seek, instead, is real-time and contextual actionable insights that can help them take impactful decisions to remain ahead of the competition. Our solutions, tools, technology, and knowledge capital empower executives in the CPG industry to do just that.

References: 
1 http://time.com/3030517/pepsico-lays-fewer-chips/


With additional inputs from Adit Chauhan, Rashi Singh and Shishir Gupta

Vaibhav Jain

Vaibhav Jain

Vaibhav heads up the CPG sector for The Smart Cube, leading a team of close to 100 people. He is responsible for delivering customised research and analytics solutions and decision support to clients, and for developing and implementing the CPG strategy. He loves spending time with his young daughter (who he believes has taught him as much as his 12-years with The Smart Cube!) and enjoys watching cricket, tennis and football.

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