For sustainable savings
The consumer products industry is facing unprecedented cost
challenges. The global economy is suffering from one of the deepest
recessions and consumers are reducing their spending drastically.
Add to this economic news other factors such as commodity price
volatility, supplier financial uncertainty and food ingredient
safety risks. Consumer products companies are dealing with an
unenviable combination of potentially declining revenues, continued
rising costs and quality concerns.
Against this backdrop, most companies have recognised that external
spend is a large component of their cost structures (typically
40-70% and growing with increased outsourcing) and have
aggressively attacked these costs, primarily through
procurement-based initiatives.
For the last decade and a half, successive waves of initiatives
have been used to reduce spend. Strategic sourcing was followed by
e-procurement, B2B exchanges and reverse auctions. Although most of
these initiatives have resulted in large potential cost savings,
executives are frequently thwarted in their ability to transform
these opportunities into sustainable savings that track to
bottom-line impacts on cost of goods sold (COGS) or selling,
general and administrative (SG&A) expenses. Too often,
long-term savings opportunities are not adopted, and the costs
quickly creep back.
For further information, download our report '
Sourcing optimisation'.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
