CONSUMER PRODUCTS
OVERVIEW
Manufacturers of consumer products face a dynamic market with rapidly changing channel focus and customer preferences. Whether reviewing focus on revenue and profit growth or simply running operations more efficiently, Consumer Products companies can count on DPO&Co to bring new perspectives that will drive superior stakeholder value.
CASE EXAMPLE
16-Week Project: Led a major project that delivered over 10% savings on $140M packaging spend for a global CPG company, utilizing RFPs, negotiations and reverse auctions
Situation
- Client sales were growing modestly but profits were declining, causing management to commit to delivering $250MM in annual cost savings
- The client had a mix of large and small incumbent suppliers across flexible and rigid plastics, corrugate boxes and cartons and paper and shrink sleeve labels
- My employer had been working with the client for 14 years and rigorously sourced most of these categories in the recent past
- Client acquired businesses in the previous 5 years that ran semi-autonomously, creating opportunity to leverage spend
- The client had stringent transition requirements and high qualification constraints once savings were identified
Approach
- Interviewed buyers, packaging R&D and brand management to evaluate and prioritize savings opportunities and understand business and supplier constraints
- Conducted market analysis to understand client bargaining position and supplier capabilities
- Designed nine category strategies based on strategic partnerships, market competition and complexity with strategies including:
- Direct Negotiation with regression
- Reverse E-Auction
- RFP with cost component analysis
- Guided client through 38 negotiations by providing targeted asks and communication strategy
Impact and Results
- Reduced overall addressable packaging spend by over 10%, with individual categories earning as much as 27%
- Negotiated payment terms from net 30 to net 60 or 90 days
- Detailed business-case with estimated NPV savings of $25 -$40MM over 3-4 years
- Improved understanding of buyer ordering behavior that drives higher packaging costs
- Detailed “should cost” model for new corrugated boxes product launches
- Reduced key supplier risk and increased optionality by adding new players to the supplier mix
- Highlighted savings opportunities for future work from alternative materials (down-gauging) and spend that was out of scope