A multinational F&B company was facing escalating procurement costs due to a decentralized sourcing strategy. The company’s various regional divisions independently managed their procurement processes, leading to fragmented supplier relationships, inconsistent pricing, and limited negotiation leverage. This decentralized approach impacted the company’s ability to achieve cost and operational efficiencies.
The Challenge
The company’s decentralized sourcing resulted in several challenges:
- Fragmented Supplier Relationships: Regional procurement teams had different suppliers, leading to inconsistent quality and prices.
- Reduced Purchasing Power: A decentralized structure meant the company could not leverage economies of scale, leading to missed cost-saving opportunities.
- Operational Inefficiencies: The redundant processes in each region led to inefficiencies and extra overhead costs
The Objective
The company aimed to centralize its procurement strategy to optimize costs, streamline operations, and ensure consistent quality across its product lines.
Our Approach and Solution
To tackle the challenges of decentralized sourcing, the company developed the approach:
- Comprehensive Spend Analysis : The process began with an in-depth analysis of current spending to identify areas of high cost and inefficiency. This detailed evaluation allowed the company to spot opportunities for cost reduction and highlighted the need for a more strategic approach to supplier management
- Internal Interviews and Qualitative Research : With the spend analysis providing context, the next step involved gathering insights from internal stakeholders through interviews and qualitative research. The team at Exorixy interviewed key personnel from various regional divisions to understand existing procurement practices, identify bottlenecks, and learn about internal expectations. This step offered a detailed perspective on the impact of decentralized sourcing and helped pinpoint the key areas for improvement. Simultaneously, the team connected with the existing and new suppliers to assess their performance, reliability, compliance, and capability. This dual approach offered a comprehensive view of the procurement landscape.
- Expert Consultations : After completing internal and external interviews, the team sought expert advice from experienced professionals in F&B sourcing. This phase included discussions with industry veterans to gather insights into best practices and assess the risks and benefits of centralized versus decentralized sourcing. The expert consultations helped confirm the findings from the spend analysis and provided strategic direction for the next steps.
- Supplier Consolidation and Strategic Partnerships : Armed with comprehensive data and expert insights, the company embarked on supplier consolidation. This step involved reducing the number of suppliers to focus on strategic partnerships with a smaller group of trusted vendors. The client and Exorixy teams collaboratively facilitated meetings with these key suppliers to discuss their expectations and lay the groundwork for long-term relationships. The goal was to improve pricing, enhance quality control, and establish a more efficient and reliable supply chain.
- Supplier Onboarding and Sourcing Strategy Recommendations : Once the supplier consolidation and strategic partnerships were in place, Exorixy moved to the final step, focusing on supplier onboarding, and refining the sourcing strategy. The team played a key role in selecting suitable suppliers and streamlining the onboarding process. This involved arranging meetings with chosen suppliers, facilitating contract negotiations, and providing guidance on onboarding procedures.Additionally, Exorixy recommended a hybrid sourcing model, where procurement is centralized at a global level but retains flexibility through regional and local decentralization. This approach allowed the company to maintain cost efficiency and operational consistency while still providing regional teams the autonomy to address unique local needs.
Outcome and Impact
The findings provided by Exorixy yielded notable results for the multinational F&B company:
- Significant Cost Reduction : Through comprehensive spend analysis and supplier consolidation, the company realized a substantial reduction in procurement costs. This approach generated a 15–20% cost savings in sourcing expenses within the first year, allowing the company to reinvest in other business areas
- Stronger Supplier Relationships : By focusing on strategic partnerships with a smaller group of trusted suppliers, the company achieved consistent quality and better pricing. This approach led to a 10–12% increase in negotiated discounts from suppliers, improving the company’s purchasing power.
- Improved Operational Efficiency : With standardized procurement processes across regions, the company eliminated redundant practices and streamlined operations. The hybrid approach reduced procurement-related overhead costs by 8–10%, enhancing overall operational efficiency.
- Enhanced Quality Control : Supplier consolidation and strategic partnerships enabled the company to establish more rigorous quality assurance protocols. This resulted in a significant reduction in quality-related issues and recalls, contributing to a stronger brand reputation and increased customer satisfaction
