Revolutionizing the Supply Chain for a Leading F&B Company

Raw material sourcing

A leading F&B company had been experiencing challenges with its supplier network. As the company grew, maintaining consistent supplier performance and managing risk became more complex. Issues such as delayed deliveries and inconsistent quality were becoming more frequent, affecting production schedules and operational efficiency

The Challenge

The company faced the following key challenges in its supply chain:

1. Supplier Performance Variability: Suppliers showed varying levels of reliability, leading to uncertainty in the production process
2. Financial Stability of Suppliers: The financial health of some suppliers was questionable, creating potential risks for the supply chain
3. Supply Chain Disruptions: Supply interruptions were becoming more common, threatening the smooth operation of the company’s businessTheir community. I wonder how they wou if their own child witnessed such a level of violence?

The Objective

The company aimed to evaluate its existing suppliers through benchmarking and risk assessment, with a focus on gaining deeper insights into supplier performance and identifying potential risks.

Our Approach and Solution

To tackle the challenges, Exorixy performed a benchmarking exercise for all existing suppliers and conducted an in-depth financial health analysis of the suppliers that accounted for 80% of the F&B company’s spending.

To gather the necessary data for supplier benchmarking and financial analysis, we engaged with various stakeholders across the supplier network. The primary research methodology included:

1. Interviews with the Supplier Management Team : Detailed interviews with senior management, provided insights into supplier operations, including delivery timelines, quality control processes, and customer service practices. These interviews were crucial for assessing the supplier’s capacity, flexibility, culture, and approach to problem-solving
2. Discussions with Quality Assurance Teams: Conversations with quality control teams shed light on the quality consistency of raw materials and components. This helped to track defect rates, quality issues, and adherence to standards
3. Interviews with Financial Executives : Meetings with CFOsand accounting teams provided a deeper understanding of the financial health of suppliers. Topics discussed included revenue, profit margins, debt levels, cash flow, and liquidity.
4. Site Visits : We also conducted visits to specific suppliers’ facilities to verify their operational capabilities, quality control practices, and compliance with regulations. These visits also allowed us to assess environmental practices and workplace safety
5. Analysis of Financial Documents:Exorixy analyzed financial statements, credit reports, and other relevant documents to assess the financial stability of suppliers. This analysis aimed to identify potential risks related to high debt, cash flow issues, or financial instability.

Supplier Benchmarking Exercise

Post gathering data and information, Exorixybenchmarked all the existing suppliers of the F&B company based on key performance indicators (KPIs). The KPIs included:

1. Delivery Times: Measuring the punctuality of supplier deliveries. This KPI tracked the rate of on-time, early, and late deliveries, offering insights into a supplier’s reliability.
2. Quality Consistency: Assessing the quality of raw materials and components. This KPI was used to monitor the frequency of quality issues, defects, or inconsistencies in the supplied goods
3. Compliance: Ensuring suppliers adhered to food safety regulations, industry standards, and company policies. This KPI included reviewing certifications, audit outcomes, and any compliance-related incidents
4. Cost Competitiveness: Comparing supplier pricing to industry benchmarks. This KPI helped determine whether suppliers offered competitive rates and contributed to cost-effective sourcing
5. Customer Service: Evaluating supplier responsiveness, flexibility, and communication. This KPI measured how quickly suppliers addressed issues, accommodated changes, and maintained clear communication with the F&B company.
6. Innovation and Technology Adoption: Gauging a supplier’s ability to innovate and adopt new technologies. This KPI reflected the supplier’s commitment to continuous improvement and staying ahead of industry trends
7. Environmental Impact: Assessing a supplier’s sustainability practices and environmental impact. This KPI considered waste management, energy use, and overall carbon footprint
8. Supply Chain Risk : Measuring the level of risk associated with each supplier. This KPI examined factors like geographic risk, financial stability, and dependency on single sources
9. Capacity and Scalability: Evaluating the supplier’s ability to meet the FYB company’s current and future demands. This KPI involved assessing production capacity, scalability, and adaptability to increased orders

Financial Health Analysis

Key aspects of the financial health analysis included:

1. Revenue and Profit Margins : We examined the suppliers’ revenue and profit margins to gauge their profitability. This involved analyzing financial statements and profit-and-loss reports
2. Debt Levels : We assessed the debt-to-equity ratio and the total amount of outstanding debt for each supplier. This analysis aimed to understand the financial risk associated with high levels of debt and to identify any red flags indicating financial stress
3. Cash Flow and Liquidity : We evaluated the cash flow statements and liquidity ratios of suppliers to determine their ability to meet short-term financial obligations. We also evaluated cash flow cycles and cash reserves, which provided insights into each supplier’s operational resilience
4. .Asset Management : Welooked into the suppliers’ asset base, including equipment, facilities, and inventory management practices. This provided an understanding of the supplier’s long-term sustainability and capacity to fulfill orders
5. Creditworthiness : We obtained credit reports and references to assess the creditworthiness of suppliers. This step helped identify suppliers with solid credit histories and those with potential credit risks
6. We obtained credit reports and references to assess the creditworthiness of suppliers. This step helped identify suppliers with solid credit histories and those with potential credit risks
7. Investment in Growth : We also explored the suppliers’ investments in technology, infrastructure, and innovation. This provided insights into their commitment to growth and capacity for future scalability.
8. Risk Exposure: A critical part of the financial health analysis was assessing external risk exposure, such as economic conditions, geopolitical factors, and market trends. This helped us understand the broader risks that could impact a supplier’s financial health.

Outcome and Impact

The comprehensive analysis and subsequent recommendations had a significant impact on the F&B company, leading to notable improvements across the supplier network. Here are the key outcomes:

• Reduced Supply Chain Disruptions: Through the benchmarking exercise and financial health analysis, the F&B company identified high-risk suppliers and implemented diversification strategies. This approach reduced supply chain disruptions by 45%, ensuring a more consistent flow of raw materials and smoother operations.
• Enhanced Supplier Reliability:The F&B company saw a 40% increase in on-time deliveries. This improvement in punctuality led to greater production efficiency and reduced downtime in manufacturing processes
• Strengthened Financial Stability: The financial health analysis allowed the F&B company to identify financially unstable suppliers and replace them with more reliable alternatives. This proactive approach led to a reduction in supply chain risks related to supplier insolvency or financial distress
• Increased Cost Efficiency: By benchmarking cost competitiveness among suppliers, the F&B company identified opportunities for cost savings. Negotiating better terms with existing suppliers and sourcing from new, more cost-effective suppliers resulted in a 15% reduction in raw material costs.