Illustrative Case · Food and Beverage
A representative composite based on patterns we see across comparable mid-market manufacturers. Figures are illustrative. No individual client is depicted.
8.9% of addressed packaging and ingredients spend.
Duplicate specs retired across four plants.
Price increases now tied to published indices.
Packaging and ingredients spend, sourced plant by plant, brought under one category strategy.
The situation
Four plants, four buying habits, one P&L.
The company had grown by adding plants, and each plant kept buying the way it always had. Packaging film, corrugate, labels and key ingredients were sourced locally, under different specs, from overlapping suppliers. Nobody owned the category across the network.
When commodity prices rose, suppliers passed increases through and plants accepted them, because no one could say what the material should actually cost. Margin was leaking quietly, one invoice at a time.
The diagnosis
Paying for complexity nobody asked for.
The spend wasn't badly managed so much as unmanaged as a category. Each plant made reasonable local decisions. Together they produced fragmented volume, drifting specs and almost no pricing leverage.
- 412 active packaging specifications, many differing only in print or minor gauge, spread across 4 plants.
- Only 54% of spend sat under contract. The rest was bought on quotes and purchase orders.
- 38 suppliers served the same five material families, with no supplier holding more than 14% of volume.
- Price increases over two years outpaced the underlying resin, pulp and commodity indices by an estimated 6 points.
Each lever was sized, validated and tracked separately, so every dollar in the total can be traced to a specific change in spec, supplier or price.
What we did
One category strategy, built from the material up.
We built should cost models for the major material families, harmonized specs across the network, and ran a competitive sourcing event on consolidated volume.
Operating flow
Mapped how each plant specified, ordered and approved packaging and ingredients, then set one category owner and one approval path across the network.
Enabling technology
Built should cost models from published resin, pulp and commodity indices, giving the team a fact base for every negotiation.
Adoption in practice
Stood up a spec review group with operations and quality, so new SKUs reuse approved specs instead of creating new ones.
The outcome
$7.4M a year, from four separate levers.
Price
Should cost renegotiation and index linked pricing delivered $3.4M, and future increases now move with the market in both directions.
Volume
Consolidating 38 suppliers to 14 strategic partners added $1.9M and gave each remaining supplier enough volume to invest in service.
Specification
Retiring 245 duplicate specs saved $2.1M through longer runs, lower changeover costs and simpler inventory.
What made it stick
Indices, not anecdotes.
Savings in packaging and ingredients usually erode at the next price increase. Here, contracts now link price to published indices, so increases have to be justified by the market. A spec review step stops new duplicates at the source, and the should cost models are refreshed every quarter so the team always knows what the material should cost.
Next step
Wondering what your direct spend should actually cost?
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