Traditional supplier relationships in the drinks sector are not geared up to deal with the required level of speed of NPI and churn. The solution is more likely to be ‘Eastern style’ supplier collaboration’ than ‘Western style’ confrontation.
Sourcing and materials strategies need to ensure that sourcing decisions come with built-in flexibility to allow the organisation to harness latest technologies.
In high product churn environments, procurement must be adept at supplier management. Harnessing supplier innovation and being first to market with new ideas ensures that the company becomes a market leader, not a follower.
As the packaging supply base in the drinks sector is relatively narrow, customers don’t just need to compete for consumer attention – they need to compete for supplier support and innovation.
The drinks sector is some way behind FMCG in two critical supplier-facing areas. Firstly, supplier relationships tend to be more transactional and adversarial with the sector only just beginning to understand the value which suppliers can drive. Second is the relatively low level of control of indirect expenditure and lack of a category management approach to this area.
Overall there is too much focus on driving the cost of packaging materials down by a few percent, rather than looking at the value potential of the supply base and how it can best be leveraged. Procurement needs to be focused on whole life costing and not just purchase price.
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