Case Study 3

Overview

BGS professionals partnered with a group of independent food packaging manufacturers in the United Kingdom to help them address increasing cost pressures and supply chain inefficiencies. Faced with rising raw material costs, fragmented supplier relationships, and logistical challenges, the manufacturers sought to enhance their purchasing power and streamline operations. BGS worked to form a buying group that could negotiate better terms with suppliers and establish a centralized logistics hub for more efficient material distribution.

The challenge

The independent food packagers, many of whom operated at a smaller scale, faced significant disadvantages when negotiating with suppliers. Due to their relatively low order volumes, they were subject to higher prices, inconsistent delivery schedules, and limited access to favorable contract terms. Additionally, the lack of a coordinated logistics system meant that many manufacturers experienced delays and inflated costs associated with warehousing and transportation.

Key challenges included

Limited Negotiating Power: Individual manufacturers struggled to secure competitive pricing for raw materials like plastics, paperboard, and aluminum due to their fragmented buying power.
Inefficient Supply Chain Management: With no centralized logistics system, materials were often ordered and shipped separately, leading to inflated transportation and storage costs.
Supply Shortages and Delays: Inconsistent delivery times and a lack of reliable suppliers resulted in frequent stockouts and production delays.

Approach

BGS professionals developed a comprehensive strategy to tackle both procurement and logistics challenges. By creating a buying group and establishing a centralized logistics hub, BGS helped the food packagers achieve significant cost savings and improve supply chain efficiency.

Formation of the Buying Group: BGS identified and brought together a coalition of 12 independent food packaging manufacturers in the UK. By consolidating their purchasing power, the group was able to negotiate as a unified entity, significantly increasing their leverage with suppliers. BGS facilitated negotiations with key suppliers of raw materials, securing improved terms such as bulk pricing discounts, longer payment terms, and more reliable delivery schedules.

Centralized Logistics Hub: To further streamline operations, BGS established a centralized logistics hub that would serve as a shared distribution center for all participating manufacturers. This hub allowed for more efficient inventory management, reduced transportation costs, and improved coordination across the supply chain. The hub was strategically located to optimize delivery times and minimize transportation costs, while also providing warehousing capabilities for materials.

Supplier Partnership and Long-Term Contracts: BGS utilized its extensive network to secure long-term contracts with high-quality suppliers, ensuring consistent access to essential packaging materials. The new agreements included volume-based discounts, allowing the manufacturers to benefit from lower prices as the buying group grew. Additionally, these suppliers committed to better delivery schedules, reducing the risk of production delays caused by material shortages.

Technology Integration for Inventory and Ordering: BGS introduced a centralized inventory and ordering platform, enabling manufacturers to place orders through a shared system that automatically tracked material levels at the logistics hub. This technology allowed manufacturers to benefit from just-in-time ordering, minimizing excess inventory while ensuring critical materials were always available when needed.

Results

Through BGS’s leadership, the newly formed buying group achieved significant cost savings and operational improvements:
Reduction in Material Cost: By negotiating bulk pricing with suppliers, the buying group collectively saved 20% on key packaging materials such as plastic films, paperboard, and aluminum.

The creation of the centralized logistics hub and integrated ordering platform allowed for more efficient distribution, resulting in a 35% reduction in transportation and warehousing costs.

Improvement in supply chain efficiency

The group’s long-term contracts with suppliers provided guaranteed access to critical raw materials, minimizing the risk of stockouts and production delays.

Reliable supplier relationships

By eliminating supply shortages and ensuring timely delivery of materials, the manufacturers experienced a 15% reduction in production downtime, allowing them to fulfill orders more consistently and grow their customer base.

Case Study 3

Forming a buying group for independent food packagers

Overview

The challenge

Key challenges included

Approach

Results

Improvement in supply chain efficiency

Reliable supplier relationships

Faster production times

Conclusion

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