Sector: Food
Client: One of the largest food manufacturers in the UK.
Region: UK
The challenge:
Producing over 6,000 fresh food products means dealing with thousands of suppliers, from farmers to dry ingredient makers, from machinery to packaging companies. This company, which is a leading international food manufacturer specialising in fresh prepared foods and produce, felt that there was an opportunity to potentially reduce some of its supplier costs at a time when prices for ingredients like wheat and fruit were rising sharply.
The solution:
The company began analysing spend on non-seasonal items like packaging. Before automatically renewing contracts with suppliers of the labels used on its products, it looked more closely at this area. As labels are a highly competitive supplier category, where its large spend made it a highly desirable customer, the procurement team realised that holding an eAuction could be a good way of reducing its spend in this area.
The team discussed eAuction options with Trade Interchange consultants and together they agreed that it would be simplest to divide the auction into two sections: printed and plain. A ceiling equivalent to the current contract value was fixed, to ensure no price increases.
Trade Interchange ran the eAuction on behalf of the food manufacturing company, inviting nine suppliers to participate. This was a higher number than the company had previously been able to consider.
The results:
By holding an eAuction, instead of simply renewing existing contracts, the company realised the following benefits:
- Whereas the original contract value was £1,391,000 per annum, the lowest bid in the eAuction was just £993,000
- This represents a saving of £398,000 or 29% of the original contract value
- These savings were implemented within five months
- In addition, the eAuction process was much faster and used less resource than the company’s previous procurement method.