Supply Chain & Value for money

In a context of scarcity of materials and rising energy prices, the impacts on production costs and the supply chain for agri-food companies and for out-of-home catering are numerous.

Leaderia can offer you an effective solution to set up a new purchasing organization, over a fixed period, by suggesting that you call on Interim Management. It is a less expensive alternative to a consulting firm or recruitment on a permanent contract.

Interim management is a solution to allow companies to benefit from an emergency business expert and manager, for a period defined in advance, in order to carry out a project of strategic importance. The interim manager also sets up new processes and a roadmap to be applied after his departure. He is not an employee of the company, which allows greater flexibility and independence in his mission.

Finally, the recruitment of a manager is done, on average, in less than 5 days, compared with current recruitment times in a tight market.

Context

For years, the economic context in France and Europe has been very favorable: low rates, stagflation, cost-based competition and perfect consumer segmentation.

The Covid-19 pandemic followed by the war in Ukraine changed the situation.

The ECB, for its part, raised interest rates and the repayment of PGEs also began.

This situation has led to a significant rise in prices, leading to record inflation since the 1980s. Consumption is falling; households with a higher average basket and energy bill.

Consequences on the supply chain

Pre-Covid was conducive to businesses and consumers and this created a situation where pricing became rationalized: to bring ever cheaper products to customers, purchasing was massively centralized to reduce product costs and related services (notably storage and delivery).

This organization of the Supply-Chain and the Purchasing function was adapted to the period of abundance created by stagflation. The changes that have taken place since 2020 prompt us to reconsider the functioning of companies and to reconceptualize these two functions.

Resilience, so much in the spotlight since March 2020, implies a new necessity: that of continuous adaptation to a world that is changing more and more, and more and more quickly.

Centralization has also removed the atomization of actors by creating very large production, distribution and negotiation structures.

The size advantage has now become a weakness: if one player falls, it is harder for others to compensate, and find viable and sustainable alternatives.

Solutions

Putting the consumer back at the center of business concerns is the new challenge for successfully differentiating and continuing to grow. This is all the more true as its purchasing behavior changes more rapidly than organizations.

Most important is to understand the concept of “Value for money”: what price are we willing to pay for the perceived value of products and services? The price is now more rational, and at the same time more subjective, because it is a tangible variable, representing what we think the product brings us.

This concept of “Value for money” is also found in the supply chain of companies:

Accounting for the “hidden costs” of ruptures
Backorder management
Quality of service measurement
Inventory storage
Decreasing chords to “lump sum”

Back to the fundamentals of the supply chain

In order to compensate for the rise in prices, partly exogenous, it is necessary to set up counterparts:

The quality of delivery
Commercial responsiveness
Product availability assurance
The readability of the rise

To cope, it is necessary that suppliers, companies and distributors collaborate to create value during exchanges and negotiations, with a view to a win-win relationship for all stakeholders.

Optimization of Purchasing and the Supply-Chain also goes through several sources:

Simple performance indicators
A reestablishment of the level of quality
Analyzes of purchasing behavior to include them in negotiations
Reassessing purchasing and supply practices is part of the solution.
The increases expected in the first half of 2023 show that a repositioning of the offer in relation to the perceived value/price is necessary.

Reassessing purchasing and supply practices is part of the solution. The increases expected in the first half of 2023 show that a repositioning of the offer in relation to the perceived value/price is necessary.