Consistent cost management: Secure the future - master challenges

The food industry is experiencing a cost explosion which, in a worst-case scenario, can lead to a massive price spiral. Industrial producer price inflation shows that there is still a lot of inflationary pressure in the pipeline. Consumer price dynamics may reach +10% towards the end of the year.

For months we have been confronted with bad news. These affect the food manufacturers and retailers massively.

The disadvantage of medium-sized companies / family businesses compared to corporations is enormous. According to their own surveys, a medium-sized company realizes 80% of its sales in Germany and mostly with only one or two major customers. The full buying power of the oligopoly of EDEKA, ALDI, REWE and SCHWARZ Group therefore hits medium-sized and family businesses particularly hard.

The corporations, on the other hand, often only realize 3, 5 or 10% of their sales in Germany. Accordingly, you can confidently shape your profitable business relationships with the major retailers.

It follows from this that the return on sales of corporations is three to five times higher than that of family businesses and medium-sized companies.

"Consistent cost management - securing the future - mastering challenges" is essential for survival. We are your experts.

Consistent cost management strengthens your strategic competitive position, improves your earnings and secures the future.

For medium-sized and family businesses, this puts the disadvantage compared to corporations into perspective. In this way, you strengthen your position in relation to food retailers and discount stores and conduct more successful condition negotiations.

The sooner you prepare for this, the better.

The partners of Bavaria Consulting have more than 20 years of project experience in the areas of consistent cost management, price portfolio optimization, restructuring, reorganization and integrated financial planning.

Strategy, structure, operational cost management and financial measures

Possible course of a project to improve results

The challenges for companies in the food sector are increasing - now is a good time to act

Operative cost management – ​​quick wins

"There is nothing good, unless you do it"
(Erich Kästner: "Morals")

• Portfolio/range (group) analysis according to sales significance and contribution margin → first rough range adjustment ("poor dogs")
• Account analysis according to turnover/sales significance and earnings contribution
• Pricing: Recognition of imbalances and price spreads in the pricing of basic items à suggestion for optimization in the offer behavior
• Batch size optimization → Reduction of variable manufacturing costs
• Site and production line comparison based on efficiency indicators (kg per man hour). Creating the measurability for efficiency. Set meaningful goals for outcome periods. "Sporty" motivation. → Reduction of variable manufacturing costs
• Functional analysis of personnel overheads (central and production sites). Identification of redundancies and synergy potential. Implementation of functional synergies. → Reduction of fixed personnel costs.
• Loss analysis of all production sites for "expensive" raw materials. Determination of the savings potential per location while avoiding losses. Determination of investment requirements to avoid losses. With an amortization period of < 1 year: immediate implementation → reduction of variable material costs
• Other material costs: Analysis of larger and recurring expenses. question "justified or unjustified?". Avoiding unnecessary expenses. → Reduction of material costs

Operational cost management - structural measures

• Uniform labor value system for all production sites and lines. Creation of a standard system for the assessment of the variable manufacturing costs of all product/line combinations. à Basic work for the calculation of articles and the calculation of production capacities.
• Benchmarking/feasibility study "what can be produced most cost-effectively and where". Analysis "make or buy?" Consideration of changed logistics costs. Implementation of production relocation and possible site closure. → Reduction of variable manufacturing costs and fixed personnel costs.
• Based on the rough indicator system that has already been introduced: Introduction of the CIP system (“Continuous Improvement Process”). Key points: Use of employee know-how to optimize manufacturing processes. Uncovering and eliminating vulnerabilities. Standardization of the process after eliminating the weak points. Constantly repeating this process. → Reduction of variable manufacturing costs and material costs.
• Logistics initiative: is there cross-site logistics (inbound and outbound)? Analysis of the logistics structure and costs. Identification and implementation of optimization potential in procurement, storage and distribution costs. → Reduction of logistics costs.
• Purchasing initiative: is the purchase of bulk raw materials and strategically important raw materials controlled centrally? Analysis of purchasing strategy (prices and coverage). Identification and implementation of savings potential. → Reduction of variable material costs.
• IT initiative: Is there a group-wide ERP system? Identification of functional redundancies due to "island solutions". Defining an IT strategy and clarifying the scope of IT outsourcing. implementation of the strategy. → Reduction of fixed personnel costs and material costs, possible avoidance of future IT investments (IT systems, SAP updates, desktop equipment, etc.).

Consistent cost management at a glance