10-step route to cut food manufacturing costs

By Mike Stones

- Last updated on GMT

Related tags Supply chain

A new 10-step route to help food manufacturers and other organisations offset higher raw material and labour costs has been launched by supply chain organization, TradeCard.

"You can't lower the price of raw materials or labor. But with prices rising it's more important than ever to get your own costs down​," said a spokesperson for the organization. "Overhead costs, processing costs, capital costs... look across your supply chain — into the extended network of parties and layers involved. There's room for efficiency and savings. Now is the time to address it."

The 10-step route to costs savings and greater efficiency include:

1 Paper assessment

2 Change transactions

3 Maximise financial strengths

4 Go direct

5 Keep close to source

6 Find partners

7 Diversify

8 Closer sourcing

9 Explore new options

10 Low investment

TradeCard’s top recommendation is to perform a paper assessment. “Examine your supply chain and find where paper is being used most, whether in purchasing orders, invoices, settlements or letters of financing,” ​according to the report. “Wherever paper is involved, there are likely to be some errors and inefficiencies.”

Changing transactions with trading partners by harnessing flexible technology could help to avoid re-keying data and other manual tasks leading to cost savings.

Maximising financial strengths such as an excellent credit rating could help your suppliers secure better interest rates. Or if you company is financially stronger than the other partners in a transaction, you can help them with early payment invoices, advises the organisation.

Eliminate layers

Going direct will help to eliminate layers within the supply chain by transporting directly to customers and finding ways to transport goods in less time.

Keeping close to the source refers to finishing customization or other services abroad instead of finishing production domestically. Reducing domestically held inventory can provide major savings.

Forging partnerships will help to reduce overseas resources and staff.

Diversification is recommended to help spread risk and cut exposure overseas. “Try to find alternatives to expensive operating costs, such as signing on with partners in regions that are more cost-effective than others​,” advises the report.

Switching to a sourcing hub closer to your main area of business can trim weeks off of transport time, reduce costs and cut down on cycle times, leading to significant savings.

Similarly, exploring new ways to connect with suppliers, service providers and financial organizations will enable companies to adjust their supply chain processes according to needs.

Finally, moving to low risk, low investment models such as cloud computing can also help to reduce costs significantly, according to TradeCard. (Cloud computing refers to sharing resources, such as software, and information on demand).

The company’s 10-step route to cost savings are explained in the report Battling the Rising Costs of Raw Materials and Production.

Related topics Processing & packaging

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