#supplierdiversification

Originally Published on: SpendEdge|Impact of COVID-19 and geo-political events on CPG procurement

The Consumer Packaged Goods (CPG) industry has faced a series of challenges, starting with the disruptions caused by COVID-19, which affected supply chains and operations. These challenges were compounded by Russia's invasion of Ukraine, leading to widespread effects on manufacturing, transportation, raw material availability, and trade practices. As a result, it has become imperative to adopt effective procurement contract management best practices when engaging with suppliers.

Emerging Trends in CPG Contracting Practices

Short-Term Contracts: In today's rapidly evolving business environment, CPG companies are increasingly favoring short-term contracts lasting 12 months or less. These agreements provide flexibility to adapt to changing circumstances and are cost-effective due to reduced setup and administrative expenses.

Supplier Diversification: To mitigate supply chain risks exacerbated by recent events, CPG firms are diversifying their supplier base. This strategy involves near-shoring operations closer to domestic markets and adopting multi-shoring approaches to establish backup options.

Risk Mitigation: Managing procurement risks is a top priority. CPG companies are specifying precise material requirements in contracts to prevent suppliers from using inferior materials or substitutes.

Collaborative Supplier Relationships: Building collaborative relationships with suppliers is vital. Open-book contracts and joint purchasing of raw materials foster transparency and mutually beneficial deals.

How SpendEdge Can Assist in CPG Procurement:

Understanding the Supplier Landscape: SpendEdge experts analyze supply chain vulnerabilities, identify potential disruptions, and offer solutions. They provide supplier intelligence, diversify supplier sources, and create contingency plans.

Effective Negotiation: Our negotiation expertise helps secure favorable contract terms. We identify best practices, supplier-specific details, and help negotiate with suppliers effectively.

KPIs and SLAs: We identify critical Key Performance Indicators (KPIs) and Service Level Agreements (SLAs) to ensure smooth supply chain operations and offer insights on negotiating and pricing models.

Success Story: Learn how SpendEdge helped a CPG client enhance their supply chain resilience and secure favorable contract terms amidst supply chain disruptions.