What if rising costs and market volatility didn’t have to eat into your bottom line? For one Fortune 500 CPG company, skyrocketing egg prices, shrinking suppliers and outdated pricing models posed serious challenges. By partnering with GEP, they found innovative solutions to unlock savings, streamline processes, and improve cost transparency.
This podcast based on a GEP case study takes a deep dive into this transformative journey. It explores how the company overcame supply chain hurdles by analyzing cost structures, renegotiating contracts and transitioning to feed-based pricing. Learn how data-driven strategies turned a volatile category into a source of sustainable savings and competitive advantage.
What You'll Hear:
- How feed-based pricing delivered transparency and savings
- The power of analyzing ingredient-level costs
- Why an outside perspective can uncover new opportunities
PODCAST SUMMARY
The speakers delve into a fascinating case study of a Fortune 500 CPG company that overcame significant challenges in its $14 million egg sourcing category. They discuss the company's journey to achieving 20% savings, focusing on the role of expert partnerships, data-driven strategies and innovative pricing models.
Facing Industry Challenges
The discussion kicks off with the speakers describing the major challenges faced by the CPG company, including skyrocketing egg prices, a shrinking supplier base and increasing market volatility. The company sourced various egg products — egg whites, yolks, and whole egg powder — critical for many CPG products. However, rising global demand for eggs and consolidation within the egg supplier market created a “bottom-line earthquake.” These factors left the company struggling to manage costs, which totaled $14 million annually for this category.
The company realized it needed expert guidance to navigate this crisis and partnered with GEP, a leading global procurement and supply chain consulting firm.
Data-Driven Insights and Strategic Shifts
The speakers highlight how GEP tackled the company’s issues with a data-driven approach. First, GEP conducted a thorough analysis of the company’s egg sourcing strategy, focusing on cost per volume across different egg forms. This revealed inefficiencies, such as using costlier egg powders when simpler, cheaper alternatives would suffice.
GEP also uncovered that the company’s reliance on the industry-standard layer-based pricing model was costing them more than necessary. Layer-based pricing tied egg prices to market fluctuations but lacked transparency, making it difficult to pinpoint cost drivers. Through deeper analysis, GEP found that up to 70% of supplier costs were tied to chicken feed.
Armed with this insight, GEP recommended transitioning to a feed-based pricing model. Unlike the opaque layer-based system, feed-based pricing provided a direct link between feed costs and egg prices, offering greater transparency and predictability. This shift not only stabilized costs but also improved supplier negotiations by aligning both parties with clear, data-backed pricing metrics.
Impressive Results and Key Takeaways
The results of GEP’s efforts were transformative. The company achieved an overall 20% cost reduction in its egg category. This included 9% savings from renegotiating contracts with suppliers based on the new feed-based pricing model and an additional 11% from optimizing the use of egg products across formulations.
The speakers emphasize the broader lessons of this case study. First, the importance of challenging industry norms, such as the standard pricing model, and taking a deeper dive into cost structures. Second, the value of external expertise in uncovering hidden opportunities and driving meaningful change. Last, they stress the need for adaptability in procurement strategies, as market conditions and business priorities evolve.
This story demonstrates how strategic sourcing, data-driven decisions and innovative thinking can yield remarkable results — even in a volatile market.