Reengineering a Value Chain to Improve Cost Efficiency
South African consumers and businesses are currently facing significant economic pressures. To ensure sustained profitability, companies need to revisit the costing and pricing of products placed on shop shelves.
Correct costing and pricing, in the post-COVID-19 economy, requires a fundamental reengineering of the value chain. A correctly structured value chain not only supports profitability, but ensures the correct balance between cost and risk, thereby driving sustainability.
Key food and beverage products require fundamental reengineering of their value chains in order to remain profitable.
A client tasked Value Chain Solutions with the reengineering of value chains for key end-consumer products. These products made use of raw materials, including vegetable oils and grains.
We first developed a robust fact base, starting at the target consumer and ending at the point of raw material production. An alternative sourcing footprint, commercial mechanisms, product formulations and end-product distribution footprints were developed.
Target cost levels were met, allowing the client to place the products on the shop shelves at a lower price point, whilst achieving the desired profit target per unit.
THE FOLLOWING DIAGRAM DEPICTS SOURCING FOOTPRINT
OF SOUTH AFRICA