Cutting COGS

Going beyond supplier negotiations

It is no secret that cutting costs can be an effective way to protect profit margins when sales growth is hard to come by. Retailers squeeze suppliers, with a goal of being as aggressive as possible. But is there another way? One which could yield more substantial reductions in spend?

This is a topic that has been high on the agenda for many of our clients, and the benefits are clear. One major European retailer that we have been working with on a three year program is on target to reduce spend on goods for resale by at least 8% in that period. We helped them build open relationships with suppliers where sharing data was the norm, a step that enabled collaborative working to reduce cost across the whole supply chain – benefiting both parties. In reducing the number of supplier contracts available, the retailer also benefited from lower supplier prices in exchange for exclusivity.