Cases

Benchmarking Cost and Identifying Cost Optimisation Opportunities for a Global Commodities Player for its Refined Edible Oil Brand in India

Challenge

The client was a manufacturer and retailer of a refined edible oil brand in Rajasthan and Western UP. The company’s top management wanted to evaluate cost saving opportunities in areas of processing, packaging, and selling and distribution. Thus it requested UCto assist in the following key areas:

  • Analysing the existing cost structure
  • Benchmarking its cost structure against that of key competitors
  • Identifying opportunities for cost optimization

Our Approach

To benchmark costs and identify cost optimisation opportunities for the client, UC adopted the following approach in the three key areas:

  • In the packaging sector:
    • Evaluated opportunities for items (corrugated box, HDPE jars, PET bottles, tin boxes etc.) contributing 98% of the consumption value
      • Buy vs. make decision
      • Change in design to optimise weight and dimension
      • Alternate sourcing options
      • Alternate packaging material
      • Reduce rework/ packaging
    • Introduced new vendors in the market to the client for better sourcing opportunity
    • Recommended changes in the packaging material procurement process and the packaging quality check process
  • In the manufacturing sector:
    • Benchmarked consumption of resources (steam, power, major chemicals) with similar profile and capacity competitors in the market
    • Analysed options for alternate grade inputs – bio coal, imported coal, alternate vendors for key chemicals etc.
  • In the logistics sector:
    • Evaluated options like alternate mode of transport, own vs. buy transport arrangement for both inbound and outbound transportation
    • Analysed the need for external warehousing and recommended the optimum usage of own warehouse

Impact

The client received initiatives, which resulted in an annual savings of almost Rs 2 crores and an action plan for the client to implement.