Food industry: the 4 top priorities for purchasing departments in 2024 (and how digitization can help)

So what are the major priorities for buyers in 2024? How can they be tackled? And, above all, what makes digitization an essential ally in meeting these challenges?

Priority No. 1: Cut costs

The soaring prices of agricultural raw materials (ARMs) have reached unprecedented heights in recent years. According to the annual report of the Observatory for the Pricing and Margins of Food Products (Observatoire de la Formation des Prix et des Marges des Produits Alimentaires or OFPM), the value of agricultural raw materials in retail prices rose by 17% in 2022. The price of soft wheat even increased by 41% over the same period.

ARMs prices finally seem to be on the way down in 2023, but remain highly volatile. The rise in energy prices, for which the food industry is obviously a major consumer, is continuing, as is the increase in packaging costs.

Regardless, reducing costs and maintaining margins is clearly one of the top priorities for purchasing departments in 2024.

In this context, the management of commercial negotiations with suppliers is obviously crucial, all the more so as it takes place within a changing regulatory framework. The Egalim law, for example, imposes new rules for commercial negotiations between suppliers and distributors from April 1, 2023.

Cost reduction in the Food sector also involves the massification of purchasing and the optimization of logistics flows: these levers enable significant economies of scale to be achieved.

How digitization can help overcome this challenge:

eProcurement solutions can simplify and automate purchasing processes, supplier relations and invoicing, thereby reducing costs. But above all, they are essential management tools for gaining visibility and making more informed decisions in terms of margin management. They also make it easier to compare offers, so you can buy at the best price without compromising on quality. Data analysis also plays a key role in forecasting price trends, helping purchasing departments to develop more agile and profitable sourcing strategies.

Priority No. 2: Improve supplier management

The quality of buyer-supplier relations is fundamental to ensuring supply chain stability, product quality, operational efficiency and cost reduction. But the current situation is rather alarming: according to a study by AgileBuyer and the "Conseil national des achats" (CNA), 93% of purchasing managers in the consumer goods sector consider that they have unbalanced or unfavorable relationships with certain suppliers, mainly due to inflation and shortages.

Purchasing departments therefore need to focus on initiatives to get to know their business partners better, and establish trust-based relationships to secure their supplies.

They also need to improve their sourcing of new suppliers, to prevent shortages and meet new consumer expectations. This is also a consequence of the first two priorities: rising costs and supplier risks are driving buyers to seek out new suppliers that are more in line with their purchasing policy and their need to consolidate their margins. According to the same study, almost one in two purchasing departments, for example, has stated its intention to relocate its sourcing. Hence the need for purchasing departments to be increasingly agile in finding new suppliers.

How digitization can help overcome this challenge:

Supplier Relationship Management tools can significantly enhance transparency and communication between purchasing departments and their partners. Solutions that make it easy to compare suppliers and available products (prices, stocks, labels, etc.) also help buyers save time and reduce risk.

These solutions automate processes, improve operational efficiency and leverage structured data to select the best offers and suppliers, then facilitate negotiation, tendering, ordering, monitoring of commercial conditions and invoicing, so that buyers can concentrate on what really matters: developing solid relationships with their suppliers.

Priority No 3: take environmental issues into account

Consumers and investors are increasingly aware of the importance of sustainability and responsibility. This is particularly true in the food sector. They expect greater transparency and concrete measures from companies to combat food waste and reduce their carbon footprint. And they are increasingly demanding local and organic products. This also makes good business sense, since reducing food waste and carbon footprints means lower costs and higher margins.

According to PWC, 34% of French companies include carbon footprint monitoring in their roadmap. And this percentage is rising considerably year on year, as companies anticipate future regulations and seek to cut costs.

According to the aforementioned Agile Buyer-CNA study, nearly ¾ of purchasing departments in the food sector, for example, consider Made in France (or local purchasing) in their business attribution criteria. However, 69% of companies do not follow this percentage of French or local purchases.

And therein lies the challenge: while purchasing departments seem to be taking on board the importance of positive impact issues, concrete measures are not always forthcoming. Responsible purchasing policies are often not accompanied by sufficient control measures.

Time is running out, however, as new regulations are soon to be imposed on players in the food industry. From January 1, 2024, for example, all manufacturers will be required to label their finished products with an eco-score.

How digitization can help overcome this challenge:

this challenge: sustainable purchasing will undeniably require digitization. With high-performance data analysis tools, for example, companies will be able to consolidate flows from all their suppliers worldwide, thereby improving traceability and accurately measuring their CO2 emissions.

eProcurement tools can also help to reduce food waste, thereby alleviating its environmental and business consequences. They can help buyers to order as closely as possible to demand, optimize inventory management and reduce the volume of refrigerated stock, thus cutting energy consumption.

These tools are also essential allies in the implementation of concrete roadmaps for more responsible purchasing. The possibility of configuring sustainable purchasing criteria or integrating labels into tenders, for example, are concrete solutions to help players in the food industry meet their CSR commitments.

Priority No. 4: Strengthen risk management

In a post-pandemic world marked by inflation, conflict in Ukraine and climate change, procurement-related risks are multiplying in the food industry: supply chain disruptions and shortages have become commonplace, while health risks, non-compliance risks and supplier risks also remain very present.

The 2017 Duty of Vigilance Act, for example, requires ordering companies to identify and prevent the risks of human rights and environmental abuses at their subcontractors and suppliers. Companies must therefore implement targeted audits, controls and support.

How digitization can help overcome this challenge:

Digital technologies make it possible to collect data in real time throughout the supply chain, from production to distribution, giving purchasing departments a 360° view. This guarantees process compliance and improves product traceability, while anticipating potential supply chain risks.

Digitization is also essential for supplier risk management: by centralizing and analyzing data more effectively, purchasing departments can create a highly accurate supplier risk map, and implement a more effective risk management strategy.