In the retail sector, cost management is imperative because of thin profit margins and high competition. This was particularly true for a leading U.S.-based supermarket chain with over 500 stores nationwide. It faced the challenge of managing its extensive packaging and supplies spend. The company had a fragmented supply base and was sourcing plastic packaging from 65 suppliers and gloves from 45 different suppliers. There was no clarity at the country level regarding primary ordered SKUs and substitute items exacerbated the issue. The lack of sustainability or value engineering guidelines for the SKUs further complicated the problem. The company urgently needed to rationalize SKUs and consolidate its supplier base.

However, disruptions in supply chains and changes in store-level purchasing behavior during the pandemic led to fluctuating demand for packaging materials. Stockouts of primary packaging materials caused a surge in orders for substitute products, further complicating inventory management. The fragmented supply base also resulted in higher packaging spend than expected. With different business units working in silos, there was no communication regarding preferred SKUs and no efficient supplier management and consolidation process in place.