A should cost model is an all-important technique for deriving and forecasting the actual cost of a product/service over the forecasted period. It serves as a competitive edge for supplier negotiations by determining the actual price for the cost components. The outcome helps procurement leaders to understand detailed fact-based cost drivers for the category.
In the vitamins and dietary supplements procurement intelligence study, we have estimated and forecasted pricing for the key cost components. Raw materials are the largest cost component of vitamin and dietary supplements manufacturing cost. It accounted for more than 50% of the share in the overall cost of manufacturing. Raw materials include the combination of Vitamin A to Vitamin K. Among these, Vitamin A and Beta Carotene hold the major cost share of 9% and 7% respectively. The price of Vitamin A is expected to fluctuate during the period of forecast, continuing its trend from 2015. Whereas, Beta Carotene price is expected to remain stable in the next five years.
Every organization and its procurement team wants to negotiate the best deal while procuring a set of products or services. Rate benchmarking uses price/cost comparison of more than one set of products/services to analyze the most efficient combination that will help the procurement team to get the optimum rate.
The dosage form is one of the most important aspects while analyzing the rate benchmarking of multivitamins and supplements. In our research, we have analyzed the rates of vitamin A in three major types of the dosage form; solid (Tablets and capsules), liquids and powders. By using rate benchmarking analysis, we found that solid forms of multivitamins are ~50% more cost-effective than liquid and powders. Solid forms also have longer shelf life than the other two dosage forms. Therefore, most of the multivitamin and supplements manufacturers allotted more than 60% of the overall production capacity to produce multivitamin tablets and capsules. Only 20% of the production line is used for liquid and powder supplements production.
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Labor is one of the key cost components incurred while offering a product or service. Understanding the pricing structure of salary is important for organizations in selecting the appropriate supplier and to build a good negotiation strategy. It is also an important factor in determining whether the category under focus should be outsourced or built in-house.
Our research indicates that Nestlé production managers earn 40%-50% higher salaries than production managers from other key competitors like Amway, GlaxoSmithKline. However, the YoY increment rate in such companies largely depends on KRAs.
It is cumbersome for any organization to continuously track the latest developments in their supplier landscape. Our newsletter service helps them remain updated, to avoid any supply chain disruption which they may face, and keep a track of the latest innovations from the suppliers. Outsourcing such activities help clients focus on their core offerings. Our research on the multivitamin supplements market has identified the following developments:
In April 2021, Nestlé announced the acquisition of the main brands of vitamins maker Bountiful Co. for USD5.75 billion, to capitalize on the growing demand for minerals and nutritional supplements.
In November 2020, Unilever acquired a U.S.-based vitamin, mineral, and supplement company SmartyPants Vitamins to expand its multivitamin product portfolio.
In August 2020, Glanbia Nutritionals acquired Canada-based custom flavor designer Foodarom for USD45 million. This acquisition will strengthen Glanbia’s flavor and nutritional solutions by expanding its ability to offer customers optimized ingredient system formulations and turnkey flavors.
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Component wise cost break down for better negotiation for the client, highlights the key cost drivers in the market with future price fluctuation for different materials (e.g.: steel, aluminum, etc.) used in the production process
Offering cost transparency for different products / services procured by the client. A typical report involves 2-3 case scenarios helping clients to select the best suited engagement with the supplier
Determining and forecasting salaries for specific skill set labor to make decision on outsourcing vs in-house.
A typical newsletter study by capturing latest information for specific suppliers related to: M&As, technological innovations, expansion, litigations, bankruptcy etc.
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