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Retailers, consumers and prices

Consumer industry eyes more cost cuts than other sectors

August 20, 2009

clothing-racksConsumer product manufacturers and retailers have a relatively sharp eye for cost-cutting, speed and expanding into new markets, a report released on Thursday showed.

Sixty two percent of consumer and retail firms see additional opportunities to lower costs in their supply chains, compared with just 48 percent across all sectors, according to Ernst & Young‘s Opportunity in Adversity research.  That means cuts above and beyond the trimming that has already been completed.

Of course, many companies in the consumer and retail space have been able to navigate the recession better than the overall business world since people still need to eat, drink and — occasionally, these days — buy clothes and shoes.  At the same time, manufacturers in the space face the added pressure of retailers cutting back inventory levels as they try to boost margins.

Others have also seen consumer industry companies taking a closer look at their supply chains.  Carlos Niezen, head of Bain & Co‘s purchasing practice, told Reuters that smarter firms take a step back to see if they can revise their cost structures, rather than just looking for quick fixes to trim spending in the short term.  Still, in a Bain survey of 60 executives from various industries earlier this year, 85 percent said they lacked best-in-class purchashing capabilities at their companies.

Ernst & Young’s report was based on responses from senior executives at 39 global companies in areas such as food, beverage, tobacco, personal products, apparel and retail.

It showed that 79 percent have undertaken a review of their current cash management and cash flows, versus 73 percent of the overall tally from 569 firms across a wide range of businesses.  The survey was completed in June.

As they look for ways to drive growth, 56 percent of consumer companies planned to accelerate the time it takes to get products to market, compared with just 30 percent of the overall group.  Consumer and retail respondents were also more likely to say they would expand into new geographical markets compared with the larger pool.


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