Arla puts pressure on suppliers
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- 02 June 2005
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During June, and in keeping with its current cost savings programme, Arla Foods will be calling upon the Group’s preferred global suppliers to help cut its purchasing budget by 5% to 7%. “Not an impossible task,” as Jørgen Skaarup, Director, Global Purchasing, puts it.
“Although these suppliers have contributed towards lowering our costs, we have, at the same time, increased our business with them because we’re placing our orders with fewer suppliers than before,” Jørgen Skaarup said before meeting some 30 ingredients suppliers on Wednesday.
Since setting up Global Purchasing following the MD/Arla merger, the Group has saved around 110 million euros on purchasing and a further 23 million euros worth of savings are in the pipeline. The savings have been achieved through global agreements with as few as one or two suppliers within each field. So far purchasing agreements have been signed covering 66% of all purchasing areas.
“We’ve picked the “lowest hanging fruits” and are now focusing on those at the top,” said Jørgen Skaarup. ”At the same time, we’re taking a second look at our existing contracts.”
In return, some suppliers will be offered better terms such as longer contract periods or sole supplier status. They will also be asked to come up with new ideas, e.g. for using thinner cardboard for packaging, fewer types of strawberry flavourings for yoghurt production or suggestions for saving water and energy.
The suppliers must come back with their savings suggestions by August/September.
Arla Foods is an international dairy company owned by 9,700 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands. Arla Foods is one of the leading players in the international dairy arena with well-known brands like Arla®, Lurpak®, Puck® and Castello®. Arla Foods is focused on providing good dairy nourishment from sustainable farming and operations and is also the world's largest manufacturer of organic dairy products.