In the animal nutrition industry, where every margin counts, protecting your margins can be a difficult task. With agricultural products driving up costs and market trends constantly changing, staying ahead requires a proactive approach.
This article takes a closer look at how companies in the feed and pet food manufacturing industry can secure profits in a highly competitive and price-sensitive market.
Understand the challenge
The animal nutrition sector faces several unique challenges that directly impact margin protection.
- Raw material price fluctuations: Agricultural products, which are the basis of many products, are affected by price fluctuations. Fluctuations in global markets due to geopolitical and climatic factors can have a significant impact on costs. To make good purchasing decisions, buyers must be able to carefully track stock exchange prices for raw materials and compare them with their own contracts.
- long-term commitments and contracts: Securing the necessary raw materials often requires long-term commitments and contracts, further complicating sourcing strategies.
- Recipe and formulation optimization: Most companies combine manufacturing and trading activities. These two activities compete for the same material. How can you determine whether it is more profitable to trade a product or use it in production?
- Logistics and transportation costs: Transportation costs can weigh on profits, making efficient transportation logistics critical to profitability.
- Product variations and packaging: Offering products in multiple formats and sizes can complicate your pricing strategy and impact your profits.
- Addition of additives: Animal feed may be sold with various feed additives, which also affects both cost accounting and selling price. Given the large number of potential combinations, it is important to automate the management of these price and margin effects as much as possible.
- Management of non-material costs: Non-material costs such as production and storage costs also affect profits, so it is essential to automate their management.
Strategies for Margin Protection
It is widely known that major agricultural products, which are important components of final products, exhibit high variability. For companies in the animal feed industry, effectively managing risk requires cross-functional collaboration. A significant challenge is the volatility of soft commodities, which are sensitive to geopolitical and climatological factors. This unpredictability leads to price fluctuations and requires close coordination between procurement and research and development teams to develop future recipes that meet animal specifications while maintaining competitive prices. .
To successfully navigate these challenges and secure margins, companies need access to accurate, real-time information and robust strategies. Here’s how a software solution like Bestmix can help your business in various aspects.
- Managing price fluctuations: Bestmix provides tools to monitor and analyze market prices, allowing you to make informed sourcing decisions. Features such as automatic market price import, future price prediction, and price hedging reduce the risks associated with price fluctuations.
- Streamline contract management:Efficient contract management is key to securing favorable terms and optimizing purchasing activities. Bestmix provides a comprehensive solution for real-time contract management, giving you greater control over purchasing costs.
- Recipe and formulation optimization: By integrating sourcing and recipe optimization, companies can predict market trends and optimize recipes for increased profitability.
- Addressing logistics challenges: Efficient transportation management minimizes logistics costs and increases overall profitability.
- Adapting to market trends: The flexibility to adjust recipes, formulations and pricing strategies ensures a competitive edge in a constantly evolving market.
Explore integrated solutions
Integrated contracting and recipe optimization systems provide real-time insights, enabling faster reactions and more precise control of raw materials. These systems facilitate informed decision-making and improve profitability by integrating sales contracts, sales forecasts, and inventory availability.
conclusion
In an industry characterized by volatility and competition, margin protection is essential for sustained success. By leveraging innovative solutions and strategic approaches, companies can effectively meet challenges and secure their market position.
To learn more about how Bestmix can support your business, contact us at hello@bestmix.com or visit our website.
