Low Cost Strategies For Bakery Manufacturers

With cost spiralling upwards for most of the components  Options for bakery manufacturers are listed below  for reducing cost of production and  increase the profitability of bakery unit


Raw material availability

To start or move to area where  raw materials like Flour , Sugar and Fat  are available at low rates or areas where these material are processed in abundance.



Labour Cost

Putting or running plants  away from metros  or suburbans areas can reduce the overheads cost as living costs in  these  areas  are very low . Governments  have setup industrial zones in such areas  to help local populations with jobs and help in  industrialization of that areas sops like tax and duty exemptions are also given to the investors.



Fuel  Availability

Check  out  for areas where one can source fuel  at lower rates  for fuel such as Lpg , Ldo , Rfo  or CNG .With proper source of  electricity .


Logistics Infrastructure

Area  to be well connected with rail and road network as to  get raw material easily and transship finished good in shorter time .


Market proximity

Not to ignore the market proximity near by as it would reduce the  logistic cost of transportation and distribution channels .


Competition

Areas where  there are fewer competitors or no competitors can enhance the sales and in turn increase the profitability

Backward Integration for cost savings in Bakery Industry

Major bakery manufacturer in India are going for backward integration for their raw material sourcing . Parle products and Surya foods are the major companies which have followed the path of backward integration to save cost .where as Britannia and ITC have centralised procurement and get savings on economies of scale while negotiating with vendors both strategies have their own advantages and disadvantages .

Bakery plants opting for backward integration has its own
Flour mills
Sugar Plants
Packaging units
These helps manufacturer to save cost on procurement of these raw material like flour , sugar and packaging material .

Advantages of backward integration is of the pricing, quality and availability of supplies, and efficiencies gained from coordinating production of supplies with their consumption