Applesauce Company Boosts Supply Chain with New Procurement Tech

Materne, a leading name in the applesauce industry with a 140-year history, originally began packaging its products in cups before pioneering pouched applesauce in 1998. Known as GoGo squeeZ in the U.S., where it launched in 2008, the company has grown significantly. Operating from New York with co-manufacturing beginnings, it now boasts two dedicated facilities in Michigan and Idaho. According to Mathieu Pappalardo, Vice President of Procurement at Materne, the company achieves annual sales of approximately $600 million and produces over 120,000 tons of applesauce.

 

Recently, Materne revamped its procurement strategy by adopting Arkestro's procurement software, enhancing its supplier relations and achieving significant cost reductions. The move has fortified its leading position, controlling 70% of the market for pouched applesauce. GoGo squeeZ is offered in various pack sizes, reaching about 50 million cartons annually, with an essential spend of around $20 million.

 

Despite dominating the market, Materne's vision extends beyond maintaining market share. "Our aim isn't just to increase our market share; we're focused on expanding the entire category to boost overall household consumption. We're looking to maintain our 70% share, but of a larger market," Pappalardo explains. This strategic shift not only strengthens their market position but also aims for broader consumption growth.

 

Enhancing Growth Through Strategic Procurement Software

 

To sustain its growth, Materne recognized the need to expand and diversify its supplier network. This strategy was essential not only for launching new products but also for safeguarding against disruptions in the supply chain.

 

Initially, Materne’s approach to its supplier network was cost-driven, but the disruptions caused by the COVID-19 pandemic shifted the company’s priorities towards ensuring business continuity and resilience. This change underscored the importance of being prepared for unforeseen challenges.

 

Mathieu Pappalardo, Vice President of Procurement at Materne, acknowledged that enhancing supply chain resilience could potentially increase costs. However, the company aimed to at least maintain current spending levels, if not reduce them. Pappalardo also saw a critical need to streamline Materne’s procurement processes, which were burdened by manual tasks and staffing shortages in certain areas. He envisioned a more automated system that would standardize Request for Proposals (RFPs) and reuse data from past bids to save time and resources.

 

Materne decided to implement Arkestro’s Predictive Procurement Orchestration (PPO) software. The initial trial of the software on a small scale yielded a remarkable 40% savings. Encouraged by these results, Materne applied the software more broadly when renewing a three-year contract with their carton suppliers. This larger deployment allowed the company to add two new suppliers and achieve annual savings of $1 million.

 

Pappalardo highlighted the dual success of the initiative, stating, “It’s a big success because we achieved both goals, which were not necessarily easy combined together.” This approach not only enhanced Materne's supplier network but also significantly cut costs, illustrating the effective integration of resilience with fiscal efficiency.

 

Utilizing Procurement Software to Optimize Materne's Operations

 

Arkestro's Predictive Procurement Orchestration (PPO) platform leverages machine learning, game theory, and data science, providing Materne with a centralized system for efficient and informed procurement decisions. This technology offers real-time insights and competitive price analysis, key features that streamline the procurement process.

 

During a critical Request for Proposal (RFP) for cartoning, Materne initially engaged its three incumbent suppliers for new pricing, but the offers were unsatisfactory. As a result, Mathieu Pappalardo, Vice President of Procurement, expanded the RFP to include eight suppliers in total, enhancing competition.

 

Materne utilized the Arkestro software to input the expected volume and specifications of their cartons, inviting all eight suppliers to submit their bids through the platform. This consolidation of the bidding process into a single system minimized the need for multiple communications, allowing all interactions, from queries to bids, to occur within the platform.

 

The software not only facilitated streamlined communication but also actively fostered competition among suppliers. It informed suppliers if their bids were significantly higher than the average, instilling a sense of urgency to adjust prices competitively—often referred to as the "fear of missing out." This feature significantly contributed to the success of the RFP.

 

Moreover, Arkestro’s AI capabilities extend to analyzing bids in the context of broader market trends, comparing them not only among the immediate bids but also against historical data and rates from other manufacturers. This comprehensive market intelligence allows Materne to secure the most cost-effective deals, ultimately driving down costs.

 

Pappalardo credits the combination of direct supplier comparisons and extensive market analysis as key factors in pushing prices lower, highlighting the platform's effectiveness in optimizing procurement strategies.

 

Speeding Up Supplier Deals

 

Materne streamlined its Request for Proposal (RFP) process using Arkestro's procurement software, completing it in just six weeks—a significant reduction from the four to five months it took using traditional methods. The RFP was conducted over three rounds, where suppliers submitted initial bids, adjusted them in a second round, and finalized details in the third. This efficient structure allowed Materne to swiftly award contracts to five carton suppliers, including three existing partners and two new ones.

 

Mathieu Pappalardo, Vice President of Procurement at Materne, highlighted the efficiency gains from using the software, noting the reduction in time spent on scheduling meetings and resolving sequential questions with suppliers. This saved substantial time and streamlined communication.

 

Initially, some suppliers expressed concerns about the potential loss of personal interaction in negotiations. However, Pappalardo reassured them that there was still room for direct conversation, ensuring that the human element remained a part of the process. Over time, suppliers adapted well to the new system, with Pappalardo observing no significant issues and noting overall compliance and adjustment to the software-driven approach.

 

Expanding Use of Procurement Software

 

After successfully integrating Arkestro’s procurement software for their carton RFP, Materne is planning to expand its use to other procurement activities. The next project on the horizon is an RFP for shipping cases, a category where Materne spends around $10 million annually. While not as large as the carton expenditure, it's still a significant portion of their budget, according to Mathieu Pappalardo, Vice President of Procurement.

 

The software's ability to store and easily retrieve Materne’s data is set to simplify future RFPs even further. Pappalardo explains that for the next carton supplier RFP, due in three years, all necessary specifications and details will already be loaded into Arkestro. This eliminates the need to consult the R&D department for specifications, allowing a new RFP to be initiated with just the click of a button.

 

Having overcome the initial learning curve associated with adopting the new technology, Pappalardo is optimistic about the enhanced efficiency it promises. He believes that once fully accustomed to the system, it becomes an indispensable tool for the procurement team, remarking, “It’s just a training thing, and once you master it, you can’t live without it.”