Dive Brief:
- Archer-Daniels-Midland Co. plans to save $500 million over the next two years as a result of a company-wide cost cutting strategy, including in its operations and supply chain, according to a Q4 earnings call.
- The costs saving initiatives come as the company navigates challenges faced in its Nutrition business — an overall revenue decline of 6% year over year in fiscal year 2023, according to ADM’s presentation to investors. The business was impacted by destocking from COVID-19, supply chain issues in the food industry and with inflation.
- ADM has already commissioned 300 projects this year targeting cost reduction, Chairman and CEO Juan Luciano said in the earnings call.
Dive Insight:
As part of this plan, ADM aims to simplify its Nutrition business by cutting 17% of SKUs and streamlining its production line, which will help ease the pressure on its overall supply chain and improve demand fulfillment performance.
The company also closed more than 20 Animal Nutrition production lines in 2023, which led to a better service of the product mix and supply chain efficiency, as well as reduced two-thirds of the brands it offers to customers, Luciano said in the call.
“Many of the supply issues are the result of the complexity built into the Nutrition business over time,” the CEO said in the call. “In our zeal to meet our customers' needs, we have created one of the strongest pantries in the industry. This added complexity in our operations and supply chain that at times impacted our ability to efficiently fulfill demand.”
The company’s leadership changes also mean to optimize its operations. New leaders with supply chain management expertise were added, while third-party experts aim to improve operations across ADM’s largest facilities, Luciano said in the call.
In 2023, ADM’s nutrition business faced a combination of challenges from market forces to misses on demand fulfillment.
“And while market forces such as customer destocking as well as softer demand for plant-based proteins are not within our control, we're already taking action on the areas we can improve,” Luciano said.
This story was first published in our Operations Weekly newsletter. Sign up here.
