In many foodservice organizations the Purchasing function is viewed as a routine low level activity. A couple of years ago our firm completed a survey of 15 emerging chain CEO's that revealed that 48% could not readily recall their annual total food spend or discuss the impact of recent commodity price increases on the cost of goods. However, they had no problem listing sales growth, Q3 profits, salary and overhead costs!
This approach is nuts in today's economy, and leads to what I call purpose-driven failure. This type of executive needs to assess purchasing, R&D and distribution managements' role in their organization. The lesson to be learned is that higher quality spend performance yields beneficial results.
Here is a my free purchasing advise:
1. Secure the support of your culinary and purchasing team by acknowledging their independence and accountability and by involving them in the product decision making process.
2. Don't expect top bottom-line success if your budget doesn't include funding for travel to trade shows and visits to vendors. Don't expect world-class results if you are asking purchasing to work without support staff or modern spend management systems. Consider that without staff resources purchasing outsourcing may be your best option.
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3. Do apply effective checks and balances between culinary and purchasing as both areas must work together to provide proper scrutiny of suppliers and product specifications. Allow purchasing to negotiate the final supply arrangements... and, please ask the chef to return to the test kitchen.
4. Include time for purchasing updates at staff meetings, remembering to allow extra time (when warranted) for procurement to explain the complexity of commodity markets or problems with distribution systems. It will benefit the team. Start to value the skills and experience of procurement staff or fire the buyer and save the overhead expense.
5. Actually sign supplyagreements. In this tough economy, with commodity shortages just around the corner, the cost of supporting your business is increasing. If you pride yourself on never signing a supply-deal, then I've got bad news. At some point your supply-chain will no longer absorb the cost of doing business with you, and there will be PAYBACK.
6. Subject every price increase, fuel sur-charge and extra delivery fee to a robust challenge! Clear the way for your purchasing executive to succeed by ensuring suppliers and distributors know that you stand behind your purchasing team, then watch performance soar upwards.
To Higher Profits!
Fred
Fred M. Favole is Founder & President of Strategic Purchasing Services (SPS), a firm specializing in purchasing department outsourcing, interim management, risk assessments and distribution program audits. Contact information: 912.634.0030, e-mail: SP_Services@bellsouth. net or connect on LinkedIN.
Insights takes you inside the world of professional food-service purchasing. The author prepares you for negotiation success, offering tips, tactics and strategies that guarantee bankable savings for your food service business. Never overpay again!
