That might seem like a paranoid question, from a seasoned procurement executive, but if you take into consideration today's business environment, it doesn't seem so far off base.
Suppliers are fighting for economic survival, just like you are. Doesn't it make sense that Every one benefits in the long run from improving pricing practices and re-directing resources to the end user.
When will suppliers stop deep discounting prices and absorbing freight for the largest chains at the expense of the regional and emerging chains? How much does it cost for the supplier to slot new products at the leading broad line distributors? How much more do emerging brands pay because of distributor spiffs, sheltered income, freight adjustments, and no-show food shows?
Distributors can improve delivery and pricing practices, too. Why do they continue to pass along their buying mistakes (100% of all price increases, charge customers based on replacement cost and not inventory value? Will distributors continue the class pricing warfare against the independent operator and emerging chain? Why can't they get pricing for contacted items right month after month? Do they profit by substituting for proprietary products? Why is it that fresh eggs, cheese and bacon prices don't follow the market down, as quickly as they move prices up?
Will the distributors' "in-house" brokers and manufactures' representatives continue to keep prices higher for smaller restaurant brand. Prove it, you say! If you move just one level higher in the food sales chain, ask the manufacturer's regional chain sales manager to confirm that the local and regional chain is priced higher than large regional or national chains for the same item.
Why do distributors and manufacturers close-code products (those non-private label products brought into inventory but not make available to you) that could save you money? Why does the industry allow distributors and suppliers to pass along institutional, GPO and health care discount pricing to non-qualified restaurant customers?
When will actual freight cost be used to determine the landed cost of goods? Exactly when will distributors start calculating selling prices for margin and case fee accounts based on true tax cost. You get the idea!
Keep in mind that not all suppliers and distributors participate in these practices. We would not be a successful purchasing firm without the strong support of a great many honest distribution companies and quality manufacturers. These folks work as hard as any operator that I know.
As part of your financial survival plan, we recommend that you implement or improve the performance of 4 spend management programs:
4 pillars of food service procurement
- strategic sourcing
- commodity-price management
- distribution price-compliance
- percentage of spend under contract
If you are willing to use a systematic approach to managing the buying process you will be protecting your bottom-line and business interests.
To Higher Profits,
Fred
Fred M. Favole is Founder & President of Strategic Purchasing Services (SPS), a firm specializing the purchasing services such as department outsourcing, bid management, and distribution program audits. Wray Advisory Group (WAG) has selected SPS as service provider to foodservice organizations Fred's contact information: p: 912.634.0030, e-mail: SP_Services @ Bellsouth.Net
