Many
of these companies will tell you they know where the cost savings are and they
have vendor “deals” in place, but they don’t really. They roll the dice on
profits by allowing manufacturers and distributors to control the true cost of
goods much like a reverse auction.
We can't be good at something until we've first spent a lot of time being really bad at it. Why should foodservice purchasing be different?
So in the spirit of embracing failure, I am sharing with you how 75 % of the chains we've consulted with over the past 18 years have mastered the process of giving money away to their so called “supply-partners”.
For many emerging chains, advanced product contracting and spend management control is out of reach unless they turn to professional outsourcing services. The legendary mistakes made by untrained staff can take years to repair.
After a few minutes of fumbling, the new Director of Purchasing for a 100 unit chain, just promoted from training director, and with zero purchasing experience, calls his primary cheese supplier and asks if there is a contract in place and demands a price decrease. Or the new manager rolls-over past contracts walking past immediate savings opportunities available through forward buying programs.
Chain executives that hire inexperienced staff
should not be asking why they come up with dry holes again and again in drilling for cost savings. Why? Because they haven't done the due
diligence needed to really understand that chains complete by having high performance procurement management. Many chain organizations do value supply executives. For example, McDonald's has always raised purchasing to a "C-Staff" level of importance, right up there with marketing and operations.
I spent a few minutes here working on the premise that experience drives performance and that if you invest in hiring or retaining a professional to manage procurement you will be more profitable.
Sifting the rubble after the purchasing guy departs
It’s easier to blaze a new trail after you've
already been hiking for a while and every time our firm takes over for those smart multi-tasking COO's or Chef's or the guy promoted from training, we are reminded just how much it really costs to be out-of-touch or “cheap”.
At some point you're going to run out of time and money as the competition devours business in your home market or stops your expansion plans. The reason is you don't control the supply-chain, manage markets or have the systems, controls and procedures in place to support
profitable growth.
You will find that one of the neat things about taking back your purchasing process from distributors, buying groups, and brokers is how, maybe after
three months, out of nowhere, bam! An
amazing string of savings opportunities will just burst onto your
bottom-line.
Trying to explain to emerging chain organization executives why they should invest in professional management can be a lot like trying to put an octopus to bed. I can always come back to it later, but for now, I am turning my attention on completing a spend analysis for restaurant chain that will lead to a $1 million savings next year.
To Higher Profits!
Fred
Fred Favole is Founder & President of Strategic Purchasing Services (SPS),
