WHAT TO DO WITH CONTRACT SURPRISES?

This is the silly season of contracting for foodservice chains with nearly 65% of all vendor deals expiring between October and December! In today’s foodservice world you must be ready for surprises. You can’t assume the fry contract will be renewed automatically, (you didn’t accept the full $.07 lb. increase did you?) or that rib prices will remain attractive well into November (they won’t), but you can often turn a surprise into an asset.

When you are faced with a bid deadline or unreasonable price increase, and your simple strategy of asking for 30-60 day contract continuation has been rejected, here is a tactic to help you deal with the situation.

Ask for a face-to-face meeting with your sales representative and the next higher level of management and visit the supplier if you must. Let the supplier (now officially your opponent) think that you are trying to get the deal signed or the price increase approved by making statements like, “this is the best that I can do” or “to make this work, you’ll have to help me by. . .” The supplier will have the feeling of victory because you are on the run, which can make him careless, which often leads to concessions. If he offers something…take it!

When your priorities in negotiations are different than your suppliers and you don’t have the option change suppliers, then offer future concessions (planned increases, add new products to the next contract) waive a quarterly rebate or convention contribution) so you can finalize today’s deal and leave the game with some winnings. Never agree to a program which limits your future rights to walk away if business circumstances change.

To Greater Profits!

FRED

The Purchasing Puzzle - How Do I Get My Best Price??

This blog will bring you my unique experiences and insights on successful foodservice purchasing, negotiating and buying strategies that have worked well for me in my consulting business and when managing the purchasing supply-chain priorities for Fortune 500 companies.

My goal is to deliver to you bankable savings ideas that you can use to lower the cost-of-goods for your business or improve your negotiation technique the next time you haggle with over the price of a used Porsche 911.   The advise in this blog works regardless of your industry or the size of your purchase. One of the most important benefits you'll discover is that by practicing the strategies and tips offered, you'll become a more confident and more seasoned negotiator.  One last thought about this initial post, if there is interest the beat goes on with new material posted weekly.  Anyone who knows me will earnestly testify that I am not a writer and have zero interest in keeping a journal.  I do have some interesting stories and occassional I may drop the name of a famous or infamous character that I've worked for or done business with over the years. 

To solve the foodservice purchasing puzzle requires learning how to time your purchases to commodity markets by anticipating surprise situations and how your will react in ways that result in securing better prices than you competition.  Not every account is a "A" account so you have to stake out your pricing turf to avoid the odds being stacked againt  you if you expect to execute a winning appraoch.  If you don't have the time or staff to follow the commodity markets, informally talk to sales represntative about what merchandizing managers are saying about future prices, and understand that taking 3-bids without benchmarketing the base cost-of-materials is a waste of time, then find one of the many experienced purchasing consultants in our industry and pay them a few grand per month to work with you.  

What Fred's Purchasing Insights blog can do for you is provide you with the information tyour need to get the best deal available, which often means you need to travel around hidden profit centers or walk past the easy rebate or bill-back offered by manufactuers or group purchasing organizations. These guys fall into several catogories, deflectors (pushing you away from your best price)  skimmers (don't add value to the transaction) or no-nothings that couldn't find the bottom-line  or net/net cost if they were handling both sides of the negotiation.

I'll close this initial post with the title of an article that I wrote for Foodservice.com a few years ago, "WHY INTELLIGENT PEOPLE OFTEN BLOW IMPORTANT NEGOTIATIONS" before they call 911.

To Greater Profits,
Fred