Wednesday, November 30, 2011

Kangaroo Spend Management

It is no surprise that reducing costs and expenses has a positive effect on the bottom line, and can have an impact foodservice operator profits faster than increasing revenues. It is also a fact of business that it’s just easier to save money than to make money. 

By directing efforts toward cost reduction and supply planning, chains can significantly impact profitability.  Yet many companies operate without a senior procurement professional, or fail to see a clear relationship between cost reduction or cost avoidance and overall operating income growth! Their Kangaroo spend management style is to pocket any immediate savings, and then hop between suppliers seeking the next short term opportunity.  
Most client companies that we consult with fall into this "bare bones" category. They are multi-unit organizations with low procurement staffing levels, that do not achieve even average savings because they have not developed a spend under management plan. This points out the need for greater balance between financial and culinary expectations to make a bottom-line impact. 
Companies can improve effectiveness and achieve year-over-year savings through hard-dollar cost reductions without adding to staff by implementing strategic sourcing strategies, such as spend aggregation, and product rationalization to reach a balance between menu and financial objectives.
The leading chains have trimmed staff and achieve higher savings at the same time by raising the profile of purchasing, allowing other departments like culinary, marketing and operations to take advantage of the expertise of consultants or purchasing professionals.  This approach allows emerging chains to level the playing field with the Fortune elite when they implement product selection practices more aligned with cutting-edge purchasing supply-chain management. 
The companies that understand  spend management have already transformed back-office purchasing functions into executive buying teams that not only hold the line on costs, but improve their organizations chances of staying profitable.
To Higher Profits! 
Fred Favole is Founder / CEO of Strategic Purchasing Services (SPS), a consulting firm specializing in purchasing dept. outsourcing, interim management & distribution progam (MDA) audits. His contact information; 912.634.0030,  Blog:

Thursday, November 17, 2011

How An "Empty Suit" Can Spoil Your Day

How An “Empty Suit” Can Spoil Your Day

In foodservice purchasing jargon, an “empty suit” is a restaurant owner or chain executive that has buying authority, without knowledge or substance, yet maintains a know-it-all attitude with suppliers. Nothing makes a new national account sales executive more wary or a purchasing director more nervous that sitting down with an empty suit to negotiate the annual steak/burger/oil/or fry contract.

Such a person will want to control the big deal, forcing suppliers to feel compelled to go forward because of past business or future opportunities. I’ve watched less-than-savvy suppliers try to reach this type of owner/executive with information, education, logic and, more commonly, entertainment.  For nothing!  And when the supplier finally goes to the wall for the account and meets the pricing demands, the next demand is revealed or worse, the great price is handed to the competitor who closes the deal.

If buyers and suppliers don’t work together to manage the growing number of empty suitsin foodservice, they can spoil your day.  Most of the time the solution rests with telling the empty suit in advance what the Company wants to accomplish in the negotiations. Use the "KISS" system because they don’t want to know how you know about egg sets or cattle on feed or commodity trends. Too many purchasing directors try to please the boss when they should be taking charge. Hey, if the executive changes the game plan, use your skills to make lemonade out of lemons.  

Based on my 17 years in foodservice consulting, my advice to sales executives is to ask yourself two questions:  Am I being intimidated or is this request just a habitual response from a powerful person? And, how will giving in to this guy affect my company over the next 6 months?   To most sales executives' amazement, when faced with a ridiculous proposition then can win by blurting out loudly,You’ve got to be kidding!" to be following by confirmation that you have best deal on the table; then go silent…and stick to your guns.

To Higher Profits!

Fred Favole is Founder & President of Strategic Purchasing Services (SPS) a foodservice industry consulting firm specializing in purchasing department outsourcing and distribution program warehouse audits.  He can be contacted at  SPS@Gate.Net  or 912.634.0030

Friday, November 11, 2011

Foodservice Distribution a Threat for Purchasing

Today’s foodservice chain C.P.O. or Vice President of Purchasing's role has changed and will continue to change as a reaction to spend management challenges and shipment problems that were once considered the responsibility of broadline distributors.  The new buzz in supply planning A.T.D. (advanced transportation decisions) challenges the foodservice chain buying staff to outthink the supplier’s limited L/TL delivery strategy and find work arounds for the distributors risk adverse philosophy of can't  “go the extra mile”.  

The tactical decision to manage around or through these distribution roadblocks means more time must be spent managing the order fulfillment and transportation process.  The immediate benefit is fewer hurried reactions when “ new products are approved, and purchasing finds out during the screening of the new marketing ad”  Sure, the F.O.B. price is great – the product rocks, but now purchasing is faced getting the product produced and delivered.   

In our consulting assignments, we often see the adverse effect on profits, when menu decisions are made and procurement is not involved. This happens quite often when purchasing reports to the culinary department or the Chief Development Officer, instead of the CFO or President.   A recent example of the problem; many fast casual burger and wing restaurant chains are changing from frozen to fresh products without considering the readiness of their supply-chain. Many non-purchasing executives actually think that all products are in stock at  every broad liner warehouse!  The shelf life and handling requirements alone for fresh wings and burgers can be a challenge, especially if the product is single sourced and ships from one plant.  The distribution system for custom and fresh products requires faster reaction time, and better cost-service efficiency levels; such as; smarter routes, plant (location) selection, carrier time-temp recording, and better receiving location inventory management, not to mention educated operations managers.  

Foodservice broadline distribution is a threat to procurement success when procurement sees logistics as the sole responsibility of the distributor.  The coming 2012 transportation crisis, partially caused by high-fuel costs and the distributor limited resources, will impact cost and availability of food and suppliers sourced and transported more than a few hundred miles. 

You have seen (or will shortly) the symptoms of the problem.  You are encouraged to seek non-traditional solutions, such as approving multiple suppliers, local sourcing and the planned use of re-distribution services.   Planning for the future of transportation in foodservice can start with tapping the knowledge of the distribution-logistics team that you already have on payroll; your primary distributor, suppliers and re-distribution company used by your distributor.

Why not schedule your own distribution-logistics forum to analyze current and future warehouse and transportation configurations for your business.  Developing the best vendor sourcing, transportation and warehousing scenarios may not be sexy, but it can be profitable!

Fred Favole is Founder & President of the longest operating foodservice purchasing consulting firm in the industry, Strategic Purchasing Services (SPS). Follow Fred’s Blog  His contact information: E-mail: