Riding Purchasing Off the Rails

You would be surprised (unless you get to see as many procurement departments as I do) just how many companies today are not able to identify savings opportunities

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.

I recently started learning to play the drums, which means that I currently suck out loud in neighbor-terrorizing fashion. On the way to my lesson today, I psyched myself up by repeating the simple trick for learning anything: embrace failure.

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), America’s most experience culinary-purchasing firm specializing in department outsourcing and cost-reduction management.  Contact email: fred@strategicpurchasingservices.com Office: 912-634-0030

Wing Crunch Time

Restaurant chains driven by wing sales should consider switching to a wing portioning program to bring menu profits more in line with acquisition cost. Supply of the highly desirable jumbo cut wing size is limited and pricing is under siege year-round - not just for the Holiday's and the Super-Bowl. The situation will not be getting better anytime soon. 

We are advising clients to adjust their portioning policy to make wing count size issues less critical. An obvious strategy is to adjust the count range requirement and move to a smaller or larger wing. Some of our favorite joints (they all have WINGS in their name) made this move in 2012).  We favor a variation of this approach;  instead of serving a set number of pieces, factor the size (wt) of the wings in each portion, more than the wing count. 

Consider what the a portioning program can bring to your business. Customers instead of ordering with the expectation of receiving a certain number of pieces, will have a choice of ordering by weight;  ¼ lb., ½ pound and 1 pound or family & friend platter servings. 

Despite the wing count, the customer gets the same volume of meat, and the new serving policy improves the chances of keeping supplied at somewhat discounted prices. Right now, because of low production and high product demand, it's " Wing Crunch Time - All The Time" for fresh small bird cut wings. 

You already know that no poultry company actually counts the wings they pack in a 40# case. The wing count is 100% determined by the size of the live bird and there aren't many 5-6# birds being grown. Just asking leading poultry companies like; Tyson, Wayne Farms, Pilgrims, Mountaire, Simmons, Perdue, Sanderson, OMP, Koch and Keystone about availability....by the time these nice folks get around to returning your telephone call, you can finish reading Wenzel's "Menu Maker".

To Higher Profits,

Fred

Fred Favole is President of Strategic Purchasing Services (SPS), America's most experienced foodservice purchasing services firm. Services: spend assessments, bid & GPO management & menu ideation & outsourcing. Contact Info:  (912) 634-0030 e-mail: Fred@StrategicPurchasingServices.com 

Hot Trend Wraps R&D, Menu, Purchasing and Profits

In the new food service workplace, multi-unit operators are creating lean organizational teams that can react quickly to competitive challenges through a dynamic management process called "culinary-purchasing (CP) ".

Many restaurants outsource technical expertise to develop products and join group group buying organizations to leverage lower product pricing. This new CP structure coordinates the efforts of highly experienced and motivated professionals resulting in new sources of supply, exciting products and higher profits, all delivered with cost effective results.

This Chain-Link-Services model introduced by Chef Paul Ladouceur and Fred Favole of Strategic Purchasing Services (SPS), combines the talents and expertise of procurement, culinary and supply-chain to deliver successful profitable outcomes. The unity of purpose is achieved by combining individual profession skills which provides food service organizations or manufacturers turning to SPS for client menu ideations with products perfectly matched to menu, kitchen equipment, price points and operational capabilities.

The CP process when incorporated into the national account chain selling program by manufacturing companies delivers the knockout punch that makes the customers culinary-purchasing process rock!

When you consider broad line distributors are withdrawing value added services and suppliers are reducing support staff, most companies have more Product Development, Recipe Development, Product Utilization and Menu Ideation projects than they are staffed to handle economically.  Now with chain-link services by SPS, all that changes!

SPS manage and implement the entire program for food service chain, or can assist with the individual steps in the process;  from the CP dynamic “ menu ideation ” and spend management (costing & logistics) analysis process through focus groups, staff training and introduction into the restaurant/hotel's distribution network.

Here’s a sad fact that based on our 18 years transforming decentralized purchasing programs;  less than 15% of all food service chains ever achieve the efficiencies of their competition.

How can things be improved to guarantee that products fit both form and function while still making a profit?   “ Culinary-Purchasing is the next logical extension and development trend that will integrated into the business outsourcing process, as older models continue to fail", states Chef Paul Ladouceur, V.P. of Culinary-Purchasing.

Lets take a look at 5 traditional ways most chains use to make bottom-line improvements. Then,  ask if culinary-purchasing management is what's missing in your process:

• Decreases in Food Cost
• Change in Sales Mix
• Increase in the Number of Covers (Customers)
• Increase in check average (often via price increase)
• Reduction in Overhead

Because of the resource-intensive nature of developing cross-functional teams, the hot new process is to use specialized services companies with motivated procurement and culinary professionals to assure profitable and successful outcomes. By bringing in your extended  “team” early on in the menu engineering or sales process, you save development time and the creative process is improved. 

Not only will this help functionality, but it will help lead to more profitable product introductions with fewer cost, operational and profit ” surprises” later on in the process. 

To Higher Profits!
Fred

Fred Favole is President of Strategic Purchasing Services (SPS), America’s most experienced outsourcing firm and innovator of the dynamic "chain-link services" program. Ask Fred about a solution for your business. Contact: Fred@StrategicPurchasingServices.com  Office: 912-634-0030 

Compete Using Strategic Sourcing To Achieve Goals

Foodservice purchasing experts focus on creating  a competitive advantage by sourcing products “outside of the box” typically created by standard supply-chain models. Ask any executive in major chain procurement what separates their performance from emerging chains, buying groups or distributor buyers and the answer may surprise you.

Their reply is likely to place saving money lower on the list.  After all distributors, suppliers and brokers always offer the best overall product solutions for the business, right?  On the other hand, we must consider that distributor account representative must maintain company earned income, brokers earn commissions selling products in the distributor' warehouse, staff buyers have limited sourcing and culinary experience, and GPO's (group purchasing organizations) partner with lead suppliers to earn money and offer  members a limited number of brand alternatives.    

For foodservice sourcing to be truly strategic, it must go outside of the supply-box created by these restrictions. A world-class process brings value to the organization in many ways including saving money; the foremost of which is establishing a direct relationship with suppliers that are committed and capable of contributing to profitable growth. 

Here are 5 strategic sourcing goals used by SPS in managing chain purchasing and providing chef services:

Goal #1: To reduce risk. The brave new foodservice world requires that buyers understand how to compete in the international marketplace for proteins and grains once available and affordable in the U.S.A. 

Building your menu based on being able to consistently buy certain imported seafood species and beef sub-primal cuts or chicken wings at affordable prices can be risky business. Strategic sourcing enables your company to sustain a continuity of supply, quality and price, even in the face of the unexpected markets and supply disruptions.    

Goal #2: To improve supplier performance. Reducing the delivered to distributor unit price on your order guide is nice, but meaningless if you don’t hold suppliers to formal product, specifications, and distributors to on-time and complete deliveries.  Not to mention quality defects or changes in product yield that affect your business.. Strategic sourcing is only truly successful when you can achieve a true cost reduction and improve distributor and supplier performance. 

Goal #3: To drive profits to the bottom-line.  Managing cost by controlling the landed cost of goods to your distributor the first step in the process. Transition from distributor or GPO controlled center-of-the-plate purchases and you can avoid the projected 3.5% food price increases through the end of the year.  Then, hire a professional to contract directly with strategically selected suppliers; then maintain high-performance standards by levering total purchases and managing future commodity costs.

Goal #4: To bring in innovations from the food supplier base. In today's competitive restaurant and hotel business you need a constant flow of new sources of supply and options to release the full capabilities of your culinary and purchasing team. Suppliers can be a great resource only if you are selecting qualified partners world-wide from “outside” the box build by many links in your supply-chain.  Start to recover your potential through sourcing and watch your Culinary-Purchasing team ROCK.

Goal #5: To support the organization's social responsibility goals. Today’s operators must support green, healthy, diversity and other social responsibilities; these principles can be incorporated in your strategic sourcing plan and services like SPS can help move your organization towards those goals. 

Discover the principles of the strategic purchasing process and start seeing immediate benefits. Empower your organization to exceed expectations by out-SOURCING and out-SELLING the competition.   

To Higher Profits!   Fred                                                                                                                                                                                                                                                   

Fred Favole is President of Strategic Purchasing Services (SPS) and Founder, Chef Support Services, a foodservice consulting firm specializing in outsourcing, culinary support, and spend management services. Fred at (912) 634-0030, email: Fred@Strategic Purchasing Services.com 

Strategic Sourcing Makes Menu Making Easier

How many times do you wish you had extra professional staff?

Chef Support is a unique program offered by America’s most experienced purchasing firm to address the product challenges faced by corporate chefs and menu professionals.

 

Our service provides real-time access to sourcing experts that use decades of foodservice experience to locate the exact product you need, while handling logistics from farm (or plant) to table.

 

Quickly locate a winning L.T.O. item, replace high cost protein suppliers, expand your CORE items bid list, select #1 product overstocks, or simply discover your next great supplier.

 

Together, working with Chef Support Services (CSS) you will quickly transform the sourcing process into a flexible, powerful and profitable culinary resource. When you select products “outside-of-the-supply-box” without the boundaries imposed by distributors, GPO's, brokers, buyers or sales representatives, you unleash the true potential of your talent and menu. 

 

Menu Making Made Easier  w/ No-Out-Of Pocket Expense.

Contact us to see how we can help you!

 

Office: 912-634-0030

Fax: 912-634-0031

Email:  info@strategicpurchasingservices.com 

Fred Favole, CPO (912) 399-1427

Dan Patterson, VP Services (678) 315-2389

Catherine Gruber , Manager (912) 623-0030