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Are Foodservice Suppliers & Distributors Out to Get You?
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. However, until they stop paying off distributors with spiffs, sheltered income, and no-show food shows, restaurant and hospitality organizations will have to watch their economic backs. The practice of inflated prices with an attitude of " I can get away with packing the top layer of 5X6 tomatoes with quality product, while the rest of the case is crap, is just about over.
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 right month after month? Do you think they profit by substituting products? Why is it that fresh eggs, cheese and bacon prices don't follow the market down, as quickly as they move up?
Will the distributor "in-house or in-pocket" brokers and the manufactures' representatives assigned to work with the large broad line distributors continue to keep prices higher for their smaller customers. Prove it? If you move just one level higher in the food sales chain, ask the manufacturer's regional chain sales manager or the distributor V.P. Sales, if your price is higher than the 75 unit chain purchasing the same item.
Why do distributors and manufacturers close-code products (non-private label product in inventory, but not available to you) that could save you money? Why does the industry allow distributors to pass along institutional, GPO and health care discount pricing to select 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. SPS would not be a successful consulting firm without the strong support of a great many honest storage & drayage companies and quality manufacturers. These folks work as hard as any operator I know.
To understand how purchasing fits into your financial profit / survival plan, and how you can move to the next higher level of performance in your buying program, , reflect on the 4 modern pillars of foodservice procurement:
1) strategic sourcing
2) commodity-price management
3) distribution price-compliance
4) percentage of spend under contract. .
These practices used by large-scale purchasing organizations can be successfully implemented into your buying program if you are willing to become informed and use a systematic approach to buying, along with your skills in the "art of the deal".
To Higher Profits,
Fred
Fred Favole is Founder & President of Strategic Purchasing Services (SPS), a firm specializing the purchasing department outsourcing, commodity contracting and distribution program (MDA) audits. His contact information: 912.634.0030, SPS@Gate.Net Follow Fred's Blog; Purchasing Insights at https//purchasinginsights.blogspot.com
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Posted by Brian Carrick on 1/28/12 at 3:05 AM EST
Having worked in the industry as a professional cook from the age of 17 at a hotel in Bakersfield, CA, I have more than 40 years in the profession as a cook and chef and also a baker. I have never trusted a single purveyor and have found the only way to get what I want consistently is to have a large group of suppliers, both nationally and local, and to keep my boot on their necks throughout the ordering process as otherwise, they will try to get the best of me each and every time whether it is crappy products or late deliveries. Since I deal with a diverse group, I can punish them by cutting them off for six months at a time and by doing this, I get exactly what I want. I like people who do what I tell them and believe me, I never have a problem. I pit them against one another and they are much to happy to do what I tell them. Brian Carrick, professional Chef, ACF
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Posted by Bill Hutchman on 2/5/12 at 9:23 AM EST
As a distributor sales rep I have a few thoughts. Number 1 Yes there are some bad eggs out there in the distributor world but there are also some good ones. Ask your distributor sales rep for references! It doesn't matter what any of us say to our customers, it matters what our customers say about us... I am in the business to help food service professionals succeed and I have all my customers willing to represent that fact on my behalf because I take care of them. I challenge all operators to demand references for their sales reps. Number 2, products end up getting substituted because the warehouse is out of stock, it's not about trying to raise the price. If you need tomatoes you need tomatoes, would you rather be shorted? I always inform my customers when substitutions take place before their delivery so that they can make an informed decision. I advised a daycare customer just last week not to accept the substitute fish sticks on their truck as they were substituted with a more expensive item. I can get them the right item at the expected price within a couple of days. If not, I write a credit to offset the increased price of the substitution, it's simple! If your distributor rep doesn't inform you about substitutions then you should have a meeting! Number 3, every operator needs to do a dollar descending report and determine their top 10 products by purchase volume. Work with your distributor and brokers to secure special pricing and/or off invoice rebates. This is another way that I help my customers save money. Number 4 I completely agree that most operators should have more than one supplier; however, you have to be "important" to someone in order to get what you want. Distributors make money and therefore operators save money based upon the number of cases on an order. If all you give a distributor is a minimum order, you get what you pay for and you foster bad service. Again, ask for references, call the references and do your homework... pick the best two distributors for your business and move on. Time is all any of us really have, spending it juggling bids every week from four or five distributors isn't going to grow your business. Working with your service staff on becoming a "sales" staff, networking with other businesses, schools, churches, and non profit organizations in your community, and engaging in activities that attract customers are what you should be investing your time in.
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