This past April, Wendy's and Arby's announced the formation of a new procurement company, Strategic Sourcing Group Co-op, LLC, an organization designed to better leverage their spend across both company and franchise-owned stores. Companies buying co-ops, and companies, are nothing new. Vodafone recently created an entirely new procurement company based in Luxembourg, largely for tax purposes (VAT and transfer pricing purposes I suspect). But in this case, the effort appears to be aimed at spend consolidation for cost reduction -- and also, most likely, for better quality control across indirect and services categories (ingredients and food are not under the purvey of the organization).
According to the news, the initiative is the "result of an initiative by Wendy's/Arby's Group, Quality Supply Chain Co-op (QSCC), which is Wendy's purchasing cooperative, and ARCOP Inc. (ARCOP), which is Arby's purchasing cooperative ... SSG will utilize the combined purchasing power of nearly 10,000 Wendy's and Arby's restaurants in North America for goods and services ... [including] securing competitive contracts for indirect supplies, such as equipment, kitchen small wares, furnishings, menu boards and signs, as well as energy and restaurant-level contract services. This includes evaluating items or shared suppliers that are not proprietary to either brand." I suspect these efforts will realize savings on the order of eight figures per year once the operation is up and running (based on the total spend under their control and the types of savings that are possible in these categories).
Purchasing co-ops such as this can also generate savings through non-traditional sourcing means (e.g., invoice auditing) as well as holding suppliers for delays or other quality/on-time issues. Moreover, depending on how an organization sets them up, they can rapidly become a revenue generating entity as well (if suppliers end up paying a transaction fee to them, similar to a GPO model). Regardless, it would seem this move by two iconic fast food giants has one real motive -- to help identify and implement as much savings beef as possible.
- Jason Busch