Spend Matters welcomes a guest post from Brian Miller, VP of Services at Intesource.
The pressure is on for the restaurant industry. Food, energy, and healthcare costs are rising and the unstable economy is keeping consumers at home – making cost containment as important as ever. So how can restaurants alleviate the overwhelming pressure to cut costs? By examining their spend – both direct and indirect – and challenging suppliers to provide the lowest possible costs.
Many procurement pros are confident that they’re already receiving the best payment terms possible – but an e-sourcing strategy almost always provides surprising results. Below are three ways restaurants can optimize their procurement strategy, and ensure they’re getting the best value possible.
1. Challenge Strategic Suppliers
Many procurement pros are hesitant to adopt assertive sourcing strategies; if a supplier provides fair prices and makes deliveries on time, there’s no reason to risk damaging the relationship. But this line of thinking can cost restaurants millions, because a supplier’s true lowest price is almost always lower than what buyers expect. Data shows that leveraging e-sourcing technology can save buyers an average of 16 to 18 percent on categories across the organization.
A sourcing event doesn’t mean the end of an existing supplier relationship. In some cases, suppliers prefer sourcing auctions, as it gives them an opportunity to offer better terms and retain existing business. And they work - incumbent suppliers lower prices 55% of the time when challenged to do so, often decreasing prices as much as 15%.
2. Look for New Categories to Source
Restaurants can also cut costs by finding new categories to take out to bid. Health insurance, employee background checks, construction, and landscaping services are all fair game. Frequently reviewing these categories and taking them to bid ensures that restaurants create a competitive environment in which all of the qualified players in the market can vie for their business.
Sourcing facilities and maintenance services can present particularly strong savings. Data shows that sourcing categories such as snow removal, floor cleaning, or lawn care delivers considerable savings with nearly every event – often as much as 25 percent.
3. Make the Investment
Resource limitations can put a major handicap on e-sourcing efforts. According to Intesource’s ‘Sourcing Confidence Bubble’ report, 46% of sourcing executives cite a lack of internal resources as the top challenge to maximizing their sourcing strategy. Without adequate staffing resources to regularly execute sourcing events, a restaurant can struggle to run events frequently enough to know they’re consistently getting the best value.
One way to circumvent resource issues is to partner with outside teams – especially to help with particularly complex categories, such as banking fees and insurance. In the end, the added investment almost always leads to a worthwhile return – regularly exceeding 15 times the investment.
Running events effectively is just as important as running them frequently. Restaurant procurement pros should provide as many details for the supplier as possible.
- What considerations beyond cost – such as dependability or customer service – are most valuable to you?
- Are local or eco-friendly products important to you?
- Do you have unique equipment, location, or other conditions that need to be accounted for?
By providing as many details on a restaurant’s needs as possible, procurement pros can expect a faster, easier, and ultimately more successful sourcing event.
The procurement team is a vitally important part of all organizations – but especially so in the restaurant industry, where the stakes are higher than ever. By allowing reputable vendors to compete for their business, restaurant procurement professionals can drive more favorable deals – and be confident that they’re getting the best possible value.