Pay Less, Get More! Managing Your Suppliers

 

Welcome to our latest post in the Double Shot Blog series!

If you missed them, check out our recent posts on Tipping and Ideas to Save on Overheads.

Short and to the point, we are giving some quickfire advice on suppliers. What separates the good, the bad and the ugly? We look at what you should expect, what you can ask for and how to know when there might be better options out there.

Venue operators and hospitality people have a very different relationship with their customers than food and beverage wholesalers. Some of these businesses are modern, organised, flexible and hire great people. Others have been doing it for 30years are not going to change for anyone.

You are their customer, and you can demand a level of customer service. It could be setting ordering windows, delivery slots or minimum purchases. Wholesalers sometimes create rules, terms & conditions for good reasons, other times it's just Sharron in accounts who's been in a bad mood for three years.

Be clear what works for you and your business.

Embrace the new

In recent years new order management systems have popped up. They offer slick ordering interfaces and leverage group purchasing. They often handle payments, integrate with bookkeeping software and provide data insights and reporting.

Three worth looking at:

Ask for market updates.

If a supplier doesn't bother to do them, consider new suppliers. You'll want to know when there are bargains at the market, likewise before the price of citrus triples in summer.

Roll with market & industry trends

Twenty years ago, pork belly and ribs were cheap cuts. Then chefs developed new slow cooking techniques to get the best out of them and made terrific margins. They later became more popular, and prices rose. Get creative!

Ask for volume discounts, particularly on beer, cider & wine. They are generally non-perishable, and if you have the cash flow and storage space, you can often find a 6+1 deal or similar. (Buy six cases, get one free - almost a 15% discount )

Avoid paying for freight or delivery fees.

Seriously, money for nothing. Minimum order volumes are understandable for the suppliers. Carefully ordering non-perishable items once a week in a single large order, instead of a few things every day, is a compromise worth making.

Fresh produce has to be delivered regularly and is a cost of doing business. Some companies might try it on, but there are plenty who don't charge anything.

Wine pouring discounts.

Nearly all wine suppliers will give a discount of between 7-15% on wines which you serve by the glass. This is an acknowledgement of the expected volume of sales and as compensation for likely wastage.

You could argue that this is priced-in and if you don't ask for it, you are overpaying.

Extract value

The best suppliers are keen to educate your staff on their product range and even on whole categories. There may be sales reps who can talk in detail about the cheeses, bread, wines or whiskey they sell and provide stock free of charge for training sessions.

Are there co-branding opportunities to pay for menu printing, perhaps? Coasters, coffee cups, aprons, bar equipment, you'd be surprised what you can get, if you ask nicely!

Pay on time, reliably.

Wholesalers run on similar operating margins as the venues they serve, without the benefit of getting paid immediately by the customer. Writing off bad debts is a reality of their business, so they certainly appreciate the accounts who pay in full and on time.

With the exception of wine distributors, few suppliers will offer lines of credit past 14 days, and many will only be seven. Consider a premium company credit card to simultaneously clock up (a lot of) points while effectively extending your credit terms with all suppliers.

Check your deliveries line by line

I know it's tedious, but it's essential to make sure you are paying for only what you receive. Flagging missing items and checking weights and temperatures keeps your suppliers honest, and lets them know you are on your game. Requesting credit notes on short-deliveries for your bookkeeper immediately, ensures they won't get forgotten.

Don't be afraid to return poor quality

Someone gets the crap stuff, and someone gets the freshest. Make sure it's known that you won't accept sub-standard quality.

Set budgets for managers

It's easy to never worry about running out of stock. All you have to do is order heaps! Not so great when it's your money, and BAS payments are due next week. Set budgets and systems to only hold the stock quantities you need. Larger companies sometimes set purchase limits with suppliers to get authorisation for significant spending.

Be prepared to switch around

If you are based in and around state capital cities, you will have dozens of alternative options for each supplier.

Call up a new one and tell them you want to trial them for a week and pay upfront. You can be sure to get excellent service and product that week! Also, be honest with your existing supplier, say that for x reason you are trialling another option this week. If you go back to them, you might find a renewed level of attention and service! 

Know your COGS% (Cost of Goods Sold).

A customer favourite has been on the menu for three years, but the price hasn't changed. You can be sure the cost of goods has!

The phrase 'a death by a thousand cuts' springs to mind, when your profit margin is steadily getting chipped away.

Talk to other business owners honestly.

Don't just stick to; "How's business?"

"Yeah, great - busy. You?"

How about "Do you fancy grabbing a coffee next week to compare prices on fruit & veg?" 

The industry could do with more sharing of ideas and business owners supporting each other.

(reading time: 4mins)

 
David HobbsComment