COVID-19 has increased the pressure on businesses and procurement departments to find new ways to optimize cost structures. Due to greater revenue uncertainty, operating budgets and staff are leaner than ever before. Distributors are having trouble keeping items in stock as they deal with abrupt changes in demand. And these supply shortages are making purchasing more of a challenge, sometimes resulting in bringing in items that are priced higher and not on contract.
Given these unique circumstances, it’s even more critical for foodservice operators to look for new sources of revenue. Where can you find new sources of revenue in the COVID era? Here are a few places to start looking:
1. Price Auditing
Because you may have many contracts with your suppliers and distributors, the pricing matrix can be difficult to verify. Food service operators with little spare time will often sacrifice invoice auditing for other activities like local marketing or quality management. Although time consuming, auditing your invoices can be a huge source of revenue for your operation. If resources are tight, this is also an area where a good GPO service provider can provide extra value, especially if they offer a fully automated solution.
2. Improving Contract Coverage
As your food service operation grows, your purchases become more diverse and extensive. Menus evolve and may require more SKUs to satisfy customer demand. This can present many issues for the procurement team of a growing brand. Many items purchased do not have the volume to become contracted. Joining a group purchasing organization (GPO) can not only expand your contract coverage but can provide you with more contracted options with which to build your menu. GPOs like Foodbuy aggregate purchasing power from many operators, making a wider array of suppliers and products available at better net costs.
3. Developing a MOG or APL
As brands grow, enforcing brand standards can be a daunting task. Unit operators might not have regional access to the same items as other units. Operators may be trying to cut costs with lower-quality products, creating lower-quality menu items. Conversely, chefs might also start using higher-quality ingredients in the hopes of creating better experiences; although these experiences might be better, they are not reflected in menu pricing, and can make the same items in other units look subpar.
Operators that do not limit the purchasing options at the location level may find their contracted spend significantly reduced. As operators stray from brand standards, not only are quality and consistency varied, but aggregate spend on specific items is diluted, minimizing contract utilization.
A managed order guide (MOG) is a list of brand-approved items that can be purchased by units. These can include food, smallwares, chemicals, and even equipment. Developing MOGs or APLs (approved product lists) help ensure that more purchases are not only contracted but deliver the best overall value for their organizations. These can be deployed via eProcurement platforms and managed by the procurement team or your procurement services partner.
4. Revisiting Your Distribution Agreement
There have been many changed circumstances due to COVID and you might consider revisiting your existing agreement to make sure it serves your present needs. For example, lower current volumes may allow you to utilize fewer delivery days with larger drop sizes. You might also be able to take more advantage of distributor private label programs (DPL) to get the same quality products for a lower cost. Due to obstacles suppliers have faced as a result of COVID, a 2-hour delivery window can be a challenge for distributors to consistently hit. Because your needs might have changed, it might be time to work with your distribution or procurement services team to find a better win-win agreement with your distribution partner. This might include lower drop size minimums, lower stocking thresholds, or other considerations to make your distributor relationship more successful.
COVID has changed the business landscape for many food service establishments across the United States, making finding new sources of revenue more important than ever to meet financial goals for your business. For more information on how these strategies and others can prepare your operation for success in the COVID era, please visit Foodbuy.com/Services.