Rachael Venditti, Business Development Manager at allmanhall (www.allmanhall.co.uk)
With rising food prices expected to continue for some time, a vital approach for caterers managing food costs is to become as efficient as possible. One area where efficiencies can be made is within the supply chain. Rachael Venditti looks at practical steps to manage and minimise the impact of food inflation as rising costs seep through the supply chain.
It is well reported that global food prices have reached a ten year high, with current inflation figures reaffirming that prices are being pushed by a combination of global factors throughout the entire supply chain. With food inflation expected to peak at 8% this Spring, and suppliers look to pass on their rising costs, this is a significant and real challenge for all caterers.
Approach to food purchasing
Now is the ideal time to work out what approach to your catering purchasing will bring you the maximum benefit. This will very much depend on your volumes, your delivery values, delivery frequencies and the number of suppliers you use.
These are the different approaches:
• Tender: Most impactful when carried out in advance of inflation, tendering allows you to measure suppliers against each other based on your given criteria.
• Operating dual supply: Can be very effective as it creates a sense of competition amongst your suppliers.
• Consolidating your suppliers: Where you have multiple suppliers, your delivery value is low, and your delivery frequency is high, reducing your suppliers is an effective way to reduce cost.
When looking at suppliers, the best approach involves considering various factors such as product specifications, prices, their service levels, contractual terms and how robust they are. The latter helps with risk management. It’s also important to evaluate suppliers regarding how they may support any systems and accreditations.
Undertaking range management
To reduce unnecessary costs and ensure you have the right product range for quality and nutritious menus, reviewing buying lists will ensure you have just the products needed to operate your service effectively. It will also help increase volume on key lines, support stock control and drive consistency.
Reducing the ‘tail’ is a key part of this activity. The ‘tail’ is typically a high number of products with low volumes which tend to have been accumulated over time. These are generally loaded with margin by your supplier, whereas your high volume lines generally have a lower margin.
Adjusting your purchase of high spend categories, eliminating any product duplications, and using a more cost-effective pack sizes is a quick way to make savings. This is a great example of where thought needs to be given to the operational impact associated with a change, and its possible unintended consequences. For example, by moving to a more cost-effective pack size this could have the negative result of an increase in wastage.
Branded products are more expensive than own brands, so a shift away from well-known names could save costs.
Understand which of your products are stable and which are volatile when it comes to price movement. Stable products are typically negotiated annually, such as canned tomatoes and solid pack apples. Volatile products fluctuate more frequently, such as butter and bacon.
Before making any switches, consider the false savings that could result. For example, there could be a reduced yield from switching to a different product, or more of a new product might be required to achieve the same flavour. Understand the false economies and do try to sample products from your supplier where a big change is being made to an important product.
Reduce cost to serve
The final area to consider when optimising your supply chain is reducing your cost to serve. This is the cost for a supplier to make a delivery, and is linked to pricing. This can be reduced by reducing the number of deliveries each week, increasing the value of each delivery and reducing the need for your supplier to split cases.
Split cases cost more than a full case due to the labour costs associated with picking the split case and an increase in cost for the supplier due to potential product damage and stock loss. Any benefits of reducing splits needs to be balanced with any potential increase in wastage in your kitchen as a result of ordering larger quantities of a product. You may find some suppliers are restricting the availability of ambient and non-food split product lines, but this will help to speed up picking times and help vehicle dispatch times, thus helping to meet delivery expectations.
You may also like to consider ways to increase your delivery value to counter-balance the cost to serve, such as adding non-food orders to your food order.
Forward planning and communication are crucial when it comes to placing orders or liaising with suppliers over stock shortages and alternatives. It is advised that to reduce the risk of inconvenience, orders are placed with as much advanced notice as possible with suppliers – a minimum of day 1 for day 3 ordering wherever feasible, for the time being. These longer lead times will reduce disappointment and help ensure orders are booked before any temporary cut offs are imposed by suppliers.
Another alternative is to outsource to a procurement provider, who will have a case and resolution handling service, and a helpdesk who can contact suppliers on your behalf. They will manage suppliers, undergo analysis and insight updates throughout the year on food pricing and will monitor these price fluctuations, negotiating and mitigating price increases on your behalf as much as possible.
By allocating these tasks to team members and ensuring they have the capacity to do the work along with other operational requirements, pressures can be eased. In conclusion, making changes within the supply chain may help reduce food costs, but it is important to also check there is no negative impact on operations from making any changes.