Time for a change in foodservice procurement

Time for a change in foodservice procurement

By 

Rich Wolverton

Former VP of Category Management, FSA

Published 

January 21, 2022

Time for a change in foodservice procurement

From the past

When I started in food sales, I would go to a grocery store, talk to the meat manager, get an order, find the nearest payphone, and call in the order to our customer service team.

Food service distributors started using Telxon to punch in orders while with the customer, then find the payphone to send the order electronically.

In the present

Today, most foodservice operators use the distributor's ordering system to place orders. This allows the operator to place an order when it is most convenient for them and gives the DSR time to consult on new products or concepts.

An interesting dynamic of procurement for foodservice operators is how the prices are set. Typically, a DSR will have a suggested price from his company, but the DSR has the discretion to adjust the price up or down. The DSR has a responsibility to their employer to reach sales goal sand profit goals. I believe most DSRs work to set fair & competitive pricing for their customers, but there are some that “merchandise the invoice ”to have an outsized margin.

What do I mean by “merchandise the invoice”? Think about when you go to the grocery store. Do you shop sales? When you can buy Best Foods (or Hellmann’s) 30 oz. mayonnaise for $2.49, the store is using a promotional deal from Unilever and some of their own margin to get you into their store, not to buy just mayonnaise on sale, but to buy your bread, mustard, lettuce, sliced turkey and cheese to make your lunch. The store merchandised the mayo and sold other items at regular price.

So, they didn’t make much on the mayo, but did just fine on everything else!

DSRs can do the same thing. They can offer a lower price on a key item and make more margin on other items.

So, what can a foodservice buyer do about it?

Today, they can run an Excel spreadsheet, write down all the items they buy and all the offers from their many distributors. They can spend hours each week pouring over the sheets to find the right deals. They can go online and compare prices with a number of sources.

If only there was one source, where a foodservice operator could have their catalog, compare pricing and quickly place an order knowing the best value was achieved and have confidence the product will be delivered!

For the distributor, what if there was one source, where they could price orders for the day based on available inventory? No more hotshots to cover short shipments to customers! What if you could get advice on pricing to be competitive? What if they never had to worry about bad debt again?  What if every order was above your minimum for size (margin, dollar and case) and fit your efficient delivery schedule?

For DSRs, what if you were done chasing down customers for payment and you could focus your time on what’s best for your company and your customers – helping your customers be more effective and profitable by leveraging your experience in the FOH or BOH?

To the future

There is an exciting platform that will soon debut in the U.S. Reeco works for both the distributor and operator to make ordering an efficient and profitable exercise.

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