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Common Issues & Your Ideas
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April 09, 2012

Written by: Fred Favole

Simple ways to “buy cheap” and minimize food spend for any large independent operator or emerging chain starts with timing purchases to the seasonal commodity markets, and using applied product specifications and improving delivery and receiving efficiencies

If you have managed procurement for a Fortune 500 foodservice chain, then read no further. However, if you are a first-time to the spend management process you must first equip yourself with the tools required for the job.

Start with these basic tools; purchase a seasonal buying calendar, Wenzel’s Menu Maker or Meat Buyers Guide; as they will provide you with industry standard specifications, and crop information. Then, bookmark U.S.D.A. websites for beef, pork, seafood, poultry and dairy, for quick access to commodity price quotes. (These links are listed on our consulting website www.strategicpurchasingservies.com).

You will also find commodity prices free on our Foodservice. Com community website, or for few bucks, you can subscribe to pay services like American Restaurant Association’s “Weekly Commodity Report” or the more expensive, “Urner Barry Reports”; both leading trade sources.

Your Savings Plan

1.
Develop product specification sheets; include the cut, grade, score, origin of the product and document accurate case yields.   Now you are ready to compare brands and evaluate price offers. You may find that lower specification products are better for certain menu applications. For example; #2 tomatoes & limes for back of the house prepared products; paying more per case can  actually save money; switch Crisco Professional or Mel-Fry from a clear a soy based fry oil for reduced consumption.

Check yields on basic items like pickle chips, where distributor labels are often less expensive but have lower case yields. With high beef trimming prices , consider changing the fat to lean specification for burgers  from 80/20 to 78/22 to gain an immediate savings of $.07 per pound. Learn as much as you can about price-value relationships as it relates to specific menu applications.

2. Create a seasonal price book for your top 20 purchased items that represent 80% of your food spend. List high volume item in one column and the low price / high price months in columns to the right. Now you have a quick reference market price sheet.

3. Track commodity item prices to gain a better understanding of the relationship between the products published raw material cost and your final purchase price. This ”farm to table” costing approach is the single most important building block of supply-chain management.

For example; assume that the U.S.D.A published price for green pork bellies on 5/2/2012 is $1.44 lb. and your delivered distributor price for 18/22 layout bacon is $2.40 lb. Using this raw material to finished goods relationship as the “basis”, you can monitor changes and project the impact of future price changes.  A change of $.01 lb. in the belly market will impact your price by $.015

4. Buy foods in bulk to reduce the per unit costs from your distributor. If you have a Master Distributor Agreement that calculates selling pricea by using case fees, increasing the case weight of burgers or bacon can save as much as $.08 per pound. If you are on a margin or cost-plus pricing schedule, be sure to do the math before you make a change.

Tip: Talk to the local broker or manufacturer representative about the proposed case change, obtain product data sheets with order code numbers. Then, when you are  ready, advise your distribution that you want to make a product change.

Perhaps one of the most critical responsibilities of food buyers is to understand how product specifications and commodity markets impact the final cost of the food and supplies they purchase. If a "hot" price offered by a new supplier seems too good, then its Caveat emptor – “let the buyer beware”.

Your applied knowledge about product specifications and raw material markets is guaranteed to impact the purchasing performance of your organization.

To Higher Profits!
Fred

 


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