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Putting a squeeze on distributors

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Question:

One of my [broadline] vendors offered to give me an ongoing discount if I agree to use him exclusively. I don’t know how he would be sure I didn’t use any other vendors, but it sounds like a good deal, if prices don’t go up. Are other people doing this?

– Chef, Casual Dining, Philadelphia

Answer:

Most foodservice operators are very comfortable dealing with multiple suppliers. Even if you get the vast majority of your products from a broadline distributor and can theoretically get everything you need from a single supplier, you likely use more than one broadline distributor or buy specialty items from a specific vendor. Having multiple suppliers is simply a better way to do business in most cases. It brings with it a number of advantages:

  • Suppliers compete for a larger percentage of your sales, thus strive to offer more competitive pricing. We’ve all experienced great pricing at the beginning of a vendor relationship, followed by “the creep”—prices creeping up which, if left unchecked, can undermine a business. Knowing you’ll be comparing prices to another vendor’s can help keep multiple suppliers in check.
  • Suppliers can specialize in what they do best. While everything you need may be available from a broadline supplier, that doesn’t mean it should be. Some items—say, canned goods—are somewhat interchangeable. If one supplier has the brand you like, in the pack size you like, at a better price than another, your shopping may be done. For other products, like fish, for example, price is only one factor—one company may be cheaper than another, but what is their quality like? Some products require specific expertise that a specialty supplier can provide.
  • Beyond pricing, suppliers work to provide new, novel or high-quality options that ensure your continued business. We know that multiple suppliers will compete on price, but what else can they do to be competitive? By offering a more variety, higher quality or unique products, you can leverage your suppliers’ energy to offer your guests something unique and better than your competitors.
  • Customer service is better when you have options among multiple suppliers in a competitive environment; they all want to win your business. Beyond price and product, competing suppliers have reps who will fight for your business. Who will make the extra effort if you were shorted something on the truck? What if it was your mistake and you missed the order deadline? Who will hand-deliver a replacement or get something you need on the truck at the last minute?
  • You can support the suppliers you value. By using multiple suppliers, you can leverage your purchasing power to support the kinds of businesses you feel good about. These may be small businesses, locally owned franchises or woman- or minority-owned businesses. Or they may be businesses that are known for high-road practices like using U.S.-made materials, paying workers a livable wage, practicing sustainable practices, supporting a nonprofit whose values you share, or even sponsoring a favorite sports team. Whatever your reasons, business relationships are built on more than comparing prices.

It may be tempting to focus your business on a single supplier rather than multiple—they may offer favorable terms in exchange for an exclusive contract or help to simplify ordering with a single phone call, and you may enjoy the perks and VIP treatment of being a big spender with your supplier. But my advice is that the benefits of working with multiple suppliers win.

More on the benefits of multiple vendors here

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