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Effective supplier price management techniques for smart operators

There are several tried-and-true methods to address supplier product price discrepancies as a way to control food costs, but one approach is the most effective.
Photograph: CrunchTime! Information Systems

As one might imagine, restaurants are extremely sensitive to the ups and downs of their suppliers’ food prices. But they are not alone. Market prices are in a constant state of flux, and vendors in the foodservice industry—just like the restaurants they supply—operate with incredibly thin profit margins. Every inventory dollar counts for both sides and prices can be difficult to track when they appear to be constantly changing. That’s why operators must have a clear and effective supplier price strategy in place to manage vendors so they can keep costs aligned with contracted pricing.

The basic approaches:

There are a number of ways operators can manage their vendor price strategy. Many successful restaurants follow one or more of these three tactics, but these tactics require significant discipline and time commitments:

  1. A manual approach: The restaurant’s accounting team compares and contrasts invoices to identify any discrepancies between contracted prices and actual prices.
  2. A routine, proactive approach: On a scheduled basis, individual restaurant managers will review prices on invoices against the most current vendor prices to identify opportunities to reduce their costs.
  3. A hopeful approach: Due to a lack of time, operators simply receive their orders and pay their invoices and hope that they aren’t paying too much.

A manual approach holds skilled individuals responsible for examining every price, so restaurant teams can control the process. This method is effective, which is why it’s widely used. That said, it’s expensive. The resource hours required to manually compare every item’s pricing is costly. Moreover, while a manual approach can ensure every price is thoroughly evaluated, it doesn’t prevent the risk of human error.

Although the routine, proactive approach will be assigned to a highly skilled and knowledgeable manager, it too carries the risk of human error. And because these routines will be assigned to restaurant level managers, success will vary greatly from location to location. Also, managers have many other things to worry about. It’s hopeful at best to believe they will be on top of all supplier invoices and checking them against agreed to prices.

The automated approach:

Let technology carry the load. Using a restaurant food and labor operations platform to automatically generate contract-to-invoice price comparisons, sends alerts, and remedy cost discrepancies provides team members the flexibility to concentrate on other pressing needs in the restaurant. With electronic supplier order guides in place, contract audit functionality gains real-time visibility to fill ratios, price compliance, substitutions and service levels. Auditing supplier contracts across vendors, products, regions and restaurants is a breeze. The ops platform is also an effective way to reduce food costs because the system will automatically compare what should be paid for products and supplies versus what is actually being paid. When a discrepancy is identified, a message automatically alerts both parties that they need to reconcile the difference on the invoice. This is the best option because it eliminates human error, doesn’t require expensive human resource hours and allows skilled professionals to perform tasks that actually require a human element.

Incorporating a mobile solution:

Receiving supplier inventory deliveries is now an increasingly mobile task. Mobile applications are easy to use and build efficiency and cost saving measures into receiving processes. Scanning shipments of received food items on a mobile device, automatically pushing that information to the restaurant’s back office operations platform and automatically matching actual prices with contractual prices will save a ton of time and ensure that the restaurant is paying the right price for each item.

Want to know more? Visit us to learn how to leverage automation technology to optimize food costs.

This post is sponsored by CrunchTime! Information Systems

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