iTrade Webinar Offers Range of Suggestions for Maintaining Profitability
In order to protect margins in the face of today’s economic deceleration and overwhelming food cost inflation, foodservice supply chain trading partners must tightly and precisely manage their businesses and relationships, according to three operators that participated in an iTradeNetwork webinar earlier this week. 

The margin-protecting solutions were not only meant to remove costs but also drive business to restaurants.

Michael Barner, vice president of field system solutions, Compass Group, advised the industry – manufacturers, distributors and operators – to consider solutions from a supply-chain perspective. Barner suggested that company leaders must manage suppliers, control order entry, facilitate purchasing of the right products, and measure procurement while searching for improvements.

Distributors can play a beneficial role in this situation by working with operators, notably multi-unit ones, in developing competitively priced private-label programs. Michael Ochs, vice president of supply chain services, IDQ/USCI, related how the chain operator is negotiating with distributors that are apprehensive about stocking some special-request products because they already stock products that are similar to their own brands.

“The problem with most distributor-label products that are purchased by restaurants such as Dairy Queen is that they have huge mark ups that make them uncompetitive with private labels. We can do our own private label tortilla much cheaper than the same tortilla marketed under the Sysco or U.S. Foodservice label because of their margins,” Ochs said. “But if we can work together and eliminate an SKU for distributors and save the money that we’re trying to save then that could be a win-win situation.”

In response to question about the advisability of aggressive operator marketing at this time, a course of action that distributors could proactively prescribe to their customers, Ochs emphatically replied “yes.” He said it is one of the approaches that Dairy Queen has always been stressing to its unit operators.

“What we’re stressing even more now is community involvement because at times like this people support the ones who support them. Dairy Queen is in small towns not urban centers. We really try as much as we can to get operators to support their local communities because when times are tough, they’ll support the people who supported them,” Ochs said.

Replying to a query about best practices that maintain competitiveness in a challenging environment, Ron Hall, vice president, Senior Resources Alliance, a senior living facility, recommended that operators reengineer their menus and product mix with an eye toward understanding what is being bought.

Dairy Queen’s Ochs elaborated on this point, suggesting that operators pay close attention to making sure the negotiated price isn’t tampered with and that they’re buying the right products from optimum vendors.

He also recommended that operators not only negotiate good distributor programs but deal with good distributors as well. He qualified that to mean distributors that can get products “where they need to be, when they need to be there.”

Ochs said a “soup to nuts” approach to technology must be used so that e-commerce transactions are verified and confirmed down to the unit level.

Carolyn Littlefield, senior product marketing manager, iTradeNetwork, listed key steps that operators, with the help of distributors, can take to reduce food costs:

• Understand your spend opportunities and capabilities
• Perform complete audits of contract pricing
• Optimize products and vendors – make sure that operators aren’t buying 100 hotdog brands and that they aren’t diluting their spending dollars with too many products and vendors; focus spending dollars on particular, high-quality products
• Work with vendors that are not only competitively priced but competitive in all areas of the business relationship
• Reengineer menus by highlighting more profitable products
• Control portions
• Manage purchasing compliance and waste
• Measure yourself against the market and verify your competitive position
• Deliver value, offer patrons good experiences and don’t skimp on service and quality
• Manage promotions, which can be positive to the bottom line but if they’re not managed then they can adversely affect the customer experience and inventory
• Investigate extending into different day parts that may be attractive to consumers.