2011 Catersource - Creating Win Win Relationships With Your Suppliers
How to Create Win-Win Relationships with Your SuppliersPresented by:Warren Dietel, President & OwnerOrlando, FL
Housekeeping• Questions welcomed• Spend time on what s important to YOU!• Discuss the WHY behind creating a great relationship with your suppliers• Leverage your purchasing power• Learn about Master Distribution Agreements• Group Purchasing Organizations• Twitter: @pscatering, #catersource• Facebook.com/puffnstuffcatering• Presentation will be available online: http://www.slideshare.net/WarrenDietel
About the Speaker• Entrepreneurial from the start• Professional Experience – Car Detailing, Puff n Stuff Catering, Disney Weddings, Disney Institute, Scott Kay, back Home!• Industry Involvement – ICA Board Member, Regular Speaker for Catersource, The Special Event, American Rental Association, and NACE
The Puff Story• Opened in Central Florida in 1980 as a family-owned business• Purchased in 2003, annual sales of $1.8 million, at operational limit• Antiquated infrastructure with inefficient space & poor equipment• Tremendous potential + aggressive growth plan = 267% growth in 3 years• Opened new commissary in 2006
It’s All About People & Culture• 40+ Full-Time Team Members and 200+ On-Call• Diversified business segments and multiple markets – Orlando & Tampa• 3 Exclusive Venues and over 100 Preferred Status When employees think, act and feel like owners… everybody wins. - Jack Stack
Building the Case for Win Win• Buy-sell context: both parties never want the same thing• Complimentary motivations introduce opportunities for mutual satisfaction• Win-win approach = long-term, mutually beneficial buy-sell relationships when… both sides’ needs are well served
Developing an Effective Purchasing Plan• Transition from: – Low value, transactional/administrative focuses to – High value, strategically focused initiatives that add competitive advantage• Competitive advantages achieved by applying the best practices of world-class purchasing operations• Best procurement practices = significant tactical and strategic value to your organization
The Norm• Vendor & distributor relationships• Orders are placed• Orders arrive• Invoices are processed• Operations team takes over• Product evolves
How Does Effective Purchasing Impact My BottomLine?• Reduces your overall delivered cost• Produces 5%-15% savings on annual purchases Remember the 80/20 Rule! 20% of Costs - impacted by smart purchasing Remaining 80% - managed by operational controls What you do once products arrive at your backdoor
The PlayersStart by defining and understanding theworld of product distribution1. Manufacturers2. Freight3. Distributors4. YOUR TEAM!
ManufacturersDevelop/produce products for sale• National branding, spec, quality and price affects your buying decisionPricing• Varies by product category (Dry food, fresh meats, frozen seafood, plastic packaging, chemicals, health care, equipment, etc.)• Affected by demand, market conditions, time of year, acts of God, etc.
Manufacturers• Utilize multiple sales and marketing channels – Company-paid sales teams – Food brokers – Distributors• Bury money in each channel – Incentives paid to whoever moves product – Large advances frequently paid to distributors – Marketing costs
Manufacturers• Focus on your high volume purchases• Leverage descending order reports• Negotiate directly with manufacturers – ASK to meet and Food Shows• Understand what is important to them• Help them understand your organization• Ultimately, committing to purchasing volume with manufacturers = deviated pricing and/or volume discounts.• Understand available rebates
DistributorsAre essentially freight companies• Very low margins = focus on volume• Distributors vary in all shapes & sizes• An efficient distributor is always effective Large vs. Small Distributors Efficiency Attention Higher volume Lower volumePurchasing power/buying leverage Limited buying leverage
Why is Freight Important?Products travel to distributors by train,ship, tractor trailer, and airplane• Multiple variables affect costs/calculations – National published freight vs. actual – Box size vs. weight – Full truck, rail car, container advantages• Partnering with right distributer is critical!
How Distributors Make MoneyDo you have a dedicated Profit ManagementDepartment? Most Distributors do…• Markup/margin on all products• Freight• Buried case monies• Upfront payments• Distributor branded items• Large purchase volumes• Internal cost controls• Product loss• Sales!
How Distributors Make MoneyWho gets paid on every case sold? Sales personto CEO, share holders and everyone inbetween…• Street accounts = the “sweet spot” – Typically 15%-25% Margin – High volume accounts – 10-15% Margin• GPOs, Multi-unit, & national chains – Average 6-9% Margin• The Role of a Distributor’s Sales Person – Process orders, service customers, protect the business and profitability – Paid on commission• Consider online ordering
Calculating MarginHow is your delivered price calculated?Pricing based on:• Annual sales, drop sizes• Delivery frequency• Payment terms• Business type• Items ordered• Agreement length or terms
Group Purchasing Organizations• Goal is simple: Contribute to the bottom line of the members while increasing sales for participating suppliers• Analyze your organization and specific purchasing history, needs, and future requirements• Develop unique purchasing strategies• Leverage the combined purchasing power with Distributers and Manufacturers• Negotiate Master Distribution Agreement with Distributers and Manufacturer Agreements
Group Purchasing Organizations• Reduce your time chasing the deal• Track and manage your refunds• Identify manufacturer opportunities• Piggy back on others• Typical Fee Structure – 1% - 2% of Annual Purchases – Percentage of Rebates – Manufacturer
NegotiatingDistribution Agreement Points• Financial – Annual sales/commitments – Growth incentives – Deviated pricing – % of overall broad line business, 70% + – Audit privileges – Terms – payment and length (typically 1, 3 and 5 years)• Logistics – Delivery $$$ or drop size, $1,500+ – Delivery frequency, delivery day & time• Product – Number of proprietary items stocked – Distributor branded items
Orders/Payments• Online ordering – If appropriate for your business model – Exclude the sales person (and commission) from your program – Empower a trusted person to managed the process in-house• Delivery savings – Key drops – Off-day delivery• Take advantage of quick-pay incentives• Pay on-time! – Poor credit history and slow payments = credit risk and higher margins
Your Role• Receiving product• Invoice price• Product handling• Portioning/menu item costs• Waste• Theft (Industry average = 3%)• Appropriate pricing• Implementing systems and controls
Relationships The Cardinal Rule Don t chase the lowest price Buying from multiple distributors dilutes your purchasing power • Leverage your volume with a select few• Create win-win relationships with distributors by clearly explaining your definition of success• Listen to distributors challenges and needs• Remember – loyal and educated customers receive better pricing
It s a Wrap! In the end, successful implementation is up to YOU! Devise a purchasing plan that best fits your operation Everyone in this room can improve their delivered price with a little effort!
ICA Membership BenefitsCome learn more at the Inspiration Zone/Attendee Lounge or Tradeshow Booth #1918• Professional Recognition• Education: Culinary Learning Journeys, Regional Education Days, CaterArts & Monthly Free Webinars• Amazing Networking• Your chef enjoys membership in the Culinary Council• Work & Learn Program• Membership Show Special: ONLY for Catersource Conference 2011 • New Members: $250 vs. $290 (must be paid in full) • First 250 new members get Inspiration CD FREE!
Thank You! To download a copy of today s presentation, go to: http://www.slideshare.net/WarrenDietelWarren G. Dietel | email@example.com | 407.398.6306