Effective purchasing in recessionary times

Effective purchasing in recessionary times

Patt Patterson

Effective purchasing in recessionary times

The federal government finally got around to using the dreaded “R” word: recession. But economists, bankers, business owners and almost everyone else were already aware that the economy was suffering from low blood pressure. The question is, How will it affect you?

There’s one given for recessions. People still have to eat. Most of them won’t eat as fancy a diet as they will during good times, and many will scale back their eating out. But most will continue to eat out.

What generally happens in a recession is that eating-out patterns go through two different alterations. Some folks will drop down a notch or two in their selection of places to eat. The ones that normally eat in white-tablecloth restaurants trade down to the moderate-priced range that is often tagged as “family restaurant” or “place mat service.”

The ones that usually eat in that category trade down to the coffee shop. And the coffee-shop customer trades down to the fast-food operation. If any segment benefits in a recession, it will be the fast-food operators.

The second alteration in eating-out patterns is cutting back. These folks may not scale down their restaurant selection, but they reduce the number of times a week or month they eat out. Eating out becomes more of an occasion and less of a habit.

There is, of course, another group: the people who frequent the upscale, top-reputation, highest-priced restaurants and clubs. They are the ones with money, to whom a recession is a temporary thing that doesn’t personally affect them. Unfortunately, the same restaurants they patronize generally also heavily depend upon expense account trade, and that, too, gets cut back during a recession.

What does that mean as far as purchasing food is concerned? It depends upon what type of operation you buy for. It also depends upon management’s recession strategy and tactics.

Many operators – on every level – add lower-priced entrees to the menu. That generally means a change in the types, sizes or qualities in the foods you purchase. Quality changes are the trickiest. I’m not talking about lowering the quality of the regular items; that’s a sure ticket to oblivion.

I’m talking about an operation, for example, that serves prime beef. Even during the recession it continues to serve prime beef on all its regular items. But it may select a choice grade for a special, such as beef bourguignonne.

One operator I knew served nothing but prime beef in his restaurant, except for the filet mignon and chateaubriand. Those two tenderloin cuts were commercial grade, and he was continually getting compliments from customers on the extraordinary flavor and texture of those entrees!

But whether your operation changes its menu at all, you can do a number of things to make purchasing more efficient and cost effective. One of these is to concentrate your purchasing.

One hotel buyer told me he was shocked when his boss, the head of food and beverage, came in one day and complained that the buyer was using too many suppliers. “I explained that I had to shop to get the best price,” the buyer explained, “but he said that I was costing the hotel money, because it cost nearly $20 to process every invoice. And I was spreading my purchases among 27 suppliers, 18 that submitted invoices every week or even more frequently.”

The F & B executive told the buyer that he’d be saving more by consolidating his buying with fewer suppliers. “Also, he suggested that I talk to my full-line distributor account executives and see what they could come up with in terms of a lower-bracket price on higher volume per drop and per month from us,” the buyer said. “He said that kind of shopping could pay off more than a few cents a case or even a pound on the food we were using.

“But he told me the biggest savings would be in the reduction of in-house accounting expenses. He suggested that I try to negotiate payment by monthly statement with everyone I could. That way there would be only one payable per supplier each month, another big reduction in accounting costs.

“He also told me he had done a task analysis in the kitchen and had discovered that we could eliminate 10 man-hours a week by cutting the number of deliveries in half. He asked me to consider how daily meat, seafood and produce deliveries could be cut to three times a week. And how grocery deliveries could be cut back to once a week. And he suggested I consult with our equipment dealer on how to increase the effective cube storage of our existing storerooms, coolers and freezers.”

The hotel buyer was amazed to find that when all the changes were in place, he had trimmed nearly 3 percent from food costs – all without changing the specs of anything he purchased. “I kept hearing about `just-in-time’ buying in manufacturing industries, and I just assumed it would work better for us. It was a shock to find that it doesn’t really work that way in the food business.”

The buyer also noted that he had started the new system last year, just after the price of fuel had skyrocketed and after most of his suppliers had added a fuel surcharge to their billing. “I found that I was saving more by getting fewer and larger deliveries from fewer suppliers than I was paying in surcharges,” he told me. “I was still getting hit with the surcharges, which some suppliers charged on a per-case, per-weight or even percentage-of- cost basis. But I was saving more than that with most of them through volume discounts.”

His equipment dealer came up with a “variable aisle” storage system for both refrigerated and dry storage. “We more than doubled our effective storage space without adding a single extra square foot,” he enthused. “The payback is expected to be less than a year. And, with fewer deliveries, we were able to go from two to only one storekeeper plus we set up a voucher withdrawal system that has cut our shrink by nearly half.”

Carrying more inventory has meant fewer emergency calls and a better tracking system for the buyer. “We now have our inventory and usage on a computer, and the chef and I can tell at any time what we have available,” the buyer said.

That’s one hotel, in one city. But the concepts are good ones to consider in this time of recession and higher fuel costs.

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COPYRIGHT 2008 Gale, Cengage Learning