Who really is your supply chain partner?
By Bruce Reinstein, president, Consolidated Concepts
A partner is defined as a person or company who takes part in an undertaking or a relationship with another or others comprised of shared risks and profits. In a business sense, your partner needs to make money if they are saving you money. However, there can’t be a hidden agenda as transparency and high integrity are crucial to any successful working relationship.
The main question is: Do you look to your relationships for information and support on things that they are not experts in, or do they look out for their own interests first before yours?
There is a large group of people and companies that you can turn to in order to reduce your costs, keep you informed on market conditions, commodity outlooks and so much more. There is no shortage of consultants, GPOs (group purchasing organizations), manufacturers, distributors and other “experts” in the field of supply chain solutions. And they all have some type of value. Many are smart, experienced industry people, and some are novices.
So, what are you looking for as an operator and who is the right partner for you? A lot of that depends on what your needs are and whether you are looking for a partner to help you make the adjustments needed for further success.
When it comes to choosing the right partner, here are some of your choices:
Consultants: Supply chain consultants come in many shapes and sizes. They tend to be very specialized in a particular category with a moderate background in other areas. Many have low buying power because they are small and have limited infrastructure besides themselves to support you. They may try to do it on their own or bring in channel partners to support them. The question to ask is are they making money from these channel partners and if so, is this channel partner the right partner for you, the operator. Some consultants will get into a bundling situation where they may be working as a group. Be careful, as you may be getting into a relationship with some who are not as reputable as the consultant you hired.
GPOs: Group buying has its benefits. Anytime you have additional leverage there are going to be savings opportunities. I recommend that all restaurant brands partner with a GPO in some capacity as there will always be benefits. As you evaluate GPO's, be sure to focus in on transparency. Any partner, including a GPO, must be looking out for you as they make money themselves. Saving you money while lowering quality is easy, but that is not what you are looking for from a partner. Make sure the savings that you are being shown is an exact match to your current product, or is of comparable or better quality. If the product is not exactly the same, be sure you test the product before approving.
Distributors: The distribution agreement is your most important contract, but what is the role of the distributor? It is important to understand that a distributor is in the business of making money. They care about themselves first, and then you. Their goal is to have you buy as much from them as possible, make their drop sizes as large as possible and for you to buy the most profitable items they can sell you. There is nothing wrong with that, but it is a reality. If you are using a distributor as a strategic partner — where you are getting advice on products, markets, etc., be aware that the answers will be based upon what is best for them first and you second.
Manufacturers: There are many manufacturers and they have many competitors. It needs to be about your specification, how you are going to use the product and what you can afford to spend. Be sure that manufacturers know your business when they come see you. If someone is trying to sell you frozen soup and you make fresh soup, you know that they will not be a good partner. If a manufacturer can’t tell you why their product stands out in comparison to other manufacturers, you will know that they are selling a commodity. In any case, how much you like someone and whether they will get you tickets to a game should not be the deciding factor on who becomes your manufacturer partner.
Partners: These are the companies that should focus strictly on you. They should be honest, transparent and understand the direction you want to go. Make sure they understand your pain points. Additionally, make sure that they are not afraid to give you with alternatives if they feel it may provide savings based upon yield as opposed to only price. They do not sell to restaurant operators, they partner with them.
They should have the team to work on those areas that are critical to you. They make money, but it is based upon results and it is geared toward a long-term partnership. They should also pay close attention to time constraints you may have so your productivity and ROI are at the maximum level.
Overall, there are many people and companies who will have a bearing on the profitability of your organization. Some will affect it in small ways and some in major ways. The key is to build relationships based upon potential results and not based on emotion. You need to ultimately build trust with your partners — whoever you choose — and they need to perform for you each and every day.