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Top Five Supply Chain Management Tips

Suppliers serving the hospitality sector have unsurprisingly been adversely impacted by the pandemic, with reports of revenues of less than 10% of 2019 levels during the first lockdown. There are a number of suppliers to the industry who sadly have not survived the crisis, making operating more challenging for hospitality businesses who cannot function without their suppliers. With a second lockdown, additional pressure will be placed on the hospitality ecosystem. It is therefore a good time to review your supply chain to ensure that the suppliers you previously worked with will still be able to deliver all of the products you need when you reopen, or over the next month if you will be offering delivery and takeaway, and to review your pricing and rebate deals. Here are our top five tips to help you shape your supply chain in this ever-evolving trading environment.

1. Streamline Your Supply Chain

When negotiating with suppliers, the larger the basket that they receive, the more competitive their pricing should be, which should not just be limited to the larger nationwide suppliers. If a smaller local supplier is guaranteed business, they are likely to provide better pricing and priortise your custom. Therefore, the more products that you can purchase from one supplier the better.

Most hospitality establishments are working on reduced revenues and have had a reduced workforce, so reducing the number of suppliers in the supply chain will be positive and have a direct impact on both the loading bay, in terms of receiving, and finance as there will be fewer invoices to process.

2. Keep Stock Levels to a Minimum

As business levels fluctuated since the hospitality sector reopened in July, and with this and the potential of further lockdowns, it is important to keep stock levels to a minimum to preserve cash and minimise wastage. When reviewing the requirements of your supply chain, flexibility of the supplier should be a big factor. You may wish to consider:

  • What is their order cut off time?
  • What is their schedule and will it be frequent enough to meet your demand?
  • Can they guarantee a specific delivery time window?

How much stock will they be holding and can they supply a business of your size?

3. Fix Pricing and Building Supplier Relations

When you decide to give your custom to a supplier it is always a good idea to fix your pricing for as long as possible to enable your business to forecast.

However, lengthier fixed pricing may mean the supplier is less competitive on the pricing, so it is about finding the best middle ground between you and the supplier so that everyone has predictability and a beneficial agreement. A general rule of thumb on the length of a price agreements is:

  • Meat – Monthly
  • Dairy – Monthly
  • Fruit and vegetables – Monthly
  • Fish and seafood – Weekly
  • Dry goods – Every six months
  • Chemicals and guest supplies etc – Annually
  • Printing and stationary – Annually

It is a good idea to manage agreed pricing and contracts in a procurement system, like Fourth’s, where you can see clearly when a contract is up for a renewal or a price file is about to expire.

Supplier relationships are key in getting a good deal so keep in contact with your account manager to ensure they understand what your business looks like as the market constantly evolves.

4. Tidy up Your Procurement System

If a supplier is no longer able to deliver to your business, you should remove them from your procurement system to avoid frustration for your team.  A review of the templates would also be a good idea, focusing on the new menus and reduced offering, ensuring that the team only order items that are appropriate for the current business.

After a supplier’s pricing has been fixed, load the pricing into the system so that team members placing orders are confident that the price on the purchase order will be the price on the invoice, which will help the team to achieve their forecasts. Loading pricing will also enable you to effectively manage contracts and price agreements as end dates will be highlighted, giving you enough time to go to market to secure your future pricing agreements.

5. Supplier Compliance

Ensure you have copies of compliance certificates for all of your suppliers, such as insurance and health and safety documents to ensure you are working with a supplier that follows good working practises. Following this due diligence will ensure that you only work with safe suppliers, and enables you to avoid business risk.

With the introduction of Natasha’s Law in October 2021, you should ensure your suppliers are able to provide you with allergen data to load into your procurement system against your recipes so you can track the allergens in every dish. A solution like Ten Kites can assist you in this process, enabling you instantly to update your menus to your website, order at table solution, digital signage, labeling solution and more.

To find out how Fourth can help you effectively manage your supply chain check out our procurement and inventory solution.

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