Are you looking to reduce costs and streamline your restaurant’s operations?
To achieve these goals, consider supplier consolidation. This is the process of reducing the number of suppliers you work with to simplify your inventory management and operational processes.
In this article, we will explore the benefits of supplier consolidation for restaurants and how to effectively manage this process.
Consolidating suppliers has always got to be the best thing; you’re increasing your purchasing power and building better relationships. Buy as much as possible from as little as possible. – Scot Turner, Founder and MD at Auden Hospitality
What is Supplier Consolidation?
Supplier consolidation is the process of reducing the number of suppliers that a restaurant uses to streamline operations and improve efficiency.
This can be achieved by selecting a few – or even one – key suppliers that can meet your restaurant’s needs, from food and beverage to equipment and supplies. By consolidating suppliers, you can simplify your ordering process, reduce costs, and build stronger relationships with your suppliers.
Consolidating suppliers must be a strategic process, and the number that restaurants can reduce to depends on the type of restaurant and the nature of the business. For example, some restaurants will get fish from one supplier, and meat from another, so in this case, consolidating suppliers could be based on reducing the suppliers for each inventory group.
How to Manage Consolidating Suppliers
Assessing your current situation is vital to developing a strategy for consolidating suppliers. It’s important to focus on the quantity and quality your restaurant requires and any contracts with your current suppliers.
For multi-site locations, it’s also important to consider that supplier consolidation may have to happen regionally, with individual locations consolidating their supplier as opposed to the overall business.
To successfully manage supplier consolidation, it is important to build good relationships with your chosen suppliers. This includes open communication, regular meetings, and providing feedback on their products and services.
Benefits of Supplier Consolidation for Restaurants
Consolidating suppliers can bring several benefits to restaurants. Improving the relationships and communication between businesses working together opens up new opportunities to grow both businesses and control costs in the process.
Consolidating suppliers can help reduce the cost of goods sold for your restaurant in various ways. By working with fewer suppliers, you can benefit from cheaper delivery costs as you can consolidate orders and reduce the number of deliveries.
It also increases buying power and allows you to negotiate better prices or pricing deals and longer payment plans with your suppliers. Minimising price volatility is another benefit, as you have more security with your suppliers, which reduces the risk of sudden price increases.
Increasing the order quantity of specific items and buying in bulk can also help to further reduce overall costs. Buying one 5kg box of tomatoes often works out as cheaper than buying four 1kg boxes of tomatoes due to the reduced labour and packaging costs. If you’re a multi-site restaurant business that can benefit from sharing suppliers, ordering a pallet would be significantly cheaper again. Altering the menu to increase usage of excess items, or adding specials is another way to keep the cost of goods sold down.
Increased Negotiating Power
Consolidating suppliers gives your restaurant more buying power, which in turn increases your negotiating power.
Negotiating powers work to improve the quality and delivery of orders, as well as influence prices. The more leverage you have allows you to request higher quality items and ensure that you’re one of the first on the delivery list to allow for maximum prep time.
Increased mutual dependence also allows restaurants to be able to request specific goods, and develop an agreed level of quality that you expect. It is easier to ensure that suppliers are compliant with the values you live by in your restaurant.
More Efficient Account Management
Consolidating suppliers can lead to more efficient account management for your restaurant. With fewer suppliers to manage, your accounting department will have less to deal with in terms of invoices, payments, and reconciliations.
A smaller chain of suppliers means that you can have more of an impact on each supplier and ensure that they align closely with your restaurant’s values and standards. Managing this can be crucial for some restaurants, but with too many suppliers it’s almost impossible. Consolidating your suppliers allows you to spend more time with them, and learn from each other.
Development of the menu can also benefit from a good relationship with suppliers. Being the first to know about the newest and most popular cuts of meat, or the best quality seasonal vegetables can help restaurants create the best menu for their customers, and therefore boost sales.
Risks of Consolidating Suppliers for Restaurants
It’s important to note that whilst consolidating your suppliers can lead to many benefits, reducing it too much, to a single supplier, can bring some risks from over-dependency.
Reliance on one supplier can be risky during slow periods, for both restaurants and suppliers, with the risk of one becoming insolvent.
If your restaurant relies on just one supplier for all of its ingredients, equipment, or other essential items, you are putting all your eggs in one basket. If that supplier goes out of business or fails to deliver, it can leave your restaurant in a difficult position, negatively impacting business and reducing restaurant performance.
Also, if there are any compliance issues with that supplier, such as food safety violations or unethical business practices, it can damage your business’ reputation. Profitability can also be affected as looking for inventory on short notice will likely lead to increased costs, and therefore reduced profit margins.
Relying on a single supplier can limit your options and flexibility. If you only have one supplier, you may not have access to a wide range of products or competitive pricing.
It can lead to a lack of innovation and creativity.
When you work with multiple suppliers, you have the opportunity to explore different options and try new products. This can help keep your menu fresh and exciting for your customers.
However, if you consolidate suppliers and limit yourself to just one, it may result in you missing out on the chance to discover new and unique ingredients that can set your restaurant apart from the competition.
In conclusion, consolidating suppliers for your restaurant can bring numerous benefits including:
- Reducing costs
- Increasing negotiating power
- Allowing for more efficient account management
By streamlining your supply chain, you can save time and money while ensuring high-quality products for your customers. To maximise these benefits, it is important to carefully consider the potential drawbacks and weigh them against the benefits before deciding on supplier consolidation.
Overall, supplier consolidation can be a strategic move that helps your restaurant thrive in a competitive industry.