A smart approach to food procurement
has never been more vital
Over the past few years, the volatility of the food and beverage markets and the fragility of food supply has been evident.
Negotiations and expert insight can anticipate shortages and also enable the mitigation of price increases. In addition to this, there are some simple and essential strategies that can be implemented to ensure that catering teams are managing both their sourcing and production in the most efficient and cost-effective way.
Without these, in the face of the challenge of food inflation experienced, it may have been easy for costs to spiral and for food production to become inefficient, unsustainable and expensive.
The past two years has seen a substantial overall increase of circa 26% in the prices of food and non-alcoholic beverages. The previous decade, this increase was a mere 9% (ONS).
More recently however, the year-on-year inflation rate for food and non-alcoholic beverages actually reduced from 9.2% in November 2023 to 8% in December 2023 which is the lowest figure since April 2022.
The inflation rates for domestic inputs and output prices for food manufacturers remain high. The output figure is 15% above the five-year average.
It should also be noted that in December 2023, the Consumer Price Index (CPI) recorded a year-on-year increase of 4%. This marked the first uptick since February 2023 and the month on-month increase stood at 0.4%, mirroring the rate recorded in December 2022. What’s more the December PPI figure for the prices of imported goods into factories was a record high and this is normally an indicator that the CPI figure will rise again soon.
It is reasonable to expect that these increases will ultimately be passed on in the food supply chain.
How we can benefit you...
When managing the supply chain, there are several areas we focus on to help reduce costs for our catering team clients. These are things within the purchasing process and start with identifying the key suppliers to the catering function. Tendering can be an effective project, used to evaluate, improve and change suppliers. The overall aim is to ensure the most preferable pricing whilst still maintaining or even enhancing quality and yield. It allows for the direct comparison of suppliers against one another based on specific criteria. This means caterers can identify beneficial changes and opportunities. It is important to consider factors such as product specification, supplier service and delivery, commercial terms and of course price, too.
The process of tendering ensures the selection of an appropriate supplier and favourable pricing. However continuous supplier management is sometimes overlooked by catering operations, potentially resulting in complacency. Fluctuations in the food sector cause both price hikes and reductions and to anticipate, plan for and manage these, a thorough understanding and insight into commodity analysis is crucial. This ensures competitive pricing throughout the duration of the supplier contract. In our most recent competitor analysis, allmanhall are on average 7.5% more competitive as a result of economies of scale, insight, negotiations, proactivity and the application of strategic procurement approaches.
Employing a dedicated procurement organisation to oversee various aspects, such as supplier performance management, the tendering process, ongoing pricing management, and invoice management, can play a pivotal role in securing competitive pricing and providing assurance to the catering function. This strategic approach not only streamlines these critical processes but also allows the catering function to concentrate on its core operations. The procurement organisation’s involvement in supplier performance management ensures that vendors consistently meet or exceed predefined contractual requirements.
Consolidating the number of suppliers within your portfolio may reduce the number of deliveries to a single site whilst also enhancing purchase volumes and delivery values. This makes it easier to negotiate preferential pricing and reduce the overall cost of goods.
And why limit consolidation to suppliers? It can also be applied to range management, where a review of your buying list can help consolidate duplicate lines. This will mean volumes on key lines increase making your product catalogue, menus and spend more consistent. It may also flag that there are more cost-effective pack sizes or lead to identifying opportunities for less wastage.
Swapping to own brand, providing the product specifications still meet the quality and nutritional requirements including allergens, can also reduce costs and create efficiencies.
With all the above, it is important to sample products and consider all factors before implementing any changes or restrictions.
A consolidation strategy can extend to reviewing the cost to serve. This is the amount it costs for a supplier to make a delivery to site… the cost of pulling up the handbrake! By reducing the number of days per week a supplier delivers, delivery costs will be lower, with benefits passed on via drop discounts and other cost savings and efficiencies. Furthermore, and the number of vehicles on site will reduce, emissions will lower and less time will be required for on-site operations related to deliveries.
The next area to address for maximum efficacy is operational practices. These can be assessed and adjusted to reduce their financial impact and deliver benefits and efficiencies. For example, ready prepped veg can be up to 50% more expensive than loose boxed veg. Whereas there aren’t such significant savings available from preparing sandwiches on site and so if these were to be sourced from a sandwich supplier, time may be released to prepare vegetables. This is all about using time more efficiently and reducing the cost of the ingredients.
Measuring and reducing waste is also a consideration for any catering operation. It will inevitably help eliminate unnecessary costs as well as helping to reduce your carbon footprint. Are portion sizes appropriate or do they need to be adjusted? Can food waste produce such as peelings or stale bread actually be used rather than thrown away?
Effectively planning and managing recipes and menus can significantly support cost reduction. Are you able to explore more cost-effective ingredients without compromising the overall quality of a dish? For example, seasonal produce is often a more economical choice (and can be more nutrient-dense, too!). A review of protein sources or adjusting meat portions, with an aim of increasing pulses and vegetable content can also help make your menus more cost effective and ensure you get the greatest value from the food you purchase. Regularly reviewing menu cycles based on the cost per dish ihelps prevent high-cost items from dominating the menu. The proactive market forecasts and commodity updates from allmanhall can be used plan and to adapt menus based on commodity availability and pricing.
And then we come to equipment… whilst the initial outlay can appear expensive, new technology and catering equipment may drive efficiencies and pay for itself in time. The benefits often outweigh the initial investment and are quickly recouped. It is essential to ensure equipment is maintained regularly so as to not compromise food quality. Regular maintenance can also help keep waste to a minimum and make sure excess water and energy are not used.
There are many factors that contribute to increasing costs in foodservice. With careful planning and by implementing a few key strategies from procurement to operations, it is possible to minimise the impact of these.