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What to Consider When Choosing a Supplier

What to Consider When Choosing a Supplier
Author profile: Frank Fileccia
For over 32 years Frank Fileccia has been helping luxury inn, boutique hotel, resort and restaurant clients achieve their potential.
Price is what most businesses will see as the deciding factor when choosing a supplier, however it is one of many considerations before deciding who to give your business to. Consider the following when evaluating new suppliers:

Quality of service/support

Can the new supplier provide the same level of service or enhanced service levels than your current supplier?

Availability of Product all year round.

If you are planning a year round menu, make sure your supplier can meet your needs throughout the year. Check to see what cost some of the items are going to be if you plan on using them out of season. Shipping or flying in items from areas where the produce is in season could reduce your bottom line significantly. Ability of supplier to deliver ???emergency??? items at last minute. The ability of the supplier to see you through a tough spot can cost you a lot less than buying the same items in the supermarket or for cash elsewhere.

Supplier can offer free training to staff in relation to service and preparation of products.

Suppliers often offer free training to staff on how to serve or produce their product. Make the most of this opportunity.

Terms of payment for supplies (discount for direct debit, 30 days, 60 days)

As a new customer, the supplier may insist on cash terms to begin with. This is worth negotiating and providing details of other suppliers you deal with who can provide a credit reference for you may help you get 30 days credit to begin with.

Compliance of supplier with statutory legislation

Does your new supplier comply with the relevant HACCP legislation or other relevant legislation? If your supplier produces food, you can request a copy of their Health Board Certificate and HACCP Compliance certificate to ensure the standards you are operating to in your business extend to your suppliers too.

What other businesses have to say about the supplier

No better way to find out how reliable a supplier is than to ask his customers. Ask for a handful of references in the area and do your homework-check them out!

Delivery Charges

Does the supplier charge extra for delivery? Maybe they have a surcharge for delivering outside of certain times. Establish this before your first order and get their terms in writing.

Policy/charges regarding returns of unsold product

If your supplier is interested in doing business with you and growing the relationship, they shouldn??™t charge for returning unsold produce (within reason). Of course, this should not be abused either or you will lose the support of the supplier if they are taking back as much as they are delivering each week. Returning produce would normally only apply to non-perishable items over-ordered in error or for a function that was canceled etc.

Policy regarding cost of substituted items when regular product is out of stock

If you order a certain item from the supplier and it is out of stock, they may substitute another item in place. Make sure that you will not be charged any extra for this item even if it is of higher quality. The supplier has run out of the product and you shouldn??™t have to pay for this. Again, get this in writing before you begin your ordering.

So how do you get the best price?

Price is an area where large savings can be made or lost. All suppliers have a list price. This is the highest price the supplier will have and should never be assumed to be the best price you can get. A number of factors will determine how much of a discount you can get, such as Volume of Sales, Payment terms (30 days, 60 days etc), frequency of order, how tough competition is in the area, whether you will be using supplier??™s equipment such as coffee machines.

In order to get the best price from a representative of the supplying company, you need to look at it from his angle. He will have targets to meet each month for volume and number of new customers. Knowing this allows you to negotiate to get the best deal. Before you meet with the rep, evaluate your current spending. Know how much you spend each week, month and year on the product he is competing to supply. While knowing the value of the high-end items is important, don??™t let the rep sweet talk you into what seems like a great deal on the high selling items, only to discover later on, that the lower selling items are costing you a lot more.

Lower selling items are of equal importance and can collectively be worth more than the handful of best-sellers. Establish the cost, exclusive of percentage discounts and bulk deals as you need to know what you will spend per item irrespective of the level of trade. Advise your rep that you don??™t want free TVs, DVD players or T-Shirts for the bar staff, you want the best possible deal for the product you want to buy. Don??™t let the rep compare your current prices against his because figures can be manipulated to show any result you want. Ask him for his best price once he knows your level of trade, then do the comparisons yourself. I cannot stress enough how important it is to know your own business, customer profile and value of invoices to allow the rep calculate his best price on your terms and to allow you work out whether a ???deal??? is actually a deal in light of your business model.

Once you have agreed on a suitable price, tell the rep you want to fix the price for six months or more. You will have more chance of doing this if the rep is reaching his targets because of the deal. Perhaps you can reduce the number of suppliers you use, in flavor of this new company, thus allowing the rep to increase market share over the competition. If you do fix the prices, get it in writing from the company before you place your first order.

So to summarize, examine your own spending habits before negotiating with reps, understand what affects the discounts you may be eligible for and look for the best price (exclusive of bulk percentage discounts and deals) that the rep can offer. Use this information to compare suppliers taking into account all factors mentioned above, then fix prices with your preferred supplier and measure the savings that can be made as a result of the change.
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