Food distributors, producers, restaurants and other food companies often split their attention between acquiring raw food materials and assembling or processing them into finished goods. The finished product is obviously important, but you also need to consider the safety, nutrition, and quality of the ingredients.
Accordingly, purchasing is a major area of strategic development for most food companies; choosing the right suppliers, the right ingredients and sustaining that relationship can drastically impact both the profitability and reputation of your company.
So what are the best purchasing practices for food companies to maintain?
The essentials of ingredient purchasing
These are some of the most essential practices to hold:
Balance cost and quality
The most important choice you’ll make in food purchasing is the balance between cost and quality (which includes a number of sub-factors). If you opt for the highest quality available, you might pay so much that you’re no longer able to make money, but if you go too cheap, nobody will want to buy your products. Instead, strive to find some middle ground: suppliers who are able to give you a good deal on food products that fit the needs and desires of your target demographics. For some companies, that might mean shopping locally or through sustainable farms. For others, it may mean looking internationally to find the perfectly cultivated ingredient. Pay close attention to how the cost of each product will affect your bottom line.
Choose reliable suppliers
Next, you’ll need to choose suppliers who are reliable in multiple dimensions. They need to ship your products on time, every time, without being reminded and without error, so you can plan your operations more efficiently. They need to maintain strict safety and health standards, so you never have to worry about tainted products. They also need to be available for communication at all times, in case something goes wrong or you need an emergency resupply. Work only with suppliers you trust—sometimes it’s worth it to pay a little extra for that relationship.
Check the details
Before closing a deal, make sure to check all the details. Visit the supply facility, if you can, to see their operational standards and equipment with you own eyes. Consider all the variables, and investigate the history of the company to make sure you aren’t missing something important.
Many food manufacturers set strict prices on their raw materials, but there’s usually no harm in attempting to negotiate. If you’re trying to get a better deal, they may be willing to offer you a discount based on bulk purchase quantities, or for a longer-term arrangement. Any wiggle room you get here will result in higher profitability for your business.
Prepare and check a contract
Informal agreements may seem easier, but for large-scale operations especially, you’ll need a firm contract in place. Set a term for the relationship, set specific quality standards and operational procedures, and of course, list the prices you’re agreeing on. Double check everything before signing.
Have a stock replacement procedure
Possibly within the contract, you should clarify exactly how and when your stock is going to need replenished. This is one of the most important operational considerations for a food manufacturer; without enough ingredients on the shelf, you won’t be able to continue with production. You and your supplier need to have a clear and mutual understanding of when orders are going to be placed, when they’re going to ship, and when they’re going to arrive. Don’t allow room for misinterpretation here.
If you can, try to simplify your purchasing relationships as much as possible. Working with five different suppliers may help you get the best prices, but it may also cost you hundreds of extra hours in additional paperwork (not to mention more stress in communication). Strive for minimalism in your supplier arrangements.
Maintain positive supplier relationships
You’ll also want to take extra measures to keep your supplier relationships positive and mutually beneficial. Communicate proactively whenever you can, remain cordial when things go wrong, and don’t be afraid to give or ask for favors. Good relationships lead to smoother workflows, and faster conflict resolution; it also means your suppliers will stick with you longer, making your food products more consistent.
Harness new technologies
It’s also a good idea to choose partners willing to work with you via new technologies, which can improve communication and streamline food product tracking. JustFood ERP software, for example, can improve the trackability of your supply, not only making purchasing easier, but also improving the safety of each batch. Technology offers organization and more options for relationship management, so it’s a factor that can’t be ignored.
It’s a good idea to keep your suppliers around for as long as possible, both to ensure the consistency of your products and to ease the stress of finding new partners. However, you also must understand that conditions will change over time. You’ll likely have to update your food purchasing policies and suppliers multiple times throughout your company’s operation, and in those cases, the more adaptable you are, the better.