You Can’t Afford to Ignore the 4 Dirtiest Words in Supplier Pricing

Suppliers care about their profitability, not yours. Get to know these words and take control of your cash.

Four “words” stand between you and more money in the bank.

They’re words your suppliers don’t want you to know.

They’re words that have to do with food costs and food trends.

Words that can save you money. 

They can be the difference between your restaurant being a success or just a mention in a newspaper article about restaurant closings.

But for suppliers, these words spell profits – even though they’re not necessarily using them to their advantage on purpose.

Sometimes, it’s just negligence on both of your parts. Or misplaced information.

But no matter what, your ignorance is costing you cash.

Being familiar with the 4 Dirtiest Words in Supplier Pricing will help make the difference you need.

Your suppliers may not be thrilled… But you’ll be laughing all the way to the bank.

WORD 1: PRICE CREEP

DEFINITION: The regular and consistent rise of a price – in small quantities – over time

You probably remember the situation clearly.

For months, you’d been paying your supplier the same amount for a carton of eggs. All of a sudden, a flashy new supplier says he can sell you the same eggs for $2 less per carton.

The decision felt obvious. Without blinking an eye, you made the switch.

All was well! Money was saved!

But, over time, you noticed your books venturing back to where they started.

One day, you finally checked your invoices. Sure enough, those “cheap” cartons of eggs were now the same price as what you used to pay.

And if the trend continued, they’d be more expensive the next month.

So you contacted your supplier. And he tried to explain it away as rising food costs he couldn’t control.

It sounded… fishy?

Really, it’s plain and simple. That was price creep.

What’s the Solution?

Well, you could do research and see what the market is paying for each ingredient, plot it on a graph, then figure out if you’re paying according to general trends,

Or, if you have the right tools and technology at hand, your prices – and the market prices – will automatically be populated onto a graph. You’ll be able to see whether or not your food costs are increasing in proportion to the market. And all you’ll have to do is snapshot your invoices.

WORD 2: PRICE SPIKES

DEFINITION: When a food cost unexpectedly jumps up then drops back down with seemingly no explanation.

It was easy to spot.

One of our customers had been buying ground beef at a consistent price for months.

Out of nowhere, they had an order that was $.42 more a pound.

That was well above the average nationally, let alone in their state. And it was an important ingredient for their restaurant.

After we shared this concern with the customer, he went in and found that his supplier had decided to order a different ground beef than normal… One that was pricier. And she had neglected to tell him about it.

Safe to say, he wasn’t pleased with this price spike we had found.

We do want to clarify that situations like this aren’t necessarily on purpose. Sometimes, it’s truly an accident on your supplier’s part.

But either way, it hurts your bottom line.

What’s the Solution?

Without proper inventory and invoice tracking, you won’t see price spikes like this until months after they happen.

You’ll be combing through old invoices and happen upon them. But by then, your supplier may have done it to you multiple times.

The better way to catch this? Visual representation of the issue at hand.

But if you can catch it quickly, you can ensure it stops happening. It’s a rough convo to have with an old trusted, supplier. But hey – maybe it’ll get you a refund.

WORD 3: OVERMARKET

DEFINITION: Paying more than the average restaurant pays for the same ingredients.

We analyzed over a half-billion transactions per month on behalf of our restaurant customers.

This allows us to get a good look at the average market price of hundreds of common ingredients.

Your accountant might be able to analyze a few dozen invoices per month, giving you a good idea of your total food spend.

But you’ve got no idea if that’s what you should be paying.

Through our data, we’ve found most restaurants pay about the same for various ingredients.

But each chart has its outlier.

Don’t. Be. That. Outlier. Unless you’re paying way under, in which case tell us your secret, please.

Suppliers aren’t going to tell you when you’re overmarket. Even crazier? You may now know when one of your restaurant locations is paying more than another for the same ingredients.

When digging into their data, we found that one of our customers was paying over a dollar more per pound of bacon at one of their two locations.

This amounted to a $19.65 overspend on 15 lb. of bacon. Even if you are buying only 50 lb. of bacon per month, that’s a lot of cheddar.

bacon-overspending-rfi.png

And both were overmarket to begin with.

That’s just plain ridiculous.

What’s the Solution?

Well, if you’re super internet-savvy or know how to easily check the market price of your most-used ingredients, you can do that.

Or, you can just download the app that checks it for you.

WORD 4: PACK SIZE + EFFICIENCY

DEFINITION: Saving money by purchasing commonly used items in bulk.

You’re constantly placing the same orders for the same ingredients from the same suppliers.

So, you’re probably forgetting to pause, take a step back, and analyze the efficiency of your purchases.

If you do, you might find in the long run, ordering a case of 12 romaine hearts once a week is often way cheaper than buying a 3-heart case every few days.

Even if you have to discard a few hearts, you end up way ahead…

You may think finding these bulk deals is as simple as chatting with your rep.

But, your rep is quite happy selling you higher priced split cases. They’ll make sure you’re very aware of how perishable the ingredient can be, or how it might overcrowd your stockroom.

What’s the Solution?

Do your research. Try and find the pricing of items in bulk, and determine if that type of purchase can affect your business.

Or, you can just have the Orderly app do it for you.

No extra research, no extra time, Just facts you can use to start saving money.

CONCLUSION: LEARN THE WORDS. KNOW THE WORDS. END THE WORDS.

Knowing these four words is going to change how you run your business.

With this knowledge, you’ll be able to find even more secret ways for you to be profitable in your restaurant’s data.

Don’t worry, you won’t have to become an expert. We’re the data nerds – and we can help you find things you haven’t seen before.

And because we know data, we know these 4 dirty words are preventable. And we know it’s not difficult to prevent them, either.

We’re in the profitability business. We want to make sure your business runs well.

That’s why the Orderly App is designed with you in mind. You can use it to save money by running a more profitable restaurant…

And you can download it for free.

Ben Baggett

Ben Baggett

Ben is the Director of Marketing at Orderly, where he leads our efforts to teach the industry to use inventory and data to run a more efficient restaurant.

Leave a Reply

Your email address will not be published. Required fields are marked *

Liked this article? Subscribe & Get Weekly Updates.