Procurement is the strategic combination of Sourcing and Purchasing intended to ensure that the buyer compares Quality, Quantity, Time, and Location for products and services to secure the best possible price.
Let us break it down in simple terms.
- Defining Requirements (determine best products to buy)
- Category Analysis (how to best shop for them)
- Supplier Selection (where to buy them)
- Contract Negotiation (agree on pricing)
- Contract Compliance and Oversite (manage that agreement)
- Supplier Management (reconcile the transactional activity)
- Identify Needs (how much to buy)
- Purchase Requisition (put it in writing)
- Issue Purchase Order (send to your distributor)
- Receiving (receive the product)
- Invoice Match/Facilitate payment (ensure accuracy of pricing)
- Pay invoices (pay the bills)
The main benefit of this process for a buyer is to receive products at the best possible price. Unfortunately, the majority of restaurant operators today do not have any process like this in place, which impairs their ability to compete with those who do.
Our own data shows that restaurants that do not follow any formality in procurement spend 15% more on food and supply purchases than their peers who do.
Chefs ordering by phone, text, or email, provides no opportunity for review and offers no ability to confirm pricing errors or to integrate with other vital business systems such as POS, food costing systems, or accounting.
I always say, a restaurant’s order history is a “treasure island”. There is a lot of potential savings opportunities can be found there, but without procurement, there is no map.
Historically the challenge to implementing strong procurement was that it was complicated and labor-intensive especially for the smaller chain or single location operator. This remains true, but in today’s world, restaurants can leverage people and technology through services that can be outsourced. In my previous article, I suggested that restaurants should seek out BOH management services. Ideally, this service MUST include procurement as part of their offering. Let us see how a restaurant would participate in the procurement process based on its definition.
In this model, restaurants continue to make decisions on how much to buy (Identify Needs), make requisitions, properly receive, and pay invoices while leveraging people and technology through a BOH Management Service.
The effective procurement process is vital for restaurant operations. It helps restaurants strategically approach food and supply purchases and it saves money. The process, most of the time, is not in place and it negatively affects the bottom line. Restaurants should be seeking out BOH Management Services that have these processes in place.