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Thursday, June 10, 2010

Should You Cherry Pick Spot Prices?

The quotes come in via fax and the internet. You load them into your recipe costing/inventory software. Next, you feed a shopping list to the program and you print the suggested orders. After some minor changes, you send the orders out to as many as 10 vendors. Is this a smart way to buy?

Yesterday, my client and I were on a conference call with a sales rep from Gordon Food Service in Michigan. Our objective is to eliminate waste in the restaurants. I have always recommended weekly inventories but the salesman's advice was twice a week. He wanted us to feed the online ordering system with the inventory counts on Monday and Thursday. Rather than going through the storage areas with a shopping list and jotting down order quantities for under-stocked items, he encouraged my client to take a full inventory.

If you have never been good at inventory control, the journey to tight control absolutely requires a tremendous change in the normal routine.

You may be unwilling to take twice a week inventories for the entire restaurant. Consider phasing in inventories by category starting with protein. In addition, carefully monitor all waste due to spoilage. If you have a sophisticated database loaded with over 100 count values per year, your entire purchasing history and details of your waste, par values will stare you in the face (with seasonal variations).

More importantly, we want to eliminate waste. Ordering too much of a perishable item with a high cost per pound and a major change in taste and texture profile when frozen has to be avoided. As you begin to order the appropriate quantities, your supplier can work with you on the proper pack/size for each item in the non-perishable goods section. They can help you find labor saving alternatives.

I believe it is highly advisable to stay aware of market trends. Whether I would go the cherry picking route in today's marketplace is the question. It's typically a mistake.

As far back as 1981, Tom Noble from Denver (eventually sold his business to Sysco) sent his rep out to our construction site in Parachute Creek. We setup a ordering guide for our comprehensive 4-week cycle menu. Scott, our Noble rep, went through the stockrooms, walk-ins and outside freezer. He designed a storage sequence for each room. We bought almost everything from this company. Our contract allowed us quarterly audit access and we had a Denver office. Once in a great while we would complain about meat yields. Overall, we enjoyed a very low cost per man per day and waste was non-existent.

Until you work with a competent supplier armed with an excellent database, it's tough to see the way to single source. Go ahead and take the plunge. The potential is huge.


Ken Burgin said...

Good post Joe.

A key question: do staff get into more trouble from over-ordering or under-ordering?

Usually the latter - big dramas occur when a vital ingredient is out of stock for even a few hours. if that's the case, expect to be permanently over-stocked...until you set up proper par levels and reward correct restocking.

Joe Dunbar said...

I like your question Ken. There is a terrific chain of seafood restaurants headquartered in Boston. When I lived in the Boston metro area, we frequently dined at one of their busiest locations.

They had a chalkboard with the fish available located in sight of the diners. As they stocked out of a species, the eraser came out.

Other than Legal Seafood, I remember a similar chalkboard at Simon & Seaforts in Anchorage, Alaska.

These chains cherish the customer's perception of very fresh seafood.

However, I believe you are 100% correct. God forbid you run out at most restaurants.

This same fear produces record levels of over-production of prime rib of beef.

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