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Special Report
Purchasing Forum Breakfast:
The buying game

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In an economic environment where driving revenue and maximising bottom line is the major focus, what role do purchasing decisions play? Has price overtaken other issues? Or have organisations sought to utilise their buying relationships as part of a wider agenda to evolve the business model?

A Purchasing Forum Breakfast hosted by EP magazine and sponsored by Beacon Purchasing was launched today to raise the level of discussion and debate in this area. Held at 1 Lombard Street restaurant and attended by people involved in purchasing decisions across the hospitality industry, the forum’s aim is to high-light the topics and issues impacting decision making in this area.

The subject of the forum was: Effective purchasing is all about price…or is it? In an open discussion the group challenged this statement and raised a number of other points for consideration, often relating to the fact that buying decisions are increasingly focused on adding value to the client or consumer. As one attendee commented;

“If you cut the purchase price you lose something, whether it is through the supplier service or quality. Value is not always just quality and price - its quality, price and service.”

The forum’s discussion

A number of thought-provoking points were raised by the group:

Local v. national supply

  • There was an overall agreement within the group that local supply was a positive ideal, and that this was important to maintain diversity of supply and a sense of community. As one delegate summarised:
    “Investing in suppliers is similar to investing in chefs; we need to invest in local suppliers to have them as part of our future.”
  • However, the point was also made that this philosophy does need to be matched by the requirements of the business to ensure the internal and external expectations are met.

    “We don’t use local suppliers as you cannot always get the reliability. But we do ensure that our national suppliers take advantage of local sourcing.”

    “You have to take into account business and customer appropriateness. If you need 300 racks of lamb, providing lamb from local butchers is often not a reality.”

    “Suppliers cannot be all things to all people, so if you need 1 million hotdogs on a weekend versus 35 day old beef for a high-end restaurant our role is to balance the requirement and source your products accordingly.”

  • The discussion also raised the question: does local always mean better? So given the variety of compliance issues involved in operating a business, is one national supplier, who takes on the risk of maintaining partnerships with local suppliers involved in delivering a contract, a more sound commercial approach?
    “Local often means small business, and that means that they may not always be on top of things like health and safety.”

    “Larger suppliers can provide quality on a national basis – they may source locally to meet demand as much as possible, but as a client you are still getting one invoice, one relationship.”

    “We try to use suppliers who match our size of business. We have found that this really works and have tried going to larger companies for better prices but often there is a clash of cultures.”

    Ultimately:
    “People want small suppliers, good prices, great coverage, a good relationship and reliability and consistency. The challenge for suppliers is to maintain a small company feel, yet provide big company advantages.”

The effect of cutting purchasing spend on the customer experience

  • This area of debate relates to the argument that, when an operator wants to reduce their prices, they always lose something – be it service or quality - that touches on the customer experience.
    “You have to buy the right product to suit your business, so it is not just a price issue but about the deal you can get and the knock on effect. It’s all very well to say we need 75% GP but it’s no use if you have an empty restaurant and you need to get the best quality at the right price.”
  • The group distinguished between two areas in which spend is managed; those which are directly customer facing v. those items used behind the scenes.
    “UK pork tastes better than Dutch pork, it’s all very well to say cut the price and no-one will notice…but they do.”

    “Dry goods are consolidated however perishable and niche items are locally sourced”

  • It is important to get the balance between suppliers, and this means taking into account how a product fulfils the business demands.

    “We have an entirely different supply chain model for different parts of our business, even though it’s all B&I.”

Relationships

  • The subject of buying relationships was a recurring theme, specifically the relationship between the buyer and supplier and the relationship between the buyer and internal customers (ie employees of a business).
  • It was noted that purchasing decisions remain an emotional touchstone within organisations, yet there is often a compelling argument for greater discipline of buying decisions behind the scenes.
    “Businesses are not good at driving compliance. They might have negotiated their Top 100 contract lines but the buyers will go outside of this and suppliers know this; so we have got to understand what we are actually buying.”
  • Equally, in the current economic environment using local suppliers raises a question over accountability and building partnerships with smaller concerns.
    “The accountability between buyer and supplier is a two way street. We have a responsibility to our suppliers and if there are small suppliers going to the wall, then it is an industry failing. It’s like saying we liked you when times were good but now times are bad, goodbye.”

Knowledge & best practice

  • An interesting topic for consideration related to the level of consumer knowledge, particularly around food, and its effect on buying decisions by organisations.
  • There was general consensus that knowledge about food in particular is a major trend as it impacts greatly on the customer experience.
  • However, the question was also raised about consumer expectations relating to non-food products such as linen, glassware etc.

    “People ask how much Sauvignon Blanc is; it’s like saying how much is our meat.”

    “Does the customer care if their wine glass is the same as Hilton?”

  • The group also discussed the willingness of people within purchasing to share information in order to enhance transparency and increase influence.
  • Whilst operators may remain reluctant to share commercially sensitive information, it was argued that there is a place for aggregating key statistics about the buying power of the hospitality industry, so that a higher profile within lobbying, government and other groups can be achieved.


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