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Purchasing, Procurement and Negotiation
Untapped Potential
Many food companies fail to realise the contribution the purchasing function of their business can make towards the achievement of corporate objectives. This untapped potential for profit becomes even more attractive when market conditions on the front end of the business leave little room for manoeuvre.

Do you realise that in a business which returns 8% nett profit; an input saving of €400,000 has an equivalent impact on the bottom line as sales growth of €5,000,000?
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The Key to Successful Purchasing Management



All food manufacturing businesses go to some lengths to ensure that they understand the financial status of their business; production and distribution efficiencies, cost models, variance reports, down time, wastage reports etc. etc. Yet, (and this is especially true of distribution, concept and food service businesses), considering the percentage of turnover expended on inputs; many food companies do not understand the cost structure of their major suppliers! If it is in your interest to understand your own business inside out; it is much more in your interest to understand the businesses of your major suppliers (and the industry they operate in). Why? Because it is in your supplier's interest and it is the job of their management and sales teams to make as much profit from your business as they can.

If your business is important to your supplier, it is almost always possible to do a better deal.


The key to unlocking a better deal is the possession of a clear understanding of your supplier's cost structure, what price they need to break even; to make 5%, 10% etc.


Knowing with near certainty a supplier's cost structure and having the ability to independently monitor changes and developments as components of this cost structure (such as internationally traded commodity prices) changes, places the purchaser in a position of relative strength and is the key to successful purchasing management.
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How to Get the Best Deal

Comparing quotes from different potential suppliers and 'hardball' negotiation are techniques which have their uses in particular situations; and the various purchasing techniques should be used interchangeably as required. However; in an industry which is increasingly consolidating, it is more and more frequently the case that moving from one supplier to another is not without complications.

Customers are frequently aligned with a particular supplier, and their major competitors are often aligned with their supplier's competitors. Moving from one supplier to another (especially of finished products) is time consuming, costly and has opportunity costs associated with it. In this situation, it is often better to find the key to unlocking a better deal with the incumbent supplier than to look to far away fields.

The negotiating power afforded by a detailed knowledge of your supplier's cost of production and the changing world commodity markets is invaluable. It serves to refute spurious price increase claims, to quickly decide on the validity of a price increase claim and then agree a price increase in due course where one is in order (rather than waste time and energy trying to check it's validity), to seek out price reductions where the supplier's margin is excessive; and to work with the supplier to reduce their costs. In the event of seeking a new supplier for whatever reason, it greatly assists in getting the right price at the start, therefore eliminating all of the pain caused by a lack of competitiveness arising from lack of, or, faulty market knowledge.

Remember, there are better deals out there; with the knowledge and expertise that Radix® have to offer, you can significantly enhance the profitability of your business.

Just click on here to make an enquiry.


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Procurement


Food Service market suppliers, concept operators and distributors are often faced with the need to quickly source a new product to meet a customer's changing requirements, to plug a range gap quickly in order to secure a contract, to keep up with changing market needs; or in anticipation or exploitation of changing consumer needs. Whatever prepared food you need to source, Radix can help you with our extensive database and contacts in Europe and further afield.

Just click on here to make an enquiry. 

Radix Consultancy Ltd.
Mornin,
Moydow,
Co. Longford,
Ireland