Vendor-Selection Criteria Overall Value

Understand how methods used to select a vendor affect an F&B operation’s cost of sales. Develop selection criteria based on the operation’s needs. Ability to investigate potential suppliers and assess their overall fit into the operation.

Discuss the implications of various pricing systems, ordering procedures, and credit terms. Describe perceived value and its relation to product quality. Describe the difference between AP price and EP cost.

When “hiring” a vendor: – Review multiple applicants – Interview several candidates National chains provide purchasing support – Still must buy some items locally Some vendors have exclusive rights: your choice is to take it or leave it

References Compatibility/Chemistry Size of the Firm Location Delivery Schedule Storage Availability

Free Samples Social Responsibility Lead Time Returns Policy Minimum Order Requirements Purveyor’s Experience

Technological Capability Ordering Procedures Reciprocal Buying Willingness to Barter Cooperation in Bid Procedures Long-Term Contracts

Credit Terms Cost-Plus Purchasing One-Stop Shipping Standing Orders Vendor’s Consulting Support

References – Join organizations to meet other buyers National Restaurant Association NRA (local chapter) American Culinary Federation (ACF) (local chapter) – Ask about vendors in the area

References (cont.) – Ask for references from vendors and call them! Is the vendor fair, honest? Are drivers easy to work with? Are deliveries made on time? How are credits handled? Will the vendor make emergency deliveries?

Compatibility/Chemistry – Note positive or negative vibes – Are you comfortable with the person? – Hopefully this is a long-term relationship

Size of the Firm – Large firms Adequate inventories Ability to meet your needs May be impersonal – Small or specialty vendors May not have large inventories More personal service May cost in the long run in stockouts and shortages

Location – The closer the better Staff members may need to pick up items Will-call or cash and carry buying will be easier Ideal world – between your home and the restaurant

Delivery Schedule – May not always have a choice as to time Ensure that a knowledgeable person is available to receive delivery – Don’t use a purveyor who uses third-party shippers

Storage Availability – Sometimes available after a big order – Stockless purchase play – pay for the order but receive it in small amounts

Free Samples – Good for trying new products – May make some managers nervous – Super Bowl tickets aren’t “free samples”

Social Responsibility – Do manufacturer’s employees receive a living wage? – Does the vendor buy from minority- or women- owned firms?

Lead Time – Time between order and arrival of shipment The shorter the better – Lets you make better ordering decisions – Saves you money in the long-run – Helps keep inventories at manageable level

Returns Policy – Is it a hassle to get a credit to your account? – Must you pay a fee for the goods to be picked up? – Is there a restocking fee? – Best when the driver gives you a credit slip right on the spot

Minimum Order Requirements – Meeting the minimum order requirement May qualify you for free delivery May give you will-call privileges May be more than you can do – so find another vendor

Purveyor’s Experience – Do you want to be a new purveyor’s guinea pig? – Financial stability is an issue here – Look for a good track record when seeking a vendor

Technological Capability – Accessible online? Product availability New products Recipes Current promotions – Still need face-to-face contact Trends Gossip

Ordering Procedures – Online is preferable – Avoid complicated ordering systems

Reciprocal Buying – “I buy from you if you buy from me” Not a good idea Break even arrangement at best Often supplier will take you for granted and you will lose services

Willingness to Barter – Tradeouts Is vendor a member of a barter group? A $500 dinner may only cost you $200 Food vendors don’t usually trade Advertising account executives like these kinds of trades

Cooperation in Bid Procedures – Request for Quote Good to shop around occasionally Current vendor may be responsive Current vendor may be secretive and not respond Online systems provide information immediately

Long-term Contracts – Some vendors may not commit to long-term prices or product availability – Most vendors want large buying commitments before committing to long-term contracts

Credit Terms – Ask about Financing Discounts – Cash on delivery – Prompt payments – Payment in advance Deposits for equipment and packaging Credit Period

Vendor-Selection Criteria Cost-Plus Purchasing – Definition: purveyor’s cost plus negotiated percentage markup – Buyers have a love/hate relationship with this process – Vendors don’t like cost-plus – they take on more risk

One-Stop Shopping – Also known as: sole-source, prime-vendor, preferred-provider or single-source procurement – Easy for the purchaser – May cost more but result in labor savings

Standing Orders – Driver leaves enough product to bring you up to par stock – Typical items: dairy products, bread, soft drinks – Remember to watch the drivers

Vendor’s Consulting Support – Source of product information – Networking source – When buying equipment, vendor may help with health and/or building permits

Value – cost of the product plus additional supplier services Edible portion (EP) cost—servable or usable cost As-purchased (AP) price—price of product on delivery Better to pay higher AP if it results in lower EP

It’s really up to you Most buyers want – Consistent product quality – Supplier services – AP price Look for consistency, dependability, loyalty and trust