7 Ways Operators Leave Profits in the Supply Chain

Nation’s Restaurant News recently published an article about supply chain management and where the biggest profit opportunities lie. Author, Bill Carmody, CEO of Trepoint, identified 8 opportunities, that if left untouched, could drain restaurant operators of their hard earned cash.

1. Inbound freight. “Most distribution agreements disclose that distributors make money on transporting products from the manufacturers to their distribution centers,” said Steve Salzberg, President of CRM. “However, few operators realize just how much profit is lost to this one component of product cost.”

2. Verified pricing. Confirming that each invoice is priced correctly is an arduous task, so most operators rely on spot-checking invoices or waiting for a food cost spike to make them dig deeper.

3. Product specifications. Are the products sold to your restaurants the items you approved? “Product substitutions can affect the quality of your menu items and often come with a higher price tag,” Salzberg said. “Monthly invoice audits uncover these occurrences and allow for correction and credit… but only when they happen consistently.”

4. Catching discrepancies in time. “Most audits, if they happen at all, occur only one to two times per year,” Salzberg said. “Most agreements stipulate a maximum of about 25 items that can be reviewed and for no more than 90 days prior. That leaves the prior months untouchable even when mistakes are discovered.”

5. Purchasing departments functions. While most purchasing departments are great at sourcing products and negotiating prices, they tend to fall short in understanding all the ways distributors make money in other ways, such as freight and sheltered income programs.

6. Third-party verification. Salzberg said distributors are focused on watching their costs associated with inventory, receivables, brick and mortar, and truck leases. It’s unreasonable to believe that distributors will also invest the time required to diligently insure your products are purchased at the lowest cost and sold at the correct price each month. Having third-party verification is a key component to catching mistakes and ensuring maximum profits.

7. Franchisees under-reporting sales. This is a fascinating one, because it’s hard to catch unless you are looking for it. It happens when franchisees report sales of X, but, by knowing the ingredient formula to make a menu item, executives are able to estimate actual sales. Tracking that data offers a valuable tool to break down discrepancies between quantities of items ordered and sales reported.

Read the full article here and click here to find out how Compeat helps restaurant operators easily negotiate, oversee, and audit their supply chain to uncover potential profit opportunities from the above.