A Primary Case for a Secondary Supplier

John Lawn

The rationale behind the selection of a primary distributor is well-known, even if the criteria are sometimes hard to compare.

The principal idea is that by concentrating one's purchases one obtains pricing and service leverage as well as better terms. And from a "total cost" perspective, there are real economic values to be had from reducing the number of deliveries your receiver has to manage, the number of invoices your organization has to process, and so on.

With so much riding on the primary supplier relationship, it is one that is typically evaluated carefully. Indeed, the analogy that one "gets married" to a primary supplier in order to take full advantage of the relationship has a lot going for it.

Like any good marriage, the relationship should begin with mutual understandings, develop during a period of courtship in which both parties get to know and trust one another more fully, and be embarked upon formally with a common understanding of mutual expectations. That should include an understanding of how you will evaluate products, services and pricing over time, any audit privileges you have negotiated and the procedures you'll follow to resolve any differences that arise.

But despite the similarities, a prime supplier relationship is un-like a marriage in one very important respect—it is entered into not for love but for commercial purpose. That means both you and the supplier need to find value in the relationship, and find ways to en-sure that the value is maintained.

That is typically easier for the distributor than for you, as he is in a position to regularly determine how profitable you are as an account. The distributor also will have cost data on comparable operations, and so will be able to compare your business to that of XYZ institution on the other side of town.

You, on the other hand, do not have an easy, ongoing way to compare the package of goods, services, pricing and terms from your primary supplier to those that might be provided by an alternate. There often are simply too many variables to make this choice as clear cut as some would like it to be.

That is one very good reason why, despite arguments to the contrary, you should put just as much care into selecting your secondary distributor(s) as you do into selecting your primary provider.

Here are a few of the key issues: Product specialties. Are there certain product categories (e.g. fresh produce, meat, dairy or bakery) where differences in product quality or price make a real difference to your operation? If so, which secondary suppliers do the best job in that area?

Service frequency. One of the main goals in a primary relation-ship is to wring all of the economies out of the logistical system that are possible. Usually that means limiting the number of deliveries to one or two a week. But because foodservice is a business in which the unexpected happens, where time can be 'of the essence,' (and yes, where primary distributors can have out-of-stocks and substitutions that you aren't willing to accept), it often pays to have a sound relation-ship with a backup distributor. It should be one with a reasonably strong product assortment whose cost structure can justify smaller drops on short notice.

To keep prices manageable, operators will often treat this kind of supplier as a "fill in" specialist, holding back enough of the goods from the primary order to both justify the order minimum from the backup and keep the relationship profitable for him. This provides one more delivery a week for add-on items. A local, independent broadliner or produce specialist with a good frozen foods selection is often an excellent choice.

Paper needs. While paper and disposable goods are often not seen as a specialty, in the way produce and meat are, they should be. That's because their high "cube" makes them difficult to store and deliver economically and those who specialize in it sometimes do it very well.

They can be bulky for you to store as well, so decisions about how to buy them and in what quantities are more critical than they seem at first. Also, these are items that often have different markups than traditional grocery and food supplies, so pricing should be evaluated carefully, with volume discounts weighed against the storage costs.

A will-call source. Sometimes things can get really desperate, and all because of a minor item like table doilies, a missing tabletop utensil or a key recipe ingredient. That's when it's handy to have a nearby cash-and-carry or will-call department where someone in your operation can pick up the needed item directly. Often, the key is having a credit authorization already arranged-for.

The days when there were so many local distributors looking for new business in a given city that you could readily play one against the other for costs or service terms are largely coming to an end.

With today's dramatic consolidation on the supplier side, having strong, reliable, mutual-trust relationships is more important than ever. But always have backup sup-pliers and ensure you don't give those relationships short shrift. That way, they'll be there when you need them.