Managing procurement for materials, fixtures, and equipment across multi-site store projects is complex, but it also offers unique opportunities. Leveraging volume and vendor relationships across multiple programs can drive efficiencies and control costs.
In this blog, we’ll explore expert procurement and vendor management best practices from Sam Langley, Senior Director Convenience Operations and Procurement at Big Red Rooster Flow, to help you identify areas for improvement in your own processes for your next opening, remodel or rollout.
Best practices for your FF&E procurement process
Whether your multi-location business is in the petroleum, quick service restaurant, convenience store, or multi-site retail industry, effective procurement practices not only support the primary focus of the business, but help contain costs.
To keep pace with a constantly changing environment and serve the needs of multi-site operations, procurement needs to be both proactive and strategic.
Proactive practices
A proactive procurement process means skating to where the puck will be–anticipating what lies ahead and planning appropriate responses. Challenges may not all be eliminated, but they don’t have to be “unforeseen.”
Consider these proactive practices that will help your procurement process stay ahead of the curve:
Monitor trends and economic conditions
“A proactive team keeps an eye on the consumer price indexes and the economy,” Langley notes. This means monitoring raw materials, upstream supply, and staying involved with both manufacturers and upstream suppliers of the product they’re manufacturing.
Understanding and tracking current economic conditions, both nationally and regionally, is vital for multi-site operations. Applying this knowledge helps your team anticipate and offset challenges that could affect pricing or lead times.
Anticipate system-wide needs
Consider yearly volume across all locations and the entire operation, as well as expected changes in process and potential expansions throughout the year, to get a better picture of future needs.
Growth, expansion, region-specific needs, and other changes may significantly affect annual volume requirements across multiple locations. “Assess what’s going on in the industry and benchmark your performance against others,” says Langley.
Constantly seek improvements
Langley notes that a procurement team needs to be constantly looking for ways to improve or enhance the process and the customers’ experience.
It pays to make the effort to protect and develop contracts and encourage solid partnerships within supply channels as well as in support of customer needs. Opportunities for improvement can be found in many areas through deeper relationships or greater efficiencies.
Langley says, “Determine where your weak points are. Consider where you could make changes to leverage increased volume resulting from expected growth or additional locations. Use this information as a starting point for further refinement.”
Strategic practices
Consider the overarching goals of your organization and the procurement practices that support them. A wide-angle view gives perspective to identify what areas need attention and how strategic procurement practices can improve the process and affect the core business.
Apply these strategies to add value that goes beyond the procurement process:
Collect data regularly through frequent surveys
Data-driven decisions are integral to procurement effectiveness. Consistently gathering current and accurate information across all locations is vital because it improves the ability to forecast upcoming requirements.
To gain a better sense of what’s going on in the marketplace and help with management of site assets, Big Red Rooster Flow collects customer data from surveys on a day-to-day basis. This broad base and extensive supplier information help in managing long term contracts.
Assess and refine the supplier network
Determine what strategic changes need to be made to your vendor base: Does it need to expand or contract? If you’re over-dependent on a single supplier for one area, you may need to seek additional sources to mitigate risk and ensure continuity of supply.
Often vendor networks are too broad. “You may need to reduce the size of the vendor network to concentrate and increase volume that leads to better pricing,” says Langley. In other cases, you may be seeking greater efficiencies from the current supply chain.
Langley offers more detail on Big Red Rooster Flow’s processes.
Leverage volume for maximum bargaining strength
Consolidating procurement needs with a smaller number of suppliers is one way to increase leverage. Another is to ensure that all customers at all locations within the organization are represented in identifying needs.
The key question is whether your volume is sufficiently large enough to get best pricing from suppliers and give you a strong bargaining position. Are you bargaining as a small fish in a big pond, when you could be a big fish with more options and control?
A project management firm can consolidate volume by leveraging similar services for comparable clients in the same industry. “Purchasing “like” products, and being a large buyer of those items, gives us purchasing power that results in price advantages that our clients are unable to achieve on their own,” says Langley.
He goes on to discuss some favorable results for clients.
Negotiate value into procurement packages
Pricing is not the only variable in negotiations. “Delivery times, shipping methods, warranty coverage and labor, and other special considerations all can be negotiated into a procurement contract,” says Langley, “particularly when volume provides leverage.”
Negotiating labor as well as materials into contracts and aligning warranty dates reduces confusion with customers and translates into time savings and expense for individual locations.
For example, warranty services can be complex and confusing, often requiring significant time and labor to resolve. A project management company adds capacity and provides the leverage to ensure that warranty coverage is as clear as any other line item on a purchase order.
“Instead of three or four different warranty periods across an array of parts within a single unit such as an illumination fixture, we align all the warranties,” says Langley. “The customer gets a warranty that covers everything–including labor–for a specified period of time.”
Best practices for managing vendor relationships
Vendor management is an area of special expertise for Langley and his team at Big Red Rooster Flow. They’ve worked with a wide range of customers and clients–owner/operators, franchisees, and hundreds of brands–on more than 20,000 sites.
Experience has taught that successful procurement/vendor management processes incorporate these activities:
Consistently measure and track vendor performance
What standards for vendor performance do you follow–and do you apply these measures across the board? Regularly measuring, tracking, and evaluating vendor performance brings greater consistency and provides the standards to use in seeking improvement.
A vendor scorecard, like the ones developed by Big Red Rooster Flow, simplifies the procurement decision making process by concisely and consistently highlighting the significant attributes of each vendor.
Langley explains more about Big Red Rooster Flow’s vendor scorecard.
Review vendor contracts annually
The practice takes commitment and time, but revisiting terms and conditions each year helps to ensure all factors are current for each vendor. And it allows you the opportunity for refining agreements and capturing opportunities for savings.
Refine or reduce your list of vendor contacts
Think about all of your contacts — including vendors, installers, and contractors involved at each site. Multiplied across all locations, the number grows rapidly. And the more parties involved, the greater potential for miscommunication.
Instead of a vast network of stakeholders and involved parties, a streamlined contact base promotes more accurate communication. Refining an extensive contact list down to a single contact (spoiler alert) is more easily accomplished when working with a project management firm.
In a similar vein, instead of setting up individual payment systems for each vendor, establish a mechanism to process payment for all vendors through a single point of contact.
Improve your FF&E procurement processes with help from a project management firm
A project management firm has the ability to step in as the interface between your team and other stakeholders. They can stretch the capacity of your team and provide several other benefits:
- Improve volume pricing and bargaining strength through increased leverage across multiple clients within the same industry.
- Anticipate and address potential issues before they become problems as a result of greater data collection capabilities.
- Negotiate in added value beyond delivery dates and volume pricing. Longer, labor-inclusive warranty coverage, for example, offers far-reaching benefits.
- Streamline contact and vendor management so that one point of contact replaces a vast network of vendors, contractors, and installers.
- Provide third-party objectivity for the closeout process to ensure correct brand execution, and create a punch list for any follow-ups needed.
- Turnkey consolidation of services so that a single contact can provide the complete range of project management and procurement related services from start to finish.
Engaging an outside procurement management firm stretches your capabilities and allows you to benefit from refined practices, enhanced vendor management, and dramatically increased procurement volume.
Big Red Rooster Flow takes it a step further by delivering an entire suite of services through one project manager contact dedicated to your brand. The results are simplified communications, expanded leverage, brand advocacy and more efficient operations.
Learn how Big Red Rooster Flow can streamline your process and supercharge your procurement leverage for multi-site projects.
