Co-ops, shipping mistakes, and unnecessary charges from suppliers could be costing you extra money.
3 Secret Ways Your Supply Chain May Be Costing You
At your store, you know exactly where your produce comes from and how it gets from the tree, bush or ground to your stock room. But did you know that your supply chain may be costing you a few extra bucks?
It's important to do research into your supply chain to make sure you are saving all the money you can.
Well, it’s not just a few dollars here and there. While business owners already contend with the produce losses during the supply process, there are a few other ways your supply chain might be costing you money – ways you hadn’t even thought about.
Here are three secret ways your supply chain may be costing you.
You Aren’t Learning from Co-ops
In a way, co-ops are like unions for farmers and produce suppliers. They bring together a group of growers who all grow the same product. Together, they share their information about their produce and its supply and demand rates. As a result, the growers have a better understanding of the market value and total returns.
According to a 2012 article published in Choices: The Magazine of Food, Farm and Resource Issues, the Central California Lettuce Producers Cooperative helped keep lettuce as a profitable commodity. Formed in 2006, the cooperative pooled its resources from all its growers and assisted in “negotiating forward contract pricing with buyers.” Because lettuce is so necessary for most fast food and sit-down restaurants, it’s usually involved in forwarding contracts.
That may be fine for the co-ops, but what does that mean for you? Co-ops usually have a lot of information on the supply and demand of a certain produce item, and as a result, their prices often serve as a guideline for the rest of the industry. If your current supplier is charging more than a co-op, then he or she may not have an idea of how much the produce is actually worth.
Your supplier is sending you the wrong produce
You have a new shipment of apples today, but when you open the crate, you find only pineapples. Your supplier messed up. Sure, your supplier may work hard to correct the issue, but if you’re receiving food even a day or two later than you expected, you may end up having to throw out more rotten produce than you thought.
Retail shrink – meaning the physical product losses in store or restaurant – is usually estimated to be about 6 percent, says Choice. That means for every crate of apples or pineapples you receive, about 6 percent of them will be no good. That can add up to an annual 10 percent loss or a total of $12 billion per year.
If the right produce arrives at the right time, you’ll be able to sell or use it before the produce starts to go bad. Even one business day can be a significant loss so if these errors are common, it’s time to look for a different supplier.
Your supplier is charging you to share information
Your produce needs vary from season to season – sometimes even week to week. Wouldn’t it be nice if your supplier could read your mind and see what you need?
A 2012 study by Roberta Cook, Ph.D. on food waste in the supply chain called for more “real-time data-based information management systems” to be used between supply chains and retailers. This means that suppliers and retailers would share their own data – the amount of produce sold and certain price points – with each other. But not all suppliers want to share information. Even those who do feel the need to charge extra for it.
Sharing information with your supplier benefits both of you. If you share your information, then your supplier may be better able to assist you. They may offer you better promotions and better assortments of produce based on what and how much you’re selling.
Suppliers benefit because they improve customer relations, and they have the chance to create promotions their customers need right then and there. Overall, it’s a win-win. Just make sure your supplier isn’t charging you for this perk.
When buyers and suppliers work together, both sides benefit. If your supplier won’t work with you, then it may be time to find a new supplier. Tell us, what part of your produce supply chain costs your store the most? Share with us!
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