Foodservice distributors and suppliers are realizing that they cannot work independently. They understand that the adoption of a total marketing strategy can help boost their operations significantly. They also agree that the driving force in the distributor-supplier partnership is not one or the other but the operator. When customers’ needs are met, then profits begin to rise. A total marketing strategy is the optimal way to meet these needs.
Ask any foodservice distributor executive how important the buying function is to the company’s total marketing strategy and you will likely hear pretty much the same answer: “Very important.”
This is not surprising. Managing landed cost and supplier selection are two of the most critical responsibilities of the purchasing department.
With the price of merchandise arriving at a distributor’s warehouse running, on average, 84 to 86 percent of sales, it is obvious that landed cost is a very significant figure in determining a distributor’s profitability.
However, supplier selection is at least as crucial as cost. It is vital for a distributor to have strong, long-term business partners in the supplier community. I say long term deliberately because the internal and external costs associated with supplier changes are significant.
A scenario in which distributors and suppliers who share values and objectives are moving unitedly in the market is quickly becoming a fundamental element of success rather than merely something nice to chat about at conventions.
The old, battered, and boring argument between distributors and suppliers over “Who is the customer?” is out of date. Distributors need suppliers, and suppliers need distributors. It’s that simple.
Each partner in this relationship is a customer. The distributor is the manufacturer’s customer because he is paying for goods and services based on stated requirements. However, the manufacturer becomes the distributor’s customer when the distributor has to supply receiving information, packaging requirements, sales-training data, and any other information that the manufacturer must have in order to meet the distributor’s needs.
The distributor and manufacturer are now conceptually joined at the hip. Their joint objective is to meet the operator’s needs. This can be accomplished only if the distributor and supplier work together very closely.
At the distributor level, the formation and maintenance of such relationships is usually the responsibility of the procurement function. Thus, the purchasing function is a key element of a total marketing program.
At All Kitchens, we operate under the philosophy that money is made moving product out of the warehouse, not into it. Therefore, we direct most of our resources toward helping our distributor members do just that.
It’s not that we de-emphasize procurement, because that is not the case. However, there are other activities that are also part of a total-marketing approach. Among them are training programs, the reach for operational efficiencies, sound financial management, advertising and promotion, and incentive programs. Coupled with a strong procurement program, these provide distributors with a total marketing package.
Increasingly, operators are coming to understand that getting the lowest price doesn’t necessarily translate into the lowest cost. These operators are getting more sophisticated. They consider value-added programs and services as part of the total price and thus arrive at the best value. If this is the way operators are making purchasing decisions, then it becomes essential for the distributor to provide such value-added services.
Such programs have to be good for the supplier as well as for the distributor. At All Kitchens, we have developed a long-term strategy of market segmentation to provide compound annual growth to our distributors and suppliers alike. Foodservice distributors can not differentiate themselves from their competitors on products alone. They must also offer their customers unique services that will set them apart.
The All Kitchens market-segment program, initiated last year for the healthcare segment and now being expanded to family restaurants, is designed to give our distributors’ sales reps such an edge when they walk through a customer’s door. These programs are built around services distributors can provide to operators in each segment.
As our distributors’ business grows, so does the suppliers. We rely on the procurement managers to work with the suppliers which support our programs. In many instances, the manufacturer rep and the distributor buyer agree on well-defined goals and objectives, which are based on the supplier’s program participation.
This requires the buyer to assume a broader role. He or she is now responsible for the communication and implementation of the goals that have been agreed to with the vendor. The buyer is eager to do this because other negotiations with the supplier–price, packaging, terms, lead times, etc.–will go smoother if these goals and objectives can be met.
If the idea is to have a program that is good for distributors and suppliers alike, broad support from the manufacturer community is essential. Operators rely on their foodservice distributor to get the product how and when they want it. The supplier carries the burden of providing the product quality, consistency, and pricing which meets the requirements of distributor and operator alike.
There is no doubt that purchasing plays a major role in this process. However, finding a customer, selling a customer, delivering to a customer, collecting from a customer, and finally reselling the same customer simply takes more than intelligent procurement decisions. It takes a total marketing approach.
All operators have needs unique to their operations and expect their distributors to help them fulfill these needs. A good buyer will be aware of his or her customer’s specific requirements and keep them in mind when reviewing suppliers and negotiating with them.
For instance, operators demand consistent quality. Therefore, it becomes the responsibility of the distributor buyer to choose the supplier that can provide product consistency and meet other criteria. At All Kitchens, we help our distributors’ procurement managers in this selection process by significantly narrowing the field of choices to approved suppliers.
Operators are also interested in providing training for their staffs, new-product ideas, promotions that can help increase sales, and service that meets the unique requirements of a particular operation.
And, although it rarely comes up in a sales call, operators are also very interested in finding out about the financial well-being of the distributors which supply them.
In order to have satisfied customers, distributors need to perform well in every one of these areas, and buyers must actively attempt to match these needs with the suppliers they select.
This, in essence, is what total marketing is all about.
It goes without saying that foodservice distributors will continue to pay close attention to the buying function. However, they should now recognize the importance of the buying function as part of their companies’ total marketing strategy.
This philosophy of joining procurement to the other spokes of the marketing wheel is opening up a new age of thinking for distributor buyers. No longer can buyers rely only on price and availability alone when their goal is to make enlightened procurement decisions.
Today’s environment demands that buyers factor in the operator’s requirements into their total-marketing-strategy equation.
That is why we are seeing the marketing function assume procurement responsibilities and the procurement function assume those of marketing. It is becoming clear that the two can no longer operate separately and still achieve the goal of satisfying a customer’s requirements.
Meeting customer needs calls for total marketing. Today’s best buyers are the ones who are making the total marketing commitment.