Products · Industry Insights · 10min read

7 Easy Ways to Save Money in Your Ingredient Procurement Efforts

Take these steps to propel your business forward.

When you reduce your expenses, you directly increase your revenue, which translates to profits. On the other hand, more efficient processes mean fewer employees are required to get the job done. Depending on your business’s structure and size, this either equates to requiring less staff for your operations, i.e. reduced labour costs, or freeing up resources on existing employees’ tables for other areas of work, such as growing your business. 

Below, we delve into actionable solutions so you can get started!

 

1. Simplify Processes with Digital Tools

It’s no secret that traditional procurement processes involve innumerable steps, lengthy communication and tedious data management. By using available digital procurement tools, you will be able to automate processes at multiple points along the supply chain. This will help optimise your team’s workflows and, in turn, save tremendous amounts of resources down the line. 

At foodcircle, features such as re-ordering ingredients in just one click or providing all documents and certificates in one place are designed to serve precisely this purpose. Other digital procurement providers also offer features such as spend management systems, supply chain data variable translators, risk management software and more. 

Our tip: To establish which procurement tool is right for your food business, we recommend identifying your biggest pain points, assessing your needs, and looking for providers familiar with the industry.

 

2. Centralise Information 

This may seem obvious at first glance, but over the years, we have come to discover that this is one of the areas many of our customers struggle most with. Think, stacks of paperwork, out-of-date, i.e. analogue, filing systems and vast amounts of documents clogging up servers and inboxes. By storing all your information and documents in one place, you will drastically minimise communication across different channels, improve visibility between employees and departments and up your efficiency. 

Our tip: Less is more! Rather than relying on a broad mix of tools and providers that pose challenges to transparency and efficiency, look for all-in-one solutions that cover numerous business areas to maximise the streamlined flow of information.
 

3. Consolidate Purchasing Intervals, Suppliers and Deliveries

Taking advantage of economies of scale is an efficient way to reduce ingredient costs, save money on processing charges and logistics costs, all of which will help increase your overall profit. Purchasing multiple ingredients in bulk from the same supplier may also make you more eligible for discounts or receiving better terms. It will also help reduce logistics costs as you can consolidate shipments, i.e. via mixed palettes.

Our tip: Always ensure that you are able to maintain a positive cash flow when purchasing large quantities of ingredients so as not to pose a threat to your liquidity.

 

4. Review Contract Terms & Outsource Where Necessary

Are you paying all your suppliers up front, far before coming close to seeing a single cent from your customers flow into your bank account? In the food industry, suppliers can often lay out payment terms with very little room for negotiation. Particularly small to medium-sized F&B businesses may find it challenging to secure 30 days at best. Working with partners who have more leverage when negotiating payment terms on your behalf, such as foodcircle, will help keep your working capital in check. This is precisely where longer payment terms (e.g. up to 120 days), such as invoice financing, come in. 

The same holds true for logistics. If you find yourself tied to your suppliers’ carries, you may come to discover that you are in fact not obtaining the fastest routes at the most affordable rates. If you let third-party specialists come in and take on this gruelling task on your behalf, you could end up saving significantly down the line. 

Our tip: Reallocate the resources you save in these areas to growing and expanding your business!

 

5. Value Quality & Reliability 

Remember the old saying, “Never change a running system”? While the exact opposite holds true for propelling innovative solutions and digitalised processes forward, we very much stand by this approach when it comes to suppliers. You are happy with the quality of an ingredient? Stick to it. You have found a supplier that always delivers on time? Look no further. Don’t waste constantly trying to reinvent the wheel or obsessing over the possibility that something better could be out there. 

Our tip: Order from your existing suppliers via foodcircle and make use of our digital order management, logistics and payment solutions without having to start comparing product specs from scratch. Plus: You can re-order anytime with just one click!

 

6. Consider Ingredient Seasonality & Price Trends

As is true for all natural resources, ingredient prices are subject to fluctuation throughout the year. While some fluctuations result from factors that may be tricky to predict in advance (see step 7 below), seasonality is a factor that drives price fluctuations and should be taken into consideration annually when buying wholesale ingredients. 

When we refer to ingredient seasonality we are mostly talking about specific times of the year when a product is harvested in specific countries. Nuts, for example, are typically harvested between September and November in the Northern Hemisphere and March to May in the Southern Hemisphere. This can drive decision-making when looking at sourcing from different countries of origin throughout the calendar year. 

When looking at price trends, you may also find that some patterns with spikes or dips in pricing repeat themselves on a YoY basis. Identify these and you will be able to strategise your orders more efficiently.

Our tip: Take the time to map out the seasonality and price trends of your entire ingredient portfolio and consider buying certain ingredients when prices are low. Good sources for this are The ITC's Real-Time Market Price Info (please note to access this service you must have a paid account) or, for commodities, Trading Economics or  Business Standard.

 

7. Monitor Industry News 

It pays off to keep at least one eye on global ongoings, particularly from countries that play a critical role in supplying the world with specific ingredients, such as sesame from India or cocoa from Ghana or the Ivory Coast. Things like civil unrest, drastic political changes, natural disasters, crop failures, or product recalls can all affect the price or availability of ingredients. We saw this with Brexit, Covid and the Suez Canal, just as we did with the 2020 cocoa farmgate price or the September 2021 coffee price spike due to bad weather in Brazil.

Our tip: Learn where your ingredients come from and pay special attention to headlines coming from these countries.

Imagery: (1) Markus Winkler, (2) Wade Austin Ellis, (3) Caelen Cockrum & (4) Toa Heftiba via unsplash.com