6 Effective Food Procurement Tips: How to Scale Your Operations & Grow Your Business
Table of Contents
- Digitalise & Automate Processes Using One Simple Tool
- Centralise Communication
- Harness Economies of Scale
- Optimise Inventory
- Focus on Your Areas of Expertise & Growing Your Business
- Pursue Steady Growth & Stay Flexible
The overall procurement process generally includes the following seven key steps: (1) identifying which goods or services are needed, (2) considering which suppliers to source from, (3) negotiating contract terms with selected suppliers, (4) finalising the purchase order, (5) invoice receipt and processing of the payment, (6) order delivery and audit, (7) maintaining accurate records of all invoices and necessary paperwork.
Below, we provide you with some simple tips and tricks for optimising your entire food procurement process so that you can scale your operations and grow your business effectively.
1. Digitalise & Automate Processes Using One Simple Tool
Do away with menial tasks that eat up your employee resources by selecting digital tools that help you move away from analogue documents. Streamlining and shortening processes will minimise costs significantly, making it easier to scale. At foodcircle, a simple example of this is our reorder tool which allows you to skip all the usual inquiries and communication and reorder ingredients in just one click.
When selecting tools for your business, we also recommend focusing on selecting simple tools and, if possible, choosing one-for-all solutions. Suppose you introduce complex tools that require intensive IT resources or employee trainings. In that case, you will need a significant amount of in-house resources to keep things running as your business grows. By prioritising ease-of-use, you will empower your team with the tool(s) rather than setting up more obstacles.
Also, consider choosing a tool that covers as many steps of the procurement process as possible. Again, this will make it more accessible to your team as you continue to grow while also ensuring that you are maximising efficiency by having everything in one place.
→ Taking this approach will prove helpful for all areas of your procurement process as it helps save resources both within and between the individual steps. Particularly in Procurement Step 7 (maintaining accurate records), there is the danger of losing track of paperwork and wasting resources with complex filing systems if the processes are not simple and digitalised.
2. Centralise Communication
One of the best ways to save valuable resources in your team is to implement measures that avoid lengthy email chains and manual enquiries. Place your trust in procurement tools that are designed to bundle information and filter requests on your behalf. At foodcircle, for example, all you have to do is input your needs into a simple enquiry form and our tool will match your requirements with some of the highest quality organic ingredient suppliers from around the world. If you centralise communication with your suppliers and cut out the need for unnecessary back-and-forths, your team will have more time to focus on scaling and growing your business.
→ This is particularly valid for Procurement Step 3 (negotiating contract terms), which is where many food manufacturers and buyers get hung up in endless email chains.
3. Harness Economies of Scale
When ordering ingredients, it's no secret that bulk orders can help you access bigger discounts. But many also underestimate the other areas of business where economies of scale for other areas of business. In financing, for example, placing larger orders may give you more leverage for negotiating better payment terms with suppliers. Or in logistics, if you order multiple ingredients at once from the same supplier, you can save on shipping costs via mixed pallets.
→ This is especially relevant for scaling Procurement Step 1 (identifying which goods) and Procurement Step 3 (negotiating contract terms).
4. Optimise Inventory
The key to optimising your inventory is balancing buying in bulk with warehouse management and demand. On the one hand, you want to place orders that are big enough that you save money on the cost of ingredients and shipping. On the other hand, you need to be sure not to overstock your warehouse and run the risk of sending your storage costs through the roof or getting stuck with pallets of perishable goods that you won’t be able to sell.
For this, we recommend aligning your buying strategy with the demand of your customers while ensuring that you are continually tracking, managing and optimising your inventory as you grow to avoid unpleasant financial surprises down the line.
→ Particularly relevant for Procurement Step 1 (identifying your business’s need) because establishing realistic requirements is the foundation for effective and efficient procurement.
5. Focus on Your Areas of Expertise & Growing Your Business
Before you begin to grow your business, make sure that you understand where your business’s strengths and key competencies are and keep those in-house. Once that is clear, you will want to look at outsourcing the parts of your business that swallow large amounts of resources without producing a satisfying ROI, as these needs will only increase as your procurement efforts go up. Depending on your business, this could be anything from vetting suppliers to handling logistics.
Outsourcing is an especially efficient way to tackle specialised resources that would otherwise require a tremendous amount of time or effort to establish successfully. For example, if you don’t happen to start out with an extensive supplier network of your own, look for a partner who does and source through them rather than wasting several months or even years navigating the landscape.
Outsourcing is particularly valuable whilst you are scaling up because it allows you to stay flexible when things don’t go as planned. It is also a good way to buy time until you better understand what resources are required to maintain your procurement operations after a growth spurt. Once you have gained more clarity around this, you can proceed to build your team and fill new in-house positions accordingly.
In the meantime, gear your in-house employee resources (manpower) towards fuelling growth and finding new business. If you are struggling to define what to set up in-house versus outsource, ask the question, “What does my purchasing organisation want to achieve?” and then consider what resources could be allocated to meet those needs.
→ This is particularly relevant for Procurement Steps 2 to 7 (see introduction) as this is where small companies often struggle to balance their know-how with their available resources.
6. Pursue Steady Growth & Stay Flexible
One of the most secure ways to make sure you can handle growth is to push for steady growth, rather than huge growth spurts. If you scale up your procurement efforts too quickly, you may run into challenges in many of the above areas of business. By aiming for slower but more continuous growth, you will be able to scale your procurement efforts alongside the growth of your team and your business, therefore allowing you to make more calculated adjustments to your strategy along the way. Resource flexibility allows you to adapt your procurement efforts as you go along.
→ All parts of the procurement process will be affected by your ability to handle this.
Need support in scaling your food procurement processes? Get in touch with our Sales Team (firstname.lastname@example.org) to gain a better understanding of how foodcircle’s digital procurement solutions can help you grow your business!
Imagery: (1) Julian Hochgesang, (4) Jake Nebov, (5) Campaign Creators via unplash.com; (2) & (3) via foodcircle