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2 Things Your Procurement Process Is Missing When You're Only Focused on Price

Posted by SugarCreek

Feb 5, 2016 10:00:00 AM

Supply_chain_data_collection

Today's supply chain data is incredible. It's rich with opportunities for companies of all sizes to become more efficient, protect product until it reaches the customer, and reduce costs. Yet, many times, the only thing the procurement process looks at when selecting a distributor is price. That's a mistake.

Turn back the clock a few decades and your options in distributors were less diverse. The risks to your supply chain seemed fewer and farther between, too—or at least unavoidable, no matter which distributor you chose. There were a limited number of companies that were globally connected, especially at the small to mid-size business range, too. Choosing the distributor who offered the best product at the lowest price was more straightforward.

Today's marketplace is constantly growing and changing. While price is an important factor, it is not the only factor to consider when selecting a distributor.

Take a Quick Step Back

While you may be ready to begin working with a new distributor, don't put your company at risk of making a mistake before you scrutinize one key component that could make this transaction a success or a costly, time-consuming problem: technology. If a potential distributor doesn’t have a system that tracks, collects, analyzes and shares the right data, problems arise. First, your business is faced with a foodborne illness that has been connected to your store or restaurant. Should an incident occur, there's no way to track down the source. Second, without access to relevant data collected by distributors, it is more difficult to get insight into current consumer trends.

Problem Number 1: Food Safety Incident Support

In the last year, a number of companies made national headlines with major outbreaks of foodborne illnesses or product recalls. None, however, has been quite as visible as Chipotle’s ongoing food safety issues. The chain has dealt with separate E. coli, norovirus, and salmonella outbreaks that have spread across at least 10 states. Sales have decreased and company stock has dropped to an all-time low as Chipotle has worked to identify the source of contamination for many incidents.

While investigations have failed to pinpoint the exact cause of contamination, many industry experts have pointed to the chain’s focus on sourcing organic, local, and sustainably produced food. Chipotle’s traceability program — which has been given top marks in the industry — meticulously audited their suppliers to ensure that all vendors were “adhering to environmentally and socially sound practices.”

Unfortunately, the data Chipotle was scrutinizing so thoroughly didn’t hold the information the chain needed to quickly pinpoint the source of contamination.

If you aren’t collecting — or your distributor's technology does not allow you to collect — comprehensive data that allows for full transparency in your supply chain, not just limited aspects, it will likely hurt your company if and when it becomes necessary to find and address the source of a contamination after a food safety incident.

Problem Number 2: A Lack Insight on Current Trends

Without comprehensive supply chain data at your fingertips, it is hard for you to track trends in consumer needs and desires. The use of both this data alongside advanced analytical tools is aiding in demand forecasting, one of the most effective methods for today's supply chains and buyers to reduce waste and meet consumer demand more evenly.

A survey by Accenture Global Operations found that easy access to supply chain data allowed organizations to react significantly faster, improving supply chain efficiency at 10% or greater. By having more information about buying trends, consumer demands, risks playing out across the globe, and much more, supply chains react faster and continue to meet the demands of the consumer more efficiently.

And, it turns out, that supply chain visibility is in itself a consumer trend.

A recent Consumer Reports study sheds light on this demand by consumers more clearly. It found that today's consumer is demanding information about products including where it came from, how the products affected their health, and much more with increasing frequency. The survey found 91% of consumers believe that knowing where their food comes from is important.

Having Technology to Facilitate Supply Chain Transparency Is Critical

You must consider the capabilities of the technology that a potential distributor is using—at length. There are 3 key questions you should be pondering:

  1. What type of data is a distributor’s technology gathering?
  2. How does the system track product and order information (or if it does at all)?
  3. How well will this technology be able to integrate with your current system?

The bottom line does matter. You need an affordable distributor. However, you simply cannot afford to have a distributor that is lacking the technology you need to keep your company moving forward in today's ever changing and demanding marketplace. Put more effort into considering the technology component offered by potential distributors to avoid these key mistakes.

Supply Chain Transparency Whitepaper

SugarCreek

Written by: SugarCreek

Sugar Creek prides itself on its authentic culinary expertise. With nearly 50 years in the food manufacturing business, we know what Americans want to eat.

Topics: Technology, Supply Chain