The nature of our operation should primarily dictate the nature of the supplier. Running a three-star operation is very different to a luxury brand. Unfortunately, our operations people forget some of these basic first principles. Put through the South African wringer of the hospitality industry often has us believing in one guiding principle: price, price and price!
It is a lesson quickly learned, that price without reliable supply is of no consequence. The cheapest guy who is sometimes out of stock or arrives with an item half way through service is of no use to us.
The nature of the supplier may be the important differentiator in choosing a supplier. As an example, is it better to buy a wine from an outlet like Makro or directly from the estate? You may on occasion save 20% or more using the discounter. However, what if you want the winemaker to offer a tasting at your property? What if there is an allocation on a special vintage? Suddenly the relationship becomes the key success factor and the savings seem irrelevant.
What if a direct relationship results in a more economical use of a product? Could a good supplier relationship result in increased sales and revenue? Discussions with people who are truly passionate about their product usually result in the creation of new concepts, unexpected uses for products, our own staff becoming aware of the product's benefits and ultimately better sales of product.
Would you make more money if all your products cost 10% less or would you do better if sales were 10% higher or if our selling price went up 10%? Take a hypothetical product selling 100 units per month and a product with a cost of 30%, ie. we buy it for R30 and we sell 100 units of it for R100.
Improving overhead costs has an even smaller effect - one cannot shrink one's way to greatness. In the end, the cost of the product barely determines our profits, sales and gross profits do.
Doesn't a cost saving cause increase revenue? It would, if it were sustainable and was somehow miraculously able to result in increased sales.
The trouble is you get this benefit, if any, through either retaining the margin in which case it wouldn't increase sales at all, or alternatively you use the reduced price by passing it on to the consumer and running a special.
Are you going to keep the special going forever? If you do, the benefit will soon disappear. One of two things would quickly happen to reduce its effectiveness completely: the customers will get used to the special and it will become forgettable and leave their consciousness; or in the event of that not happening your competitors will notice and imitate you and you are instantly back where you started. Indeed, your competitive advantage will be lost.
This is why supermarkets rotate their specials so quickly. Not that "specials" in our industry always mean a special price for the consumer. Are we effective at communicating these to our clients anyway? It would be if the special came from a switched on supplier, ready and waiting to train, educate and promote for you. Notice that we are back to supplier relationship as a key success factor.
Being cheapest is a good market perception to have. It is also the hardest to maintain. Every new kid on the block will attempt to undercut you, or a stronger competitor will take a position against you, gnawing away at that very perception and in any event, quickly killing profits.
So if you cannot make headway being the cheapest, what is the alternative? Being the best. There is no halfway position. Some consumers go for the cheapest deal; others go for the highest quality. No one is searching for the most average. Trust me. You need to be the best in the world at whatever you do - whatever your world is.
Creativity and added value thus seem the way out of this dilemma. If you are a five-star venue, a neighbourhood restaurant or a stall at a market, the challenge and route to the solution is the same.
Find a supplier who wants to get involved. Who is desperate to turn your staff and clients on about their product. Who is continuously improving the quality and perception of whatever it is they supply to you.
Don't you want the supplier who can create a product, category or event that your competitors are not bothered to go to the cost or trouble of creating, but that your customers will find alluring and return for, and better yet, that your customers will tell their friends about? Can this be done if the only conversation you are having is about procuring at a better price? Sure, a special or two a year is a reasonable conversation, but if you want to be the best in "your world", price cannot be the recurring theme of discussion.
Consider choosing suppliers for competitive advantage and nurturing the best from your relationship with them.
As for the products themselves, are there some products that one should focus on and others to merely consider the price? If you want to be the best in the world, no. If you want your clients to fall in love with you, come back to you and remember you, then god is in the details. The luxury venue needs luxury bathrooms, and even the soap and toilet paper are not simply least cost considerations. Consider even back of house purchases that the customer will never ever be aware of. If you are truly creating the kind of team necessary for a culture of excellence, you need to be consistent at every level. If you create a facade of quality, which your service staff knows is bullshit, your customers will not believe you for long. You can only pull the wool over their eyes for so long.
We have seen this over the last few years in certain categories.
In the past, wine lists at most venues were built on price. Cheap wines abounded. Next, came wine lists built by suppliers who gave marketing funds to the venue in various respects in return for their products dominating the wine list. Today the switched on venue creates a wine list to allure their clientele with seductive offerings and unexpected delights at various value propositions. Quickly we found that greater profits were not necessarily found by concentrating on price or free marketing. What message does using box wine in the kitchen tell your staff though?
If a premium ingredient can change the value proposition and justify a higher selling price or a more satisfying product, won't sales go up? What if the bread roll given away at the table "at a loss" was the most amazing roll your client had ever tasted? Even if it cost more, wouldn't you be making more profits when you consider the return business? Serving yesterday's re-heated mass produced roll bought from the cheapest supplier may just be costing you more than you think. No, they won't complain, but what do they think about the rest of your offering when they push the unfinished remains to one side. And no, you didn't know they thought that way because "nobody complained" - the buyer's answer to maintaining shoddy quality.
Perhaps how we incentivise our buyers may be at the root of the problem. What if their bonus was on the restaurant's profits and not on the discounts they received, would we see a dialogue between buyers, suppliers, the chef and management? Perhaps then purchases would be considered from the client's perspective?
A culture of excellence is not a destination; it is a process, and one that needs everyone from management to back of house to your clients themselves to believe in. Choosing the right supplier is a quest for value, not price.
