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Strategies Shifting Slightly

11/16/2015

Strategies Shifting Slightly

Everything that purchasing can do to maximize profits on the buy side, after all, cushions broadline distributors’ razor-thin margins on the sell side. With chain business continuing to increase and street sales flat or decreasing at many companies, that’s a paradigm not likely to shift any time soon.

For distributor buyers, not a lot has changed over the years in terms of typical job functions and primary responsibilities. Most spend the bulk of their time monitoring inventories, processing orders and managing fulfillment for the product categories they oversee. Each buyer handles, on average, four product categories and that’s a level that has remained consistent since Technomic Distributor Intelligence Report’s (DI) purchasing survey, in 2010. 

While the buyer’s position is often one of quiet replenishment, aided and automated to a large degree by technology, their job nevertheless requires a blend of analytical, negotiating and communications skill sets. Most distributor buyers (77%) are considered professional versus administrative and their performance 0 both in replenishment and other aspects of their position – has a potentially powerful impact on distributor profitability and customer satisfaction.

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One East Coast independent distributor, in a recent online ad for a buyer’s position, outlined the following as essential functions of the job:

  • Continually identify and determine optimum sources of supply
  • Manage service levels and inventory of assigned categories
  • Make purchase decisions and manage process for order fulfillment
  • Be responsible for procuring designated quality and quantity
  • Minimize cost of goods
  • Communicate favorable purchasing opportunities to management
  • Support established logistical procedures to facilitate product arrival
  • Communicate effectively to all department managers, managers and supervisors
  • Seek opportunity/spot buys
  • Monitor and report items/categories/business trends within assigned categories
  • Maintain awareness of market trends, technology and food safety
  • Maintain awareness of company marketing strategies and competitive activity
  • Ensure that product recalls are completed

Category Management Taking Hold

Indeed, as category management begins to gain a foothold in foodservice distribution, traditional buyers’ position will presumably evolve to become more strategic and collaborative. In DI’s May 2014 Category Management survey, 100% of distributors who are already phasing in or planning to phase in category management said their buyers/merchandisers are or will be responsible for executing it. Current data underscore the fact that category management as part of the strategic purchasing function is targeted to increase.

One in two distributors said category management efforts at their organizations have increased over the past year. And slightly more (56%) said their Cat/Man efforts will increase in the year to come. Expected benefits from category management – improved vendor relationships, profitability and understanding of SKU, vendor and category profitability, according to the May 2014 survey – provide ample justification for the strategic shift.

But while category management may be ramping up and while buyers are the logical associates to bring it to life, their positions don’t appear to be evolving to the strategic level. Buyers on average spend just 10% of their time meeting with and negotiating with suppliers. Even less is spent on planning and actively working with manufacturer representatives or brokers. In fact, over the past year many buyers are spending less time on these collaborative activities, according to recent data.

Perhaps as telling from a strategic standpoint is that less than half of distributors today say they reward their buyers/merchandisers for category growth and/or profitability.

Buy Local Still Growing

Along with category management, local sourcing continues to be an important and growing part of distributor’s procurement strategy. Half of recent survey respondents say they increased their local sourcing efforts last year and more than half (56%) say they plan to do so in the year to come, as well.

Consumer demand and operator trends over the past several years – with “local” leading nearly every what’s hot list – have mandated that distributors get on board and establish systems for purchasing and distributing more locally produced products. Many have done so and, in the process, can rightly claim credit for helping to make it possible for operators large and small, institutional and independent, high-end and quick-serve to incorporate local products on their menus. 

Source: Excerpts; Technomic Distributor Intelligence Report, October 2015

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