BUS606: Operations and Supply Chain Management

A customer can increase his/her value to a supplier in at least three important ways.

First

He/she should place orders of a reasonable size. Because delivery services cost money, most suppliers establish minimum size requirements for orders. In other words, the order has to be big enough to make it worth the supplier's while to deliver. The buyer should learn what these minimum size requirements are and try to stay above them. Of course, a good supplier will usually help out in an emergency that requires a rush delivery or a small order, but don't ask for these special favors too often or you'll end up paying for it.

Second

A customer should not place his/her orders too often. In fact, spacing-out orders help assure that they are kept to acceptable sizes. Very frequent or small orders indicate inexperience and poor planning on the part of a buyer. Careful planning and accuracy in estimating needs are necessary to build a good relationship with a supplier. If the foodservice operation is large enough, the supplier may be willing to make frequent deliveries, but will usually pass added expenses on to the buyer as the price for the buyer's inefficiency. The acceptable frequency of delivery varies from place to place and is determined principally by the accessibility of the goods and the distance the supplier has to travel to make his deliveries. In large cities, for example, daily deliveries are common. Nevertheless, if a buyer does a fairly small volume of business with a supplier, the buyer should try to place orders only two or three times a week to minimize the supplier's expenses. In rural areas deliveries may be made only once or twice a month, so that it may be necessary for the foodservice operation to maintain an inventory somewhat larger than would normally be desirable. (It is, of course, economically advantageous to keep the inventory as low as possible. Large inventories involve investment insurance, storage, and spoilage expenses.)

Third

A customer should not spread his/her business among too many suppliers. The wise buyer will confine business to a limited number of suppliers who provide acceptable service. This is not to say that the buyer should never order from other companies. It does mean, however, that a few suppliers in each food category should receive the lion's share of the business. A buyer may occasionally order from other suppliers, especially if they have something new or interesting to offer, but it is wise to check with the current supplier first before looking elsewhere. "Cherry picking" should be avoided. This is a practice of buying each item from whichever supplier has the lowest cost, no matter the size of the overall order. In some smaller operations, the buyer may choose to use one supplier in each food category; in most cases, it is wise to have more than one supplier.