While running a restaurant business, the three key areas that business owners focus on are – customer acquisition, operations, and managing the supply chain. Within supply chain management, vendor management constitutes the lion’s share. Right from the taste of the food that your restaurant serves to the profit margins that you can afford, vendor management has an important role to play in all the major aspects of a restaurant business.
Vendor management seems a little daunting for experienced business owners and novices alike. The sheer number of vendors in the market, competition, complexity of dynamics between the organized and unorganized sectors of the supply chain, the fragile nature of food products, and the challenges associated with it, etc could be reasons for this. Hence, it is very important to strategically manage vendors and ensure smooth processes at the core of your restaurant business.
So, here are some of the important pointers to keep in mind when you create a blueprint for managing your vendors.
Find the right vendors
Yes, this is an obvious first step but its importance cannot be stressed more. Just like the more front-end tasks of setting up the physical space for the restaurant, branding for customer acquisition, and designing the menus, the back-end task of finding the right vendors takes a lot of time and resources too. You will need to be very clear about what materials you need and how frequently you will be needing them. Especially when you are just starting out, you have to really plan in detail and have your requirements listed clearly to be able to start the search for vendors.
Once the search is on, it is not just the quality of materials but also reliability, trust, consistency, and peer-reviews that you should look for before finalizing. Flexibility is also another important aspect to look at if you are experimental with your menu or if you are still unsure of your requirements.
The worst thing you can do is to rush while finalizing vendors in a hurry to start operations. The beginning of your end product is with your vendors and it can make or mar your business, so finding the right ones definitely warrants the best of your efforts and strategy.
Get the pricing right
Once you have found the right vendor or have finalized on a few top ones, make sure to focus on the prices that you are fixing for the materials. Pricing is a tricky area. Going for the vendor who offers materials for low prices might be tempting but deciding a vendor based on just prices may not be the best idea. When the cost of vendors is low, the profit margins rise for restaurant owners and that can be a strong point that might cloud judgment on other important aspects such as the reliability of the vendor, their experience in supplying materials, compatibility, etc. On the other hand, vendors who charge high costs could eat into your profits and might even make it hard for your business to sustain.
So, pricing has to be fixed while taking many other aspects into account and not just costs. In fact, vendors are best treated as employees of your business because they work very closely with your operations and it is crucial that they feel like a part of your team as well. It is a good idea to discuss pricing with the same attitude. For example, if a vendor is charging very less for materials and you think it could benefit you to work with them, it is good to explore how they are able to afford to do that and understand their business to see where your interests align. Similarly, if vendors are charging you high prices, you could try to understand what it is that they are offering for the higher price and see if it could be an advantage for your business.
So, based on what stage of business your restaurant is in and what your long-term and short-term plans are, consider the prices that you will be able to afford and find reliable vendors within that range who can understand your business and work in collaboration with you.
Fix timelines with care
Timelines are extremely important when it comes to vendor management for restaurant businesses. Since a lot of the raw materials are perishable and have limited shelf-life, it is important to plan and fix timelines with your vendors to make sure that the operations of the restaurant keep running smoothly. The many challenges that people face when deciding timelines are the unpredictable nature of demand at restaurants, the seasonal aspects of raw materials, and the challenges of transport of the materials. Restaurants have to fix timelines on the safer side which could lead to wastage in some cases. It is important to have a plan to deal with this as well.
You have to consider credit cycles as well because they can make a big difference in the running capital that you have access to. Credit periods offer the option to get the materials from a vendor on credit and pay as per a fixed timeline. As convenient as this is, it is also necessary to not keep the credit cycles too long as this might lead to the accumulation of debt if the business is not generating enough revenue.
Maintain a good relationship
The relationship between vendors and restaurants are contractual. While this is very important and the contract has to be drafted with attention to even the smallest of details to avoid any mishaps, it is also important for vendors and restaurants to have a relationship beyond the contract. A good relationship based on mutual understanding, trust and common values can help restaurants build a solid foundation for the business to run smoothly even in times of uncertainty.
When it comes to contracts, it is important to think through every possible scenario and come to an understanding on all of them. For example, some raw materials are highly temperature-sensitive and go bad when the transportation does not take that into account, the responsibility for delivery of the material at the right temperature should be part of the contract in this case. By coming to an agreement on important points, the relationship between vendors and restaurants can be transparent and without conflicts. This can pave the way for the relationship to evolve.
Explore vendor management services
Third-party vendor management services bring in technology into the picture and make it a seamless process for restaurants to manage vendors according to their specific requirements. From accessing a pool of vendors, auditing contracts, integrating payments to protecting the safety and interest of you business, vendor management services can support your business in ways that can help you manage your supply chain with ease.
Check out (website) to know more about how your restaurant can avail vendor management services that could be a game-changer for you!