10 WAYS
PROCUREMENT SYSTEMS SAVE TIME AND MONEY
1. LOWER THE COST OF YOUR SUPPLIES
2. ENSURE YOU ARE NOT
OVERCHARGED (INVOICE CHECKING)
3. ALLOW YOU TO ORDER ALL PRODUCTS ONLINE AT ONE SITE
5. CHECK THAT THE PRICE YOU ARE PAYING FOR EACH PRODUCT IS NOT OUT
OF LINE WITH MARKET RATES
4. PAY SUPPLIERS ON YOUR BEHALF AT THE AGREED TIME AND RATE
police over-pricing with better information. But it is after the formal tendering pro- cess has been completed that Ferris believes a good procurement systems company really starts to demonstrate benefits. What procure- ment firms do is build a relationship with the suppliers as well as with the client. They receive all invoices electronically and consoli- date them. They can be checked by the cus- tomer as well as by the procurement firm, which will then pay the invoices on the cus- tomer’s behalf, acting as their agent. There are a number of things that these systems routinely do. One is to tell the cus- tomer what they are spending their money on. Another is to check the invoice against the con- tract that has been signed. It is surprisingly common for an invoice price to be higher than the agreed one, mistakes which often go unno- ticed unless there is a proper checking system in place. Ferris says that making sure the cor- rect amount is on all invoices can save 3% of total spend on food and drink. Computerised systems can also identify products that are ordered but are outside the standard contract list. Chefs often want to order special ingredients, and it is always worth asking whether a good price for the extra items should be negotiated, particularly if they are to be ordered repeatedly. Stock management is another area where procurement services can help. It is all very well buying something and having it deliv- ered, but it is useful to know exactly where it
40 | Technology Prospectus 2017
is. In the fridge? The storeroom? The cellar? Another advantage to stock management is that it can give you a stock valuation at any point, crucial to working out your gross profit. Then there is online ordering at one site. Whoever does your ordering – head chef or manager or both – can log on to a single web- site to do so and order with one pre-agreed price. Cost analysis and control does not end there. Menu management is also possible, with analysis of how much it is costing to serve one portion of, say, lasagne or steak and kidney pie.
“The point is they can see how much they are making every time they sell that particular product,” says Ferris. How much money do they all save? Well, it depends on how efficient they were before adopting specialist procurement help. Never- theless, Ferris says Pelican’s figures suggest it can drive costs down by 10%-15%. How much do you have to pay to get the chance to get such savings? Well, the good news is that your investment is in time rather than money. It does take effort to adopt a new purchasing strategy but most procurement specialists get their fee from the suppliers. The amount varies but it is generally about 2%. Suppliers tend to be happy to pay it because they know they are likely to get more business with more operators by working with the pro- curement provider. Quid pro quo. Most procurement service providers take their fee in this way and operate in a similar
fashion, but that doesn’t mean that they are all the same, even the ones that specialise in help- ing hospitality operators. One difference is that some procurement providers are bigger than others. Foodbuy, one of the newest names, is also one of the largest. It was launched by Compass in the wake of its purchase of Acquire. While Acquire looked after £200m a year of spending for hospitality businesses, Foodbuy jumped to £1b annually after the injection of all the Compass Group business. It also has some prestigious clients, including Oxford and Cambridge Universities. Andy Badger, who was MD of Acquire but is now chief information officer for Foodbuy, says that its clients use its technology for dif- ferent but complementary reasons. He says: “For some it is about saving money on the products because of our buying power; for others it is about saving time. A small group will also need fewer people working in their purchase ledger team if they use our services, so staff can be redeployed.” Investor interest in the procurement ser- vices sector has also increased in recent years. In 2015 Fourth, another of the big players in the UK, was effectively taken over when New York-based Insight Venture Partners acquired a majority shareholding. Fourth now has 1,100 customers worldwide and 400 staff. Angela Hart, who is a solutions architect at
Fourth, says the firm’s systems are not just a help to groups but can also help smaller
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