Today’s consumer demands natural, high-quality and healthy ingredients. Grocery and food service teams are determined to deliver on these expectations, but success can be very difficult to achieve. Organics is a complex market with tight supply and limited suppliers and it takes a well-rounded sourcing strategy to be successful.
Summer is nearly here, and with that, so comes the season of farmer’s markets and roadside produce stands. Fresh, organic and locally-grown food is a big trend on dinner tables and restaurant menus, with worldwide sales of organic food reaching $81.6 billion in 2015
Who are your suppliers and are you asking them the right questions?
Strong supplier relationships
are the foundation of an effective sourcing strategy
, especially when it comes to the organics market where suppliers are limited – if you don’t have solid working relationships with these few companies, you risk the chance of not being able to offer organics to your customers because one hiccup could leave you with no other supply options. Having tight, trusting bonds with these partners will pay off in the long-run as they’ll be more willing to work with you on your specific needs and help you deliver the kinds of ingredients consumers are demanding.
Performing proper due diligence and asking the right questions before engagement with a supplier is critical. Cost containment is important, but shouldn’t be the only objective. Other factors, such as the suppliers’ reputation, quality control procedures, tier two suppliers and their geographic locations, could have an even larger financial and strategic impact on your business. The more due diligence you do and insight you have into their operations and working practices, the better you’ll be able to compete, monitor supplier compliance and performance and avoid supply disruptions.
Tackle indirect spend to overcome high costs.
Given organic ingredients are hard to find, and often come at a high cost, it’s often important to adopt an enterprise-wide sourcing strategy that also looks for savings in other areas of the organisation to help offset the higher cost structure. Consider store operations, like facility services, background checks, construction needs, office equipment and supplies. By running competitive events on these items and capturing more value from indirect areas of spend, your team can deliver savings to the bottom-line while offering customers organic options - without having to eat the increased cost, or pass it along to consumers by raising product prices.
Turn risks into opportunities.
If you anticipate products will fly off the shelves due to high demand, the typical course of action is to prepare for the spike by ordering a larger supply of goods ahead of time, or by alerting suppliers of the potential for a last-minute order. This strategy won’t always work in the organics category, where demand is high and supply is limited – suppliers’ hands are often tied by market constraints and won’t be able to expedite a large shipment of such niche products.
This is where moving beyond a single or sole source to having a network of trusted suppliers – or as wide as is feasible in the organics market – is extremely valuable. Having insight into all partners that can deliver on your unique, organic product specifications, and developing solid relationships with those vendors, will set your team up for success. The trust that comes with these partnerships and willingness to work together will give you more options to choose from when disruptions occur and better equip you to meet demand and capture more sales.
To learn more about how your sourcing approach can move the business forward, read our take on why the right procurement strategy can protect a company’s brand reputation