Supply chain deafness

The relationship between operators and suppliers should be one of the most vital to both sides of that equation. In grocery it is central to success: the power of buyers and the responsiveness of producers gives the sector its edge. In hospitality, with a few notable exceptions, the buying arena is too often neglected. Suppliers and producers don’t know operators; operators don’t know suppliers. Or at least, they seem to have little idea what each other is about, what their respective objectives or ambitions are. A recent report commissioned by CPM, a UK-based field marketing agency, suggests that food and drink manufacturers and suppliers are missing out on big business opportunities within the broad foodservice arena. The attractiveness of foodservice lies in the fact that it is a market that already generates £23bn of sales a year, and is predicted to grow to equal retail food sales within 10 years – and at a time when grocery margins are being increasingly squeezed. The report says that producers have an "unclear and unsustainable" approach to the sector, with an apparent "disconnect" across the supply chain. It argues that suppliers need to change their approach to the market and create new "partnerships" right along the supply chain. Problems it highlights include a lack of robust data on the market and manufacturers relinquishing responsibility for their products down the supply line. The report confirms the impression that communication between operators and the supply-side is, in general, poor – and fault can be found on both sides. The larger operators, such as Whitbread, Spirit, M&B and the fast food players, are bringing much more professionalism to procurement, increasingly copying the retail chains. Spirit, for example, has employed a food category director to increase efficiencies in its product ranges, while M&B boasts of how it is using its buying power (it is now a bigger buyer of turkey tops than even the supermarket groups, for example) to underpin its value offerings. But hospitality is different to retail, in that product selection is still principally in the control of operators, not buyers. This is one of the biggest issues for suppliers who rarely have relationships with operations teams. Their main, and some times only, point of contact with pub, restaurant and hotel companies is through the buyer, leading to a lack of understanding of retail strategies and requirements and with price becoming the only bargaining tool. There is an obvious need for suppliers to create contacts and communication at all levels of operating companies. But there remains a reluctance, or perhaps nervousness, about doing this among too many suppliers and producers. Perhaps they just don’t know how to do it? It is remarkable how many lavish, corporate entertainment events are held at which the hosts just don’t engage in conversation about business with their operator guests. Most operators would welcome the opportunity for constructive dialogue. They want suppliers to understand their needs better, but also want to better understand the product ranges and new developments producers are working on. They also recognise that in many cases suppliers have valuable consumer insights they don’t have access to. With more operators adopting the retail and fmcg practice of refusing supplier entertainment, corporate hospitality might not be the best vehicle for establishing this dialogue, but a straightforward business approach might actually prove more productive. It just needs someone to start taking the initiative.