Today’s post is by Mark Davis; Sr. Vice President of Operations and CTO at SafeSourcing
2012 brought the Midwest one of the worst droughts since 1936. The drought coupled with other affected sources of food throughout the world has Rabobank, a leading agricultural investment house predicting massive increases in food prices by June of 2013, specifically in meat and dairy products where shortages in feed will require farmers to greatly reduce their livestock inventory leading to shortages next year.
With so many companies being dependent on the cost of food in their offering, increased food costs will lead these companies to make other adjustments in their business to help balance the increases out. Today we will take a look at a few of the strategies companies will be using in 2013 to help control their costs.
Re-evaluating all vendor deals – As vendors begin to enter 2013 and begin to think of how they can begin to balance out upcoming food price increases they will have to begin examining all of the current contracts and agreements they have in place especially those that are getting ready to expire in the next 6 months. Many of these agreements have been in place for several years and have the potential to be improved even if the incumbent ends up winning the business.
Repair Vs. New – In a recent article on the Foodservice Equipment and Supplies website results of a survey to operators in the industry, 68% of the respondents stated that rising food costs would limit their ability to buy equipment and 98% stated that they repaired instead of purchased new equipment in 2012. With a move to repair instead of replace, many companies will be searching for quality companies who can make the repairs they need in a timely manner in a way that will not cost them more money than purchasing new equipment would have.
Product mix – Another thing that will change for suppliers in 2013 will be a re-evaluation of the product mix that they offer their clients. As prices of some products increase, leveraging other that aren’t increasing as much will be a key for many companies and understanding the companies that offer these products will be a key to changing their mix in a way that continues to satisfy their own customers.
Energy Saving Measures – Along with food costs, fuel costs are always one of the most watched indexes on the market as the ups and downs of that market affect so many things. As food prices climb in 2013 companies will look to reduce another of their major costs by looking in energy saving measures, services and products that will help them manage their expenses. Many companies will look to fuel saving equipment, 3rd party energy reduction consultants, and energy savings policy changes to help them reduce this expense category.
When faced with uncontrollable expense/cost increases learning how to reduce costs in other ways is a critical piece of successful business. For more information on how SafeSourcing can help you with this process, please contact a SafeSourcing Customer Service Representative.
We look forward to your comments.