How to reduce all costs even in these inflationary times.
Today’s post is by Ron Southard, CEO at SafeSourcing Inc.
I just read an article by Eric Revell from FOX Business titled “Here’s why grocers are really raising prices”!
There were several quotes from National Grocers Association President Greg Ferrara regarding increased labor costs, and inflation that ripples through the supply chain. He also went onto say that independent grocers have seen enormous increases in commodity prices and that our members realized a net profit margin of 1.4% in 2023.
My thoughts after reading it were, welcome to grocery. Net operating income has been like that for decades.
I have written endlessly about how to reduce all costs even in these inflationary times. However, in order to do it, there has to be executive ownership at the CEO, CFO or Owner level. You can just not accept that it is what it is from your supplier, wholesaler, or your procurement team.
There are savings out there and while they may not be home runs all of the time, a 2% savings on a commodity in a business with a 1.4% bottom line can’t be ignored. There are however much larger savings opportunities across all cost of goods categories as well as indirect spending.
You have to be able to challenge your suppliers and wholesalers. That means, maybe you leave them and take a category elsewhere. Maybe another wholesaler. Maybe a DSD opportunity. Your current contract if negotiated properly should allow a percentage of your buying to go elsewhere. If not, whose fault is that?
In the expense area you have to think strategically. Example: What other things have an impact on new hires beyond wages. Are your new hires required to take blood tests and drug screening? How much do you pay for that? Are they required to wear uniforms? How much do you pay for those and to have them cleaned. I could go on and on and have proof that this works, but you have to be ready to ask tough questions and you have to be engaged in the entire process. If not, welcome to 1.4%.
SafeSourcing is a Procurement as a Service provider of strategic sourcing solutions. We offer a variety of applications within our SafeSourceIt™ family of products. All solutions are delivered via a white glove service approach using our products or our competitors’ or customers’ products.
It is our mission at SafeSourcing to assist our customers in reducing costs to increase gross margins and net earnings while supporting their growth plans and maintaining or retraining where necessary their employee headcount.
