Your organisation will benefit from carrying out regular price checks to ensure you are getting the best value from your current suppliers – across all areas of your spend.
Comparing the cost, delivery time and quality of one product or supplier against another can provide a highly effective measure of food costs, to help maximise best value.
Indeed, benchmarking is promoted by the Chartered Institute of Procurement and Supply (CIPS) as an activity that can deliver valuable improvements in managing purchasing.
However, for any benchmarking exercise to be valid it is essential that comparisons are made on a like-for-like basis. It’s also vital you ensure that you analyse the type and volume of products that actually reflect what is being used by the organisation.
Pelican’s procurement analysts follow a stringent benchmarking process to give you a truly fair, impartial price review. If you’re benchmarking, there are plenty of pitfalls that could lead you to the wrong result – here are eight common errors that you need to be aware of.
8 key areas to watch out for
1. Full shopping basket
Ensure the price analysis is carried out across all the products you actually buy.
Some benchmarkers may leave out products that are not competitive, leaving only
items where their own pricing is favourable.
2. Brand switching
Switching from one branded product to other is fine, so long as the quality is
the same. Beware of switching to cheaper alternatives, in order to achieve
savings. The replacement can be a false economy, if it is inferior and fails to
deliver the same yield.
3. Same size?
Watch out for alternative products in smaller packs – of course they’ll be
cheaper! Be sure to adjust the price accordingly.
4. Using a loss leader
Supermarkets do it, so can commercial suppliers. Watch out for the flagging of
a number of loss leader products, which may be discounted for a limited period
before returning to a higher price after that.
5. Up to date price lists?
Check that pricing is current – accidental use of outdated prices could give an over-optimistic impression of greater savings.
6. Not using a weighted shopping
basket
Benchmarking should not simply calculate savings on unit prices, it should take
account of your product volumes over the period being compared.
7. Get the weighting right
Just as unit prices won’t give a real world comparison, so can a skewed basket
inflate savings. Best check product volumes match your use, over the period
under consideration.
8. Hidden management fees
Always double check for hidden extras such as management fees or delivery
charges. These can be used to claw back headline savings.
If you would like the Pelican team to carry out professional benchmarking for you – please email us hello@pelicanprocurement.co.uk
