Achieving Favorable Economies of Scale

economies of scale

Article contributed by Mike Berman, COO, Day & Nite/All Service

If you have not recently done so, before 2nd quarter 2021 kicks off later this week, make a point of counting all the suppliers you actively buy from to support your business—across all categories.

More than any other field, foodservice suffers from diseconomies of scale due to inherent external factors, most notably a too complex and unwieldy vendor set.  Even the smallest operator will be shocked to learn just how much time is consumed ordering from, administrating and managing a surprisingly large number of vendors over the course of each week.  Like pretty much everything else in our world, Covid-19 is the catalyst for not just rethinking the status quo but demanding necessary changes.

Vendor reduction has long been a primary Corporate America objective, in fact there’s an entire industry built around vendor management and consolidation. The movement started with a recognition that buy-side power is the necessary force for getting greater value from the sell-side. More than having a vision or concrete vendor consolidation objective, hospitality leaders must also set the performance-expectation bar much higher than is commonplace. Supplier reliability, established relationships, fair pricing and terms represent the bare minimum price of entry and should not be overvalued.

When basic qualifications are treated as virtues there is little incentive for innovation, or even alignment with your most critical business objectives. Events of this past year may make us long for a return to “business as usual”, yet the unusual now must serve to create more favorable, lean operating conditions. When it comes to strategic vendor management, foodservice thriving in the months and years ahead recognizes good enough is no longer good enough.

While Covid-19 has been the story of our moment in time, our times have been reshaped by the emergence of smart technology.  From smart phones to smart homes and much more, connected intelligence unleashes unrivaled conveniences and efficiencies.  It therefore stands to reason that hospitality should adopt accepted best practices from the smart tech sector, with Gartner’s highly effective 3-step strategic vendor management process standing out as an excellent guide. However important your own preparation is, learning about how prepared and poised your vendors are will determine how rapidly you can convert essential vendor consolidation concept to high-impact economic reality.

  • Simplot Frozen Avocado
  • Day & Nite
  • AyrKing Mixstir
  • McKee Foodservice
  • RATIONAL USA
  • T&S Brass Eversteel Pre-Rinse Units
  • Inline Plastics Safe-T-Chef
  • BelGioioso Burrata
  • RAK Porcelain
  • Imperial Dade
  • DAVO Sales Tax

Of all supplier categories, foodservice professionals instantly identify the numerous physical property, plant and equipment-related (PPE) trades as the most fragmented. Not only are there literally dozens of vendors needed for installing, maintaining and repairing PPE, the low average ticket price makes it even more difficult to achieve anything close to reasonable economies of scale.  Consequently, the strong recommendation is hospitality starts with the services-trades category.

The Day & Nite family of companies not only offers an unrivaled installation, maintenance and repair platform across hot and cold side kitchen equipment, HVAC and plumbing, the company’s highly integrated systems and technologies allow for superior flexibility, visibility, predictability and growth.  Including energy management services, Day & Nite Performance Solutions highly specialized indoor environmental quality practice simultaneously couples lower energy consumption expenses with the most comprehensive hygiene and food safety suite of technologies, products and services.Day & Nite HVAC, Day & Nite Refrigeration, All Service Kitchen Equipment, Popular Plumbing business units are all at the leading sustainable business practices edge, equipped to deliver uniquely powerful solutions for the betterment of your profits, people and our planet.

In scope and density of operations, scalability and utility, the Day & Nite family of companies is ideally suited to reduce any foodservice operator’s volume of vendors, create enormously favorable economies of scale through your reduced administrative overhead and favorably bundled pricing.

With long sought-after changes to the prevailing hospitality industry model well within grasp, with vendor consolidation looming as a major influence for swift, significant and sustainably favorable foodservice economics, email jbf@wearetheone.com to bring streamlined disciplines to your business today.

  • RATIONAL USA
  • RAK Porcelain
  • Simplot Frozen Avocado
  • AyrKing Mixstir
  • McKee Foodservice
  • BelGioioso Burrata
  • T&S Brass Eversteel Pre-Rinse Units
  • Imperial Dade
  • Inline Plastics Safe-T-Chef
  • Day & Nite
  • DAVO Sales Tax