Foodservice Manufacturers: Address the Leak in Your Trade Spend

Posted on March 21, 2018 by Brian Maloney under Foodservice 101

Are you adequately addressing leakage in your process? To stop leaks in trade spend: invest in a trade promotion management solution, prevent double dipping, monitor contract performance, take control of your deduction balance, minimize claim processing time, and maintain a low pending count.

Recently, I came across an article titled, There’s A Massive Restaurant Industry Bubble, And It’s About To Burst. Independent operators seem to be the ones getting hit the hardest. The Chicago Tribune reported that in 2016 “the number of independent restaurants in the US dropped 3%.” Foodservice manufacturers may see a hit to the bottom line if independent operators become obsolete.

The Good News for the Foodservice Industry

Even though there could be a decline of independent restaurants, we see promising feedback from the restaurant industry. Each month, the National Restaurant Association provides information that tracks the health of and outlook for the US restaurant industry called the Restaurant Performance Index (RPI).

RPI

RPI

As you can see, in 2016, there was some decline. The good news is that restaurant industry sales have continued to grow. So, even if independent restaurants close, there’s an increase in overall sales.

What Foodservice Manufacturers Need To Do

With the decline in independent restaurants, foodservice manufacturers need to be on top of their contracted business and trade spend process. Are you adequately addressing leakage in your process?

If you’re not addressing some of the major issues that could be costing you money, then you may be hit harder as more independent operators close. Here are a few things foodservice manufacturers can do to stop leaks in trade spend.

  • Invest in a Trade Promotion Management Solution. If you’re managing trade with a homegrown or manual system, then you are probably losing money without realizing it. The right trade management application offers insight into volume and profitability that can help improve your business.
  • Prevent Double Dipping. Identify double dips and implement processes to minimize overpayments to distributors. Double dips can gradually creep up and get out of hand quickly.
  • Monitor Contract Performance. Monitor and update your contracts. Run reports on your contracts and their performance to identify areas for improvement and opportunity.
  • Take Control of Your Deduction Balance. A high deduction balance means you’re losing money. Distributors deduct and collect monies for what they already deducted. Unfortunately, many foodservice manufacturers will pay because they don’t have a way to identify if they’ve already paid the distributor.
  • Minimize Claim Processing Time. Distributors have a deduction policy time frame. Therefore, they will deduct if their invoices do not get paid within the specified time frame. If you’re not processing claims quickly, then you may risk a deduction taking place and a check getting issued as well.
  • Maintain a Low Pending Count. Pendings on your claims will hold up payment, which will, in turn, increase the likelihood of a deduction occurring. So, monitoring your pendings and addressing them early on will help to lower your costs.

 

As you can see, there are ways foodservice manufacturers can keep their bottom line in good shape even if the restaurant bubble does burst. Each of these things are related and should be a part of your trade promotion management process. Keeping them under control comes down to having the right TPM solution in place.