Properly Managing Indirect Spend Can Help Your Business Thrive

When many operators look for ways to save money on procurement, they look to better manage their indirect spend. But what is indirect spend, and how can you make sure your business is managing it correctly? Foodbuy Foodservice has the answers you need for successful procurement.

What Is Indirect Spend?

Indirect spend refers to all the goods and services necessary to run your business, excluding the raw materials and labor directly tied to the product you sell.

For instance, for restaurant owners, items like chicken, beef, and produce count as direct spend. However, expenses like facility maintenance or a DIRECTV subscription for your bar fall under indirect spend.

Other category examples include:

• Staff uniforms
• Office supplies
• TV subscriptions
• HVAC services
• Cleaning services
• Pest control services

These products and services play a crucial role in ensuring smooth business operations. That’s why it’s essential to carefully select programs that meet your needs.

Common Indirect Spend Pitfalls

Your next step should be creating a procurement strategy to cover these categories. It’s easy to fall into some common pitfalls.

The first is allowing your locations manage this spend independently. While location needs may vary, giving every property free range on multiple buying categories can easily lead to overspending and conflicting supplier relationships. This can not only damage your relationships with supplier but also hurt your bottom line.

Another common pitfall is arranging for services only on an as-needed basis. While you may try to get by with only occasional property maintenance and pest control services, a reactive strategy can sometimes cost you more money than a consistent contract. Indirect spend makes up an average of 13% to 20% of total spend for the average restaurant. You want to make sure that you’re not losing money because of a lack of planning.

Strategies for Success

How can you best optimize your indirect spend purchases? There are several strategies procurement experts recommend.

The first is to centralize your procurement. Buying across locations can work in some scenarios, but if you know a service or product would benefit all your properties, it may be best to centralize. This strategy can increase your negotiating power with suppliers, as you’ll offer a larger portfolio. It can also help you maintain consistency across your locations by working with one supplier for all properties.

The second is to partner with a group purchasing operation (GPO). GPOs allow you to combine your buying power with a network of other companies, giving you more leverage with suppliers. The result is better programs at competitive prices.

Foodbuy Foodservice provides GPO programs for multiple indirect spend categories. From uniforms to facility maintenance services, we work closely with our supplier partners to provide solutions that will work for our Members.

Become a Foodbuy Foodservice Member today to get started.