Consolidate suppliers

Consolidating vendors brings dollar savings, allowing retailers to leverage their increased buying power. It also results in increased operational efficiency: lower costs in relationship management, lower administration costs, less risk to the business, and increased quality and speed in delivery, according to Forrester Research.

Consider DineEquity, Glendale, Calif., the parent of IHOP and Applebee’s Neighborhood Grill & Bar restaurants. In a recent move, the company established a purchasing co-operative, Centralized Supply Chain Services, to manage the procurement of goods for its nearly 3,400 franchise and company-operated Applebee’s and IHOP restaurants. By leveraging its increased buying power to secure more competitive contracts for key commodities and other items, the new procurement plan is projected to deliver 3% to 5% in cost savings to the Applebee’s and IHOP restaurant owners during the next several years.

A primary benefit from the formation of the co-op is the expected price advantage resulting from the combined $1.6 billion in annual purchasing power of the Applebee’s and IHOP systems, the chain said. Secondary benefits include an opportunity for the streamlining and consolidation of products as well as the potential to consolidate the brands’ network of third-party product distribution centers.

“We believe that expected reductions in food cost and increased supply chain efficiencies made possible by the co-op will create a significant competitive advantage for our brands and present one of the greatest opportunities for improved franchisee profitability in the coming years,” said Julia A. Stewart, chairman and CEO, DineEquity.