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agoodcustomer

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Reply with quote  #17 
Quote:
Originally Posted by Refusetolose
Agoodcustomer, I noticed you said you were "a generally happy US Foods customer". That would imply you are unhappy about something. Would you share what you are umhappy about?


Great question!

A perfect illustration: That Sysco has showed up to poach us from US Foods, and now US Foods is about to give us a proposed package that should (according to them) give us better pricing than ever before, is exactly what I don't like about my current vendor relationship.

This has historically been evidenced when I would perform a market basket and realized US Foods pricing had crept. I'd go to my rep, and he would ultimately sharpen his pencil.

Important: I realize this may just be capitalism working itself out, but it would be AWESOME if I had some sort of assurance that the price I was receiving today, was the vendors more aggressive pricing available to me.

This is what attracts me to Sysco's proposed MDA with locked margins. But then, maybe that's fantasy too --- or maybe you actually end up paying MORE for locked pricing.

Great question.
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Refusetolose

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Reply with quote  #18 
Just a suggestion on my part, if it ain't broke don't fix it. If you have a successful business and a good working relationship with your rep, keep it that way. In my opinion, Sysco came in with low ball prices. I know that by the reaction of your rep you feel he was taking advantage of you. Judging from past behavior, it sounds like a company would lowball, he matched the pricing and then crept back up to a level that was profitable for him.
The Sysco offer is just smoke and mirrors. They will make their money. Companies like Sysco and US will offer a cost plus contract, then have the product billed through a 3rd party to show they are living up to their end.
Bottom line, you have to ask yourself a few questions before you make this decision.
1. Is 5% savings (albeit temporarily) enough to trash my current working relationship and possibly ruin your rep's career?
2. Is the deal they are offering worth risking your business success? If they can't properly match up the items, you could see a dip in business. If their service isn't on parr to what you are currently receiving, then you will see major issues with the consistency of your business.
Don't get me wrong, if you are experiencing service issues now (mispicks, late trucks, out of stocks, etc) looking at another vendor can help wake up your current provider.

Disclaimer, I never worked for US Foods. I did work for Sysco at one time.
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I AM A KOOK

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Reply with quote  #19 
agoodcustomer,  I work for an independent, I just opened two different Sysco Accounts which were both Cost Plus 5 % plans.  Both found their pricing after 60 days was much higher than expected.  Both found out they could only audit 10 items.  As an independent, I don't have a Sales Manager twisting my arm to make your pricing higher.  

Find an independent. With an honest rep who will stick with it. Give you the service you deserve. And be more than happy to turn his computer around and let you do an audit any time you like.




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Southchikid

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Reply with quote  #20 
There are no companies that can remain in business on 5%. It will be smoke and mirrors, look at Sysco quarterly releases I believe they run at 20%. I think a good independent is the way to go, personally. Or why not have 2 vendors? Sounds like you have the business to warrant using 2 guys. Lets you price compare when you want. Just remember that they need to make something too and not to Nickle and dime them.
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SCURVYCHEF

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Reply with quote  #21 
Quote:
Originally Posted by Southchikid
There are no companies that can remain in business on 5%. It will be smoke and mirrors, look at Sysco quarterly releases I believe they run at 20%. I think a good independent is the way to go, personally. Or why not have 2 vendors? Sounds like you have the business to warrant using 2 guys. Lets you price compare when you want. Just remember that they need to make something too and not to Nickle and dime them.


AGREED! 5%?! yea, okay, from the company that yields 6% return AFTER EBITA
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LinesInTheSand

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Reply with quote  #22 
agoodcustomer,

Why don't you stay a good customer and not fall for Sysco's low-balling antic's, or any competitors antics like this because they will always paint a rosy picture in an effort to gain more of what they don't have.  You want better pricing okay, ask what can be done.  You want to use more of US Foods tools to help you be more efficient and profitable, great! Do it.  Change the focus, yes price is very important.  But don't be blind, use the inventory manager program, have them calculate your food costs in recipe manager.

FOCUS on making more money and dialing in on profitability while minimizing loss.  WORK with the rep you feel has shown that they care about your business.   
WATCH what they are doing.  LISTEN to what they say.  ASK questions.  EMBRACE your vendor or rep as a working partner, a food service consultant if you will.

I feel its important to tell you that I don't work for either of these vendors, never have.

You really might want to think about what the real cost will be to switch and who will bear that burden.  Is the Sysco mayo thinner than what your used to and are the items matched up accurately?  What is the delivery schedule? When will the new rep come to see you?  Will you be punching your own order?  Its always easier to fix a bridge than to build a new one, unless that bridge is crumbled beyond repair and that doesn't seem to be the case here. 

Good Luck
 
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Retired President

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Reply with quote  #23 
Over the long run, Sysco and US will be within 1 to 2 % of each other. You need to focus on what you are good at which I assume is selling food and service to your customers. You will never become more profitable by focusing on the purchasing side. They both purchase products for about the same cost and the fluctuations will likely be in the commodities where somebody makes a better buy on a rising market, but that happens both ways and why I say over the long run, they will be equal. By long run I only mean 5 yrs. If you were only in business for one week, then buying the best price on everything would matter. Pick your supplier by an overall comparison of quality, service, and price
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foodpolitician

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Reply with quote  #24 
@agoodcustomer

If you are happy with the service US Foods provides, just use the Sysco pricing to make them sharpen their pencils and give you a better cost of goods, without having to change up your vendors and items .   

I am wondering who pointed you to this board.  Feels like the wives trying to be a member at an all boys club..... I expect to get crap for that statement, but I came to read this board and be entertained about the companies we work for, our industry headaches, our pay nightmares, etc.   Doesn't seem that a customer would want to be here, but what do I know.....
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agoodcustomer

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Reply with quote  #25 
Quote:
Originally Posted by foodpolitician
I am wondering who pointed you to this board.  Feels like the wives trying to be a member at an all boys club..... I expect to get crap for that statement, but I came to read this board and be entertained about the companies we work for, our industry headaches, our pay nightmares, etc.   Doesn't seem that a customer would want to be here, but what do I know.....


That's so funny. Google led me here, but I didn't realize 'till some of the responses that it was so industry specific. Too funny. I feel less like a wife among all boys, and more like a sheep among wolves maybe?

Totally kidding. All that insights have been very helpful!
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yogibuck

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Reply with quote  #26 
The problem with "cost" is that it can be anything the company/opco wants it to be.

Rarely is cost actually "cost" of an item.

Often if it is one of the Giants, the corporate division wants a cut.  So the supplier adds a rebate, backend money, marketing, blood money or whatever you want to call it, into the "cost" and the supplier will pay it directly to corporate.

Then at the opco level it happens again.  They may start out net net. But may want to raise their cost.  They ask for marketing money (which prior to they either haven't been doing or paying for it out of profits), rebate money, more pick up allowances, purposely cause lumper fees to go up by hiring a lumper service and splitting the revenue.  Often, the supplier will agree to, but won't eat these additional costs but will add to the cost.  Heck, some of these guys charge for bad pallets and they virtually add a profit center into the company for bad pallets that they later sell.  But eventually the supplier will charge the distributor.  (This is also done hoping the supplier doesn't charge for hidden or delayed costs).

So basically, they can name their "cost."  I've seen 15% or more added onto the "cost" and then rebated back to the company as a rebate.  Depends on if he market/product will bear it. 

Often the opco salesman, if unexperienced, doesn't even realize this is going on, but this all cuts into his margin if he is getting a bonus on any type of profits.  And their have been lawsuits over it.  I'm sure the language in the employment contract protects the distributor in all but a few instances.

But it is not stagnant.  The opco's are always asking for more and more program money of one type of another.  Typically want it increased at least annually.  So the supplier will add 1%, and send it to whoever asked for it and add the 1% to the "cost."  So the customer cost went up, but the distributor was able to pocket it.

I've seen government and other entities sue distributors over cost plus programs and early on in some instances they prevailed, but after getting hit, the attorneys just re-word the agreements with a definition of cost more suitable for the supplier.  Here is one involving some hospitals where US Foods got nailed for nearly $300 million.

https://www.law360.com/articles/540142/us-foods-pays-297m-to-put-price-scam-class-action-to-bed

As mentioned above, these guys wouldn't stay in business if it was a true 5% plus cost of the item.  They have to account for overhead, freight, sales salaries, etc. etc. etc. etc.  I guess they could guestimate those items and try to add it to the product cost and call it cost.  But 5% probably doesn't cover overhead.

I'd love to see the contract language of one of these cost plus agreements.  I imagine they were very precisely written.

I think the best thing you could to is to constantly review your bills and try to make sure your price is competitive to whoever else can supply you roughly the "same" product.  You may want some items only one supplier can provide, but yet you still have to meet a minimum purchase order of other items so you don't get hit with more fees.

Or you need to be large enough to warrant more than one supplier.  If you can only have enough volume to order from one supplier, than to be honest, you aren't going to get the price that your competitor who can pick and choose between two can.  

This board is set up mostly for folks who's job it is to sell products for a distributor.  Just keep that in mind.

Most all are great people just doing a job like the rest of us.  And theirs is a position that is under attack to eliminate them, use cheaper alternatives, use computers, cut their pay, take allowances away, increase their volume at less pay, etc. etc. etc.

It is a tough tough tough job.  There are some out there that will look out for their customer expenses at their own detriment.  But doing that is at odds of what they were hired to do.  Their job is to maximize company profit and often their compensation is tied to the margins they can extract from their customers.



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foodpolitician

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Reply with quote  #27 
@agoodcustomer 

I think the wolves have given you an insane amount of good advice.  Now you will be able to live near/with the pack and know what we do to survive
Really curious why you haven't tried a non-publicly traded distributor also.   And how much do you buy each year?

Again, I would still suggest you stick with US Foods and use the Sysco bid as leverage to get a better cost of goods... unless you don't like/trust your current supplier.   change is a headache in and of itself, with the amount different items you will be having to try.  Stick with US Foods, learn their food cost systems/tools for your business, and get to work marketing and selling more of "your" brand....
 [smile][smile][smile][smile][smile]
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northernms

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Reply with quote  #28 

Forget publicly traded companies like Sysco and US. Find an independent regional that's family owned and has a good reputation. They will actually value your business. It will seem, at first,  like you are paying a few bucks more here and there but you will likely get more honest pricing and less monkeying around. You'll also probably get much better service which counts for a lot.  

These indies also have a lot less overhead and no shareholders to pay so often times they can be pretty competitive on price. Even large national chain accounts are turning to these independents because the big guys only give a shirt about stock prices. Manufacturers also love independents due to the constant abuse they get from Sysco and US. 

Are you able to pick up the phone and get the president of US Foods on the phone? I doubt it. You can at my company. 

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northernms

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Reply with quote  #29 

5% on your top items. They're guessing you won't notice when they slip in a $50 roll of film wrap and $20 for single box of gloves. I see this ridiculousness everyday when I look at competitor invoices. Sure you got a great deal on ground beef sadly you lost all that savings ten fold on your spices, paper goods, chemicals. 

I tell people straight up I need to mark up their items 12-18% based on their volume. I promise to not play games with things they aren't paying attention to and to warn them when I can about market increases so they can plan some strategic buys. I issue credits promptly and fairly. I fix mistakes. But I'm not gonna get bullied or nickeled and dimed. You need to make money and we need to make money. I want a long term relationship and I'm not gonna bid every week. 

 

I actually have an account that I'm ready to cut loose because they keep going back and forth with us and Reinhart on items. Reinhart gives them zero service but a few key items are cheaper. I'm ready to let them go to Reinhart for the summer. Then in the fall we can look at those summer invoices. You know they are going to get hosed. I'm not willing to battle it out to the bottom. 

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MagicChef

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Reply with quote  #30 
Northernms, I agree to a point with ur statement on an Independent but who knows what they have in this customers area. I know I am sure happy working for an Independent. When I worked at the Blue Cube, I was told to believe the sun rose and set with them. Boy, was I wrong, well... in my geographical location. If these large companies don't give the reps a slice of the pie, I can't see them giving it to the accounts. Unfortunately, the reps for these companies that have never tasted the sweetness of being with an Independent will never really know, as I didn't and yes to those out there balking at what I say, there are exceptions to the rule but all in all they will not let you make the sales u can make with an Independent without cutting you back. I think it would be the same for a customer, there only gonna give so much. Just my take on it. I still stand by though, if ur an operator and ur rep is good and ur making money, just be happy and live a stress free life.
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Sadbuttrue

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Reply with quote  #31 
Be careful on the calculations and ask for additional audit rights. Both companies will say over sales cost but they will play with the earned income. So in the basket, X = 10 but their real sales cost does not have EI in that factor. Then over time it's added back in and your paying the 10 plus the EI which could be 10 on top of that. You will be paying the same if not more. Any money given up front, I guarantee you they will make back up by more than double in the end. Personally, I prefer lower margin over rebate, but if you take a rebate put towards your account as a credit and don't take a check because your paying taxes on that check. Stick to major brands and leverage your buying power on them to have manufacturer rebates come to you direct separately. And do not let either distributer make you hit a certain dollar or case count to get your rebate, they already know what you can do and will try to make it look better that way but if you have a poor quarter or year, you won't get anything. Go from case one. If you truly have the buying power, one of them will cave. And make sure you do the audits every chance you are given in your agreement. Hold them accountable.
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Rumor Man

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Reply with quote  #32 
Quote:
Originally Posted by agoodcustomer
I own a few locations and am generally a happy US Foods custkmer. Recently I've been approached by Sysco with some upfront money and an MDA. US Foods has also countered with upfront and a rebate program (no locked in margins, that I can so far tell.) I was wondering if anyone had ideas of how to negotiate and evaluate these two offers apple-to-apples. All I really care about is the best pricing year-after-year. Thanks!!



Don't take any money.  Negotiate your margin schedule and leave it at that.  THERE IS NO FREE MONEY!!
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