Tag: Indirect Spend

Direct and Indirect Spend

The Differences Between Direct and Indirect Spend

38% of operators say their restaurant was not profitable in 2023.

Are you effectively balancing exceptional dining experiences with healthy profit margins across your multi-unit restaurant? 

In this industry, where profitability is a constant challenge, mastering spend management is crucial. But how can you ensure that every dollar spent contributes to your bottom line?

Understanding the intricate differences between direct and indirect spend is key.

While the terms “direct” and “indirect” might sound straightforward, their application within the context of foodservice procurement can be multifaceted and nuanced.

What is Direct Spend?

Direct spend refers to the procurement of goods and services that are directly involved in the production and preparation of food and beverages for a restaurant or food establishment.

These are the expenses incurred on items that are essential for the core operations of the business.

Examples of Common Direct Spend Categories

  • Food Ingredients: Raw materials like vegetables, meat, seafood, and spices for dish preparation.
  • Beverages: Soft drinks, alcoholic beverages, coffee, and tea fall under direct spend.
  • Kitchen Equipment: Expenses for ovens, refrigerators, knives, and utensils.
  • Packaging: Costs for containers, takeout boxes, napkins, and disposables.
  • Cleaning Supplies: Expenditure on cleaning products for kitchen and dining area maintenance.

Efficient management of direct spend is crucial for controlling costs and impacting the profitability of a restaurant or foodservice establishment.

What is Indirect Spend?

Indirect Spend refers to the procurement of goods and services that are not directly involved in the production and preparation of food and beverages but are essential for the overall functioning and support of the restaurant or food establishment.

These are the expenses incurred on items that are necessary for the smooth running of the business but are not directly related to the core operations.

Examples of Common Indirect Spend Categories

  • Facility Maintenance: Covers expenses for building repairs, renovations, and equipment upkeep.
  • Cleaning Services: Includes outsourcing for regular and deep cleaning of the restaurant premises.
  • Office Supplies: Expenditure on administrative essentials like paper, pens, and printer ink.
  • Marketing: Costs for advertising campaigns, social media, and promotional materials.
  • Staff Training: Expenses for employee training programs and workshops.
  • Utilities: Costs of electricity, water, gas, and internet services.
  • Insurance: Payments for property, liability, and worker’s compensation insurance.

Indirect spend, while not directly impacting the food preparation, plays a vital role in the overall efficiency and success of the foodservice business.

Proper management of indirect spend can contribute to cost savings and improve the overall performance of the restaurant.

How do I manage my Direct and Indirect Spend?

At Consolidated Concepts, we understand the challenges of managing direct and indirect spend across multiple locations.

With our innovative technology and centralized approach to procurement, we offer actionable strategies to enhance your spend management practices and drive sustainable growth.

  • Leverage Technology and E-Procurement: Implement technology to streamline processes, centralize supplier databases, and automate orders, ensuring efficient spend management.
  • Centralized Procurement: Establish a dedicated team to oversee purchasing decisions for all locations, providing better coordination and streamlined processes.
  • Standardized Supplier Agreements: Negotiate agreements covering all locations to secure consistent pricing and terms, minimizing spend variations.
  • Implement Spend Analysis and Reporting: Utilize analytics tools to track spending, identify patterns, and uncover cost-saving opportunities effectively.
  • Supplier Consolidation: Consolidate suppliers to negotiate better terms and achieve economies of scale, reducing administrative overhead.
  • Group Purchasing Organizations (GPOs): Join GPOs to pool purchasing power and access exclusive deals negotiated on behalf of members.
  • Regular Reviews and Audits: Conduct frequent reviews to ensure compliance with policies and identify areas for improvement.
  • Implement Budget Controls: Set clear spending budgets and approval processes to maintain financial control.
  • Training and Communication: Educate staff on spend management policies and promote adherence to guidelines.
  • Share Best Practices: Foster collaboration between managers to share successful strategies and drive continuous improvement.
  • Sustainable and Ethical Sourcing: Emphasize responsible sourcing practices to meet consumer demand and enhance brand reputation.
  • Stay Updated on Market Trends: Access timely insights on market trends and emerging technologies to optimize spend management.

By partnering with Consolidated Concepts and implementing these strategies, you can effectively manage direct and indirect spend, optimize costs, maintain consistent quality, and drive sustainable growth across your restaurant locations.

Fill out the form below and join Consolidated Concepts today to transform your spend management practices for success.

 

Indirect Spend

9 Ways Technology Can Help Multi Unit Restaurants Manage Indirect Spend Savings

Restaurant indirect spend savings refer to the cost reductions or savings achieved in the procurement and management of indirect expenses within a restaurant operation. Indirect spend in the restaurant industry typically includes various non-food and non-beverage-related items and services that are necessary for the smooth operation of the establishment.

Examples of restaurant indirect spend categories include:

  • Kitchen Supplies: Utensils, cookware, cleaning supplies, kitchen equipment, and appliances.
  • Tableware and Dining Supplies: Plates, glasses, cutlery, napkins, tablecloths, and other dining accessories.
  • Cleaning and Maintenance: Cleaning products, equipment maintenance services, pest control, and waste management.
  • Restaurant Supplies: Menu printing, packaging materials, uniforms, signage, and promotional materials.
  • Utilities: Electricity, gas, water, and other utility services.
  • Technology and IT Services: POS systems, software licenses, hardware maintenance, and IT support.
  • Marketing and Advertising: Advertising campaigns, online marketing, social media promotions, and printed materials.
  • Insurance and Legal Services: Liability insurance, legal consultations, permits, and licenses.

Managing indirect spend savings is a crucial aspect of operational efficiency and profitability for multi-unit restaurant brands. With the right technology solutions, operators can streamline procurement processes, optimize supplier relationships, and drive cost savings across their operations. Let’s explore various ways in which technology can empower multi-unit restaurant brands to effectively manage their indirect spend savings, enhance data visibility, and achieve greater efficiency.

Centralized purchasing made easy

E-Procurement Platforms: Centralized Purchasing Made Easy

Implementing e-procurement platforms provides multi-unit restaurant brands with a centralized approach to purchasing. These platforms offer online catalogs, automated ordering, and electronic approval workflows, reducing manual efforts and improving efficiency. With a centralized system, restaurant brands can consolidate purchasing activities, standardize procurement procedures, and negotiate better pricing and terms with suppliers. E-procurement platforms also enable better visibility into spending patterns and provide valuable insights for cost reduction opportunities.

Harnessing the Power of Spend Analysis Tool

Harnessing the Power of Spend Analysis Tools

Spend analysis tools play a crucial role in managing indirect spend savings. By gathering and analyzing data from multiple units, these tools provide actionable insights into spending patterns, supplier performance, and potential areas for consolidation or cost reduction. With accurate and comprehensive spend analysis, multi-unit restaurant brands can identify high-performing suppliers, negotiate favorable contracts, and streamline their procurement strategies.

Efficient Supplier Management Systems

Efficient Supplier Management Systems

Supplier management systems enable multi-unit restaurant brands to maintain an organized database of suppliers, track supplier performance, and ensure compliance across all units. These systems help in managing contracts, monitoring supplier relationships, and identifying opportunities for better pricing and terms. With improved supplier management, restaurant brands can build stronger partnerships, negotiate more effectively, and consolidate their purchasing power to achieve significant cost savings.

Streamlined Inventory Management with Technology

Streamlined Inventory Management with Technology

Effective inventory management software is crucial for optimizing indirect spend savings. Technology solutions, such as inventory management software, enable multi-unit restaurant brands to track and control indirect spend items. By automating inventory processes, these tools help reduce waste, prevent stockouts or overstocking, and ensure that the right items are available at the right time. Accurate inventory data also facilitates demand forecasting, allowing for proactive purchasing decisions and cost savings through efficient inventory management.

Digital Transformation of Invoicing and Expense Management

Digital Transformation of Invoicing and Expense Management

Digital invoicing and expense management systems streamline the accounts payable process for multi-unit restaurant brands. By automating invoice processing and expense tracking, these systems improve accuracy, reduce paperwork, and provide real-time visibility into spending across all units. Digital transformation of these processes minimizes manual errors, expedites approval workflows, and enhances cost control measures. Furthermore, it enables businesses to analyze spending patterns, identify cost-saving opportunities, and make informed decisions to optimize indirect spend savings.

Empowering Unit Managers with Mobile Apps

Empowering Unit Managers with Mobile Apps

Mobile apps or platforms designed for unit managers and staff simplify the ordering process for indirect spend items. These apps allow managers to conveniently place orders, monitor budgets, and track deliveries using their mobile devices. By leveraging mobile technology, multi-unit restaurant brands empower their managers to make efficient purchasing decisions, reducing administrative burdens and improving overall procurement workflow. This real-time connectivity ensures faster response times, enhances communication between units and suppliers, and contributes to significant time and cost savings.

Unleashing Data Analytics and Reporting

Unleashing Data Analytics and Reporting

Data analytics tools provide multi-unit restaurant brands with valuable insights into spending trends, supplier performance, and key performance indicators (KPIs) related to indirect spend savings. By generating reports and dashboards, these tools enable businesses to track progress, monitor cost reduction initiatives, and make data-driven decisions. With access to real-time and actionable information, restaurant brands can continuously refine their procurement strategies, identify areas for improvement, and optimize their indirect spend management for maximum savings.

Integration with Point-of-Sale

Integration with Point-of-Sale

Integrating procurement technology with point-of-sale (POS) systems enables multi-unit restaurant brands to capture real-time sales data. This integration facilitates demand forecasting and ensures that indirect spend items are ordered at the right time, preventing excess inventory or stock shortages. By aligning purchasing decisions with sales data, restaurant brands can optimize inventory levels, reduce waste, and achieve significant cost savings. The seamless flow of information between POS systems and procurement technology enhances operational efficiency and supports data-driven decision-making for indirect spend management.

Continuous Improvement through Feedback and Adaptation

Continuous Improvement through Feedback and Adaptation

Technology solutions in indirect spend management should be flexible and adaptable to evolving business needs. Multi-unit restaurant brands should actively seek feedback from unit managers and staff regarding the effectiveness of technology systems, supplier performance, and usability. This feedback loop allows for continuous improvement, refinement of processes, and identification of new opportunities for cost savings. By listening to the needs of their teams and staying receptive to technological advancements, restaurant brands can stay ahead of the curve and ensure their indirect spend management remains efficient and optimized.

Managing indirect spend savings in a multi-unit restaurant brand requires a comprehensive approach that harnesses the power of technology solutions. E-procurement platforms, spend analysis tools, supplier management systems, and other technology solutions enable centralized procurement, streamline processes, and enhance data visibility. By integrating technology into their operations, multi-unit restaurant brands can optimize indirect spend savings, drive cost reductions, improve operational efficiency, and enhance overall profitability.

Embracing technology as a strategic enabler empowers restaurant brands to stay competitive in a dynamic and evolving industry while delivering exceptional dining experiences to their customers.