Indirect Spend FAQs
Are you reassessing your plan when it comes to indirect spend? Foodbuy’s Director of Category Management for Supplies, Equipment, and Services sits down with us to answer some frequently asked questions.
Q: Define Indirect Spend at Foodbuy Hospitality.
So, we’ve got over 70 programs — we’ll be pushing 80 programs by the end of this year. We cover categories like maintenance supplies, textiles, amenities, and office supplies. Then we get into services: waste hauling, pest control, kitchen equipment repairs — you name it, we’ve got it. We run a lot through these programs. We had 31% growth this past year in this area.
Q: Why Should Businesses Pay Attention to These Categories?
At times, these categories are called ankle-biters. They can be a lot of work with a little return. But when you’re working within a procurement context, a lot of times these categories have never been addressed and there’s often noise involved with them. One of the big benefits of moving these categories to Foodbuy is that you’re getting all the spend under a single contract. You then have the ability to make smarter procurement decisions down the road.
Q: Does Indirect Spend Have a Big Impact on Hospitality Budgets?
So, excluding labor, real estate, etc. spend in these categories can range from 25-40% of your hotel’s total running costs. Foodbuy has continued to double down and invest in our services, equipment, and supplies portfolio. We see it as a strategic offer for our members.
Q: What Would You Say to Operators Who Source These Programs on Their Own?
It’s tempting to pick up the phone and try to tackle something yourself but so much has happened with COVID and we’ve all been through a very challenging time — we’re not totally out of the woods yet. There’s high staff turnover, there’s liability, there’s cost concerns, there’s a lot that goes into a contract. At Foodbuy, our contracting process is not always the quickest but it is a very thorough process. You can rest assured that insurance and all of that kind of stuff is covered exponentially more than a Member is likely going to need. So, it’s tempting to do it yourself, but I would ask you to please reconsider.
Q: What About Operators Who Source by Location Leadership?
Some of the challenges that you see when you have what we call “distributed procurement” are very inconsistent pricing, inconsistent service, and there’s not a single person you’re dealing with, it’s various people around the country. Things can go south pretty quickly.
Q: What Should You Look for When Signing onto an Indirect Spend Program?
So, for a hotel, let’s say they’re signing onto a local agreement or a Foodbuy agreement, the things to be aware of, you want to have a direct relationship with that supplier. Ideally, it’s something on the national account level. That way, you have a nice level of support. You also want to make sure that you’ve got an escalation point. One of the challenges you can have with a local team is you’ve got just that local person — you don’t have the support structure that you need.
Q: How Does Foodbuy Hospitality Choose These Suppliers?
Word of mouth, industry reputation, all of that kind of stuff plays a big part in the vetting of suppliers and the other part is looking at AP spend reports. We have a team of 30 category managers supporting my team. So, they’re also a great resource.
Q: How Can Operators Determine Which Programs to Start With?
The best way is to start with an AP spend report if that’s an option. If not, we have other options we can talk through but ideally, we’ve got an AP spend report. It’s nothing proprietary just spend by supplier, descending spend — there’s no pricing in there. We’re just trying to get a sense for where the money is going today with that Member or potential Member. Then, we can go through and look to see if there’s certain supplier that, based on our experience, would be a good candidate for a quick win.
Q: How Can a Member Get Started?
It all starts with a phone call to your Foodbuy Hospitality account manager.