To those of you that are new to the bulk ingredient buying world, evaluating and choosing ingredients for your new product can be a bit daunting. But you're not alone-- small business owners, company founders and young ingredients puchasers have all been in your shoes.
Understanding a basic outline of the standard process can be helpful. Knowing how others tackle the sourcing process will help you make sure that you don't miss any important steps that may cost you later. As you move forward, you can adjust the ingredient evaluation process to fit your needs.
Here's that sourcing process, based on the most common progression that ingredient buyers go through. Keep in mind, we reference bulk oils, but this process can be used across the board for all manufacturing ingredients.
11 Steps To Selecting Bulk Oil Ingredients
1. Decide what kind of oil you might be interested in.
This first step in the process can actually be the most complex, but don't fret. You just need to make sure that you tackle some key questions for your business, and an answer will emerge on it's own. Use these key points to help you make your decision:
- You have probably created this product before if you're bringing it to market. What kind of oil did you use then? That will be your starting point.
- If you could change anything about this oil that you used before, what would it be? Was the price to high? Did it give your product the necessary zing or was it too bland?
- Think about other popular oils that might work instead and keep them in mind for the future-- just choose 1 or 2 options.
2. Estimate how much oil you will need in a month or a year.
I know this is a tough thing to do, and often is unknown. But it's important, because it's going to drive you towards a particular type of supplier. If you think you'll go through a gallon a month, you're not going to want to waste your time contacting suppliers who offer railcars. So ask yourself:
- If I was going to buy bulk oil today, how much would I need for this month only?
- Based on our sales projections, how much do we think we'll need 11 months from now, just for that month? Average these numbers. You'll revisit this in step number 4.
3. Work with your production team to decide which packaging is going to be ideal.
Before you jump into getting pricing for the oils that you chose, complete this step first. It's a key factor to pricing that most people overlook. Don't just assume that the packaging you've used in the past is really the best option-- opting for a different size can potentially save you thousands over the course of the year.
Ask production the following questions to really get the conversation going:
- Do we have a fork lift or pallet jack, or are we going to invest in either of these soon?
- How many pallets could we comfortably store at one time? If the answer is less than a pallet, what's our max storage space in terms of cases?
- Show them pictures of the drums and how to get the oil out. Do the same with the totes, and let them see how to set up the oil dispensing attachments.
4. Research suppliers
Do your research. Ask a colleage who they've worked with or do a quick search on google for your ingredient.
Keep in mind, how much oil you're going to need is going to dictate the best type of supplier for you to work with. Here's a really rough guage to point you in the right direction:
1-30 Gallons Per Month:
- Food service distributor
- Online wholesale store
- Wholesale or industry specific supplier (contact us for recommendations in your industry)
30+ Gallons Per Month:
- Ingredient specific suppliers like Centra Foods
- Manufacturing distributors (contact us for recommendations)
Before asking any of these potential suppliers for pricing, you're going to want to confirm:
- What's the FOB point? How far away are they from you?
- Do they have both the oils and packaging available that you want?
- What's the minimum order?
- How does the oil get from them to you and who takes care of that?
5. Request price quotes.
Pretty self explanitory... Once you find a few suppliers that are going to meet your requirements for oils, packaging and minimum orders, ask for some price quotes. Try to get some general comparisons (like each packaging size and each oil) so that you can do a well-rounded comparison.
6. Get an estimate for shipping.
If shipping is not included in the price (and it usually isn't), get an estimate of how much it's probably going to add. You can always request a current quote for shipping to get an up-to-date delivery price to help build an accurate landed cost.
Don't be daunted by working with suppliers who are located far away. If someone has a lower oil cost across the country, you can still end up saving even after you factor in the shipping.
7. Complete ingredient testing.
Choose the top 1-3 suppliers that you liked and request samples. If you selected a couple oils that could work for you in step 1, ask for each of them. R&D is going to need samples of each to see which is going to work best.
Also, this is a great time to ask for all the QA documents you're going to need for each oil. Kosher certificate? Organic documentation? How about spec sheets or nutritional statements? Bring them all in now so that R&D and Q/A can evaluate the options in full.
8. Make your selection.
This is the big moment where everything comes together. Work with R&D to select the type of oil that's going to work best. Compare pricing for that oil to the other options. Let production weigh in to select your final packaging size. Congrats, you're almost done!
9. Select your suppliers and get them set up in your system.
Make your favorite supplier selection. Remember that price is not the only factor-- compare value, attentiveness, communication and how easy it will be to work with them in the future.
Most purchasers would recommend using one supplier and having a couple set up on the back burner for emergencies. If you use a lot of oil, consider diversifying your purcahses (even just 80/20 or 70/30) so that if you need that secondary supplier they'll be really ready to take care of you in times of crisis.
Request supplier information so that you can get them set up in your purchasing system.
10. Get set up as a new customer in their system.
Don't delay on this one. Get set up as a new customer before you need to place your first order-- think 2 weeks to 1 month in advance. You can fill out the credit application, get extended terms (if you want them) and get everything prepared for your first order. That way you're not scrambling to make payments or send information when you really need to get you ingredients out the door.
In preparation for your first order, ask things like:
- What's your standard lead time from when I place my order to when it leaves your door?
- How long is the shipping going to take to my location?
11. Place your purchase order.
Place your first PO! You should expect a confirmation soon after your order is received, acknowledging that your order reached them sucessfully. Once production can schedule your order, you should get a confirmation with a freight quote and a ship date as well.
You should also expect to know when it leaves your suppliers docks. We send shipping confirmations that even include a tracking number, which is helpful so that you can communicate with the shipping company directly and get an updated ETA for your delivery.
Want to keep all of this straight?? Download the Manufacturer's Checklist for buying bulk oils so that you can check off each step as you go.
