Want to get the best deal on bulk edible oil for your business? You may not to pry it out of your bulk oil ingredient supplier. In fact, there's lots of simple things that you can do to help cut your own costs and save money. Hopefully, your supplier is already suggesting them to you!
Take this list into your next meeting with your bulk oil vendor and try to put as many of these strategies into play as possible. They will cut your costs, allow your team work more efficiently and best of all, prove your worth as a strategic and skilled purchasing manager.
1. Switch to a larger pack size
Switch to the next larger pack size.
Using 35 pound containers? Switch to drums. Using drums? Switch to totes.
Using a larger packaging size cuts out packaging costs, and helps reduce your total delivered cost. Just make sure to work with production to figure out which packaging size will work for your line and allow your team to remain efficient.
2. Consolidate your orders
Many suppliers have bracketed pricing, which means that you will get a discounted rate for larger orders. Larger orders allow your supplier to increase their efficiency when packing, and they pass that savings along to you.
Consolidate your orders so that you buy more oil at one time, but less often. If you buy one drum per week, consolidate your orders to buy eight drums every two months.
3. Lock in a supply contract at an ideal time
If you use a reasonable amount of oil (200-300,000+ lbs/yr), it is a good idea for you to lock in a supply contract when the time is right.
If the market is low, or harvest are looking good consider locking in your bulk oil price for a specific period of time – six months or one year, for example. Just keep in mind that if the market is high, you may want to skip out on a commodity market contract and simply ride the market for a while.
4. Please forward POs, if you don’t have a supply contract
If your edible oil volumes are not high enough to warrant a supply contract, you can sometimes still save money by placing forward POs.
Forward POs tell your supplier that you need a particular volume of inventory and when. It allows their production to plan accordingly, to pack your order at a convenient time and schedule their own incoming inventory. In return, your supplier will often offer you a discounted price.
5. Talk to your supplier about your price goals
The best way to get the price you're looking for is to talk with your supplier about it. If you have a specific price point or goal that you were hoping to meet, it's okay to tell them about it and ask if they can meet that.
Worst case scenario, they can't meet your price, but they will still have a better idea of what you want and will be able to offer cost-saving suggestions. Best case scenario, they can look at the the market and work with you to find a price point that's going to fit for both parties.
6. Partner with a supplier who has buying power
A supplier’s price is only as good as their buying power. Suppliers who buy more, or those that have strategic partnerships with mills around the world often have better buying power. That allows them to negotiate low priced contracts and keep pricing as steady and low as possible for you.
7. Don't limit your search to local suppliers only
Local suppliers are nice because they have short lead times and shipping is cheaper. It’s tempting to want to work with them.
However, there are only about five-ten large scale oil suppliers in the US. Chances that they are right in your backyard are slim. More likely, anyone located right near you is actually a distributor of pre-packaged oil products – not the product manufacturer.
Manufacturers will have a lower cost on the oil, though shipping will be higher because it will be traveling a longer distance. Usually though, working with a manufacturer who is further away will still be cheaper than working with the distributor right next-door.
Expand your search outside of your local area to get the lowest pricing.
8. Expand your countries of origin accepted
If you except oil from many different origins, you can always source from the lowest price around. If you limit your search to a particular origin (for example, only sourcing organic sunflower from the US) you will be missing out on lower pricing that is available from imported products. The same rule applies in the olive oil world: if the Spanish olive oil market goes up, you can get lower pricing by purchasing from other countries where production is high.
9. Communicate, communicate, communicate
Having open communication is the number one way to get lower pricing from your supplier. They can't help you get exactly what you want, unless you ask for it!
Be open about your needs, you company’s goals, and any other information that's going to be relevant to how you work together. Any good supplier will be receptive to your request and will communicate with you about how they can (or sometimes can not) meet those goals.
Key Takeaways
Want to lower the cost of your bulk ingredients used in manufacturing? Take these 9 tips into your search process as you’re working with current and potential vendors. They’ll help you save as much as you possibly can!
- Switch to a larger pack size
- Consolidate your orders
- Lock in a supply contract at an ideal time
- Please forward POs, if you don’t have a supply contract
- Talk to your supplier about your price goals
- Partner with a supplier who has buying power
- Don’t limit your search to local suppliers only
- Expand your countries of origin accepted
- Communicate!
Topics: Food Manufacturing, Prices & Saving Money, Food Service
