If your job is to purchase ingredients for a manufacturing company, we know much of your day revolves around money. Well, money and planning, that is.

It’s every purchasing managers’ job to keep the cost of ingredients down to a reasonable rate so that the business can continue to profit. It’s also your job to make sure these ingredients show up on time, that they can be easily used by production, and that they meet all of the requirements set forth by QA and R&D.

That’s a tough job! You’re responsible for finding lower prices all the time, but you can’t change the ingredients. And as you know: you get what you pay for, and sometimes things just cost what they cost.

The one advantage that you do have at your fingertips is that you can change the logistics of how you buy. A lot of times, these sort of changes can save more than you may think. 

5 Easy Ways To Save Money By Changing How You Buy− Not What

Here are 5 easy ways you can change the way that you buy to save money on your oil ingredients. It all comes down to who you buy from (what type of supplier they are) and what you buy (aka, what packaging do you get and how much do you get at each order). None of these suggestions require changing the type of oil, which (while that can save money) is more of an issue for R&D.

1. Buy From a Local Distributor

If your business is small to mid sized, buying many different ingredients from a local distributor can save you money. A local distributor would buy from many different large ingredient suppliers (like Centra Foods) bring the stock in locally and you would buy it in smaller volumes.

The advantage is that if you don’t need very much of a particular ingredient (say 1 drum of olive oil a month) you can save on shipping buy getting it locally and combining it with other ingredients that you need more of.

2. Buy All Your Ingredients From A Manufacturing Ingredient Supplier

If you’re a mid-sized manufacturer and you buy lots of different ingredients, it can be helpful to work with a manufacturing ingredient supplier. They source all of your different ingredients for you, arrange the shipments and help you find the lowest possible pricing. In effect, they are an extension of your purchasing department, but they already have all of the connections and experience with different vendors. They may be located right next door or across the country.

Of course, they may have a slightly higher cost for each ingredient because they’re not working for free. But, with the total volumes that they buy and the time they spend scouring the US for low cost, experienced suppliers it may turn out to be the same price that you could have found anyways.

Need a suggestion? Call Food Guys, located in Oregon.

3. Buy From A Large, Ingredient-Specific Supplier (like Centra Foods)

If you use a lot of one particular ingredient, it’s important to move as high up on the “food chain” as you can. Cutting out the middle man (any distributors, brokers, etc. that will add their own fees) will help you save quite a but.

For example, in the olive oil industry there are about 5-7 large, nationwide oil suppliers. If you use a lot of olive oil, it’s best to work directly with one of those large suppliers who can sell to you at a lower cost than a local distributor might be able to.

Let’s take Centra Foods as an example. We sell to large distributors, who then re-sell in smaller volumes. If you need larger quantities, it’s best to work directly with a Centra Foods (or other large supplier) and save yourself the margin that a distributor would add.

With the scarcity of large suppliers like this, all of them work with not only local businesses but also manufacturers located all across the country. Therefore, you can expect a lower cost of oil but potentially a higher freight cost. If you’re using at least pallet or two a month, it’s still worthwhile to order from a large supplier even if they are located farther away. You’ll still save more on the oil than you would spend in additional freight costs.

4. Opt For A Larger Packaging Size

Packaging choices greatly influence the total cost of your oil. No matter what packaging you’re currently buying your bulk olive oil in, ask yourself if you can go bigger. If you’re using the drums, switch to totes. If you’re using totes, can you switch to in-house storage tanks? If you can make the switch to a larger size without negatively affecting your production line, it’s worth the change.

Do a bulk packaging comparison with someone in your production department to see if there’s a larger size that would work well for you.

5. Buy More Olive Oil At Each Order

Consider buying more bulk olive oil, less often. For example, if you use 2 drums each month, buy 8 drums (2 pallets) every 4 months instead of the normal once a month shipment. Buying a larger volume every time you order can save you money on both the oil and the shipping.

Many suppliers have what’s known as bracketed pricing-- meaning the more you buy, the more you save. Centra Foods, for example, has a price break at one pallet and then another one at two pallets. Buy ordering two pallets at a time, but making your orders less often you can lower the cost of your oil by $0.03-0.05 /lb right there (as compared to the one pallet price), which comes out to $100-200 over the two pallets in oil costs alone.

In addition, freight carriers will often charge you a little bit less, the more pallets you ship at a time. You can sometimes save $20-30 per pallet by shipping more than one.

Choose One Or Two Of The Suggestions Above To Save

Choosing the right options from the list above will depend on the size of your business, how much you buy, how many different ingredients you need and many more factors. You won’t be able to make all of these changes, because some of them are actually contradictory--like which type of supplier you’re going to work with.

Instead, just choose 1 or 2 of the suggestions above, and compare pricing to see how much it would save you to make these changes. It’s worth considering all the possibilities, because any of these changes could potentially save you a lot of time and money for your business.

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