You’re buying olive oil in bulk you say? What type of supplier is going to be the right fit for your needs? It all comes down to how much you’re buying.
What’s the difference between these two kinds of businesses: distributor vs. supplier? There’s actually a lot, and based on how much you’re buying, and if you’re ordering any other ingredients, it will help you to find the right fit.
Here’s a quick review to start with.
Local Distributors
- Have lower minimum orders, and can often offer a smaller volume like a few cases or just one drum at a time.
- Can combine your oil needs with other products for one efficient delivery. For example, you can buy 10 cases of flour and 10 cases of oil to ship together. These products come from two different manufacturers, but you can buy them together from one.
- May have lower shipping costs, because they’re located within a particular region. Often they have their own truck fleets and can provide free or discounted delivery.
- May have higher prices for each product, because they have to purchase olive oil from a bulk supplier and add their own margin. There are costs to hold the inventory and to warehouse it. But it can still be a better fit for you, because their delivered cost may still be equivalent.
- Require less capital output. With smaller order minimums, you don’t have to spend $5-10K on ingredients to sit on them for a few months. This can be key for growing your business and using your money wisely.
National Bulk Suppliers
- Have higher minimum orders, ranging from one pallet to one truckload.
- Typically have lower prices, because of their buying power and because you’re purchasing direct, avoiding the “middleman.”
- May have higher shipping costs, depending on the location of the inventory. These suppliers work with customers across the country and it’s not unusual to ship a product thousands of miles (which can cost anywhere from $100-600 per pallet for freight).
- Delivery is usually done with an 18-wheel truck, and they don’t usually deliver inside your business. This means you need a loading dock, fork lift, and/or a pallet jack to move the heavy inventory around once it delivers.
- If you're a restaurant used to your driver dropping off the load in the kitchen, that won't happen anymore.
How To Decide On The Right Kind Of Supplier For Your Business
So how you decide what is the best fit for you? Well, the goal you’re after is lowering your overall delivered cost while still getting product delivered to you in an easy, smooth way.
Typically, if you’re an established food manufacturer the best thing is to work with a national bulk supplier.
If you are a start-up or new growing food brand, you may have to debate the best fit as you’re growing and your needs are continually changing. After doing the math tens if not hundreds of times, here’s the official cut-off that I recommend for businesses like yours:
Recommendations For Small Businesses
If you can use more than 40 gallons of olive oil in one month, it will make sense to work with a national supplier IF you can handle the capitol output of spending $~5,000 on a pallet of oil and sitting on the inventory for 4-8 months as you slowly use it.
Keep in mind that minimums are typically about ~270 gallons (which is equivalent to one pallet of product). A pallet is a 4’ x 4’ platform that is packed about 4-5’ high full of oil in any number of packaging sizes.
Even if you do use this volume, sometimes working with local suppliers can still be easier. Here’s why:
- The delivery is planned and they’re often in your area multiple times a week
- National supply trucks are often 18 wheelers, which means that you will have a large truck showing up at your location and dropping the load outside. This usually requires that you have a commercial facility.
- Even though distributors may have higher costs for the oil product itself, often when you factor in freight the delivered cost can be similar.
- As a young business, cash is king: that means that it may behoove you to spend more on the product to not tie up thousands of dollars on inventory that will sit on the floor for months before you use it.