ArrowStream Foodservice Blog

The cost of pricing errors in food supply chain management

Posted by Ryan Cox on Oct 1, 2020 9:00:00 AM

Supply chain partners recognize the critical nature of visibility. But what happens when a supplier’s pricing has an error in the food supply chain system?

suppliers double check his prices for restaurant chains

Pricing errors are all too common in supply chain management in the food industry.

From restaurant brands, suppliers and distribution partners, pricing errors cause major headaches and extra work for all parties. On top of that, pricing errors usually leave someone in the supply chain stuck with the bill because the process to resolve errors is often long due to the need to debit or credit the difference. 

The pain of pricing errors can go on and on, depending on what role in the supply chain you play. However, these errors are often the result of a simple data entry mistake that’s easy to avoid with the right processes and procedures. 

Foodservice supply chain pricing errors cost more than just money

With millions of foodservice operators around the world, supply chain technology has become an ever-popular choice. 

Implementing the proper supply chain technology means you won’t have to catch price discrepancies manually. Instead, the use of food supply chain software automates checks and balances within the supplier entry process, which should easily identify and mitigate pricing errors.  

But explicit pricing errors aren’t the only costs a brand incurs if a pricing error occurs. If a large national brand wrongly entered their product’s price, the brand might not discover this until their suppliers tell them about this mistake. After learning of the error, the brand must retrace their steps and confirm that they were the party at fault and cover the cost of the mistake. 

This mistake could cost brands tens of thousands of dollars, unhappy franchisees and lower profit, making for unhappy parties at every turn. 

Mitigate pricing errors with food supply chain management software

With digital transformation in full swing, the world of supply chain operations has not gone untouched. 

Supply chain software solutions often provide different tools and workflows needed to manage supply chain operations, from sourcing and procuring inventory to submitting quality incidents or updating distributor information. 

One popular element of foodservice supply chain software is the capability to automatically collaborate on pricing with suppliers online -- making it easier for suppliers to enter or update product pricing and automatically notifying relevant brands to approve or reject the changes.

Using a supply chain software can create a checks and balances system that benefits both the supplier and restaurant chain. Reducing the number of pricing errors that occur and facilitating collaboration between the supplier and brand creates transparency and can lead to a stronger long-term relationship. 

Collaboration and transparency are critical for accurate operations

Nothing is more important than adequate communication between supply chain partners. Traditionally, many parties involved have little to no knowledge of others’ actions, contributing to inefficiencies, waste and mistrust. 

What’s worse, multiple pricing errors or supplier slip-ups can cost brands long-term profitability and harm their image to the point of no return. 

With supply chain software, both the supplier and the brand are incentivized to keep pricing accurate and updated promptly.

By ensuring the correct pricing is sent to the distribution center, suppliers reduce the risk of pricing issues such as late arrivals to chains or even losing invoices in email inboxes. This results in fewer instances of the supplier tracking credits or debits with the distribution centers. The result? Restaurant brands save time on price entry and ensure the suppliers enter accurate data, with both parties agreeing to it. 

Next steps for your foodservice supply chain organization

The latest enhancement to Price Collaboration Portal was released in May 2019 and is part of ArrowStream’s industry-leading Contract Audit solution, used by over 200 chain restaurant brands, and comes standard with all current customer accounts.

ArrowStream’s Price Collaboration Portal allows operators to invite suppliers into the ArrowStream platform to input detailed pricing information. Once complete, the operator approves the new pricing, allowing those details to seamlessly flow into ArrowStream’s contract database, which can then be automatically tracked and audited. This closed-loop process benefits operators by reducing pricing errors while streamlining business processes with their suppliers and distributors, such as accelerating sourcing operations and the contract management process. 

 

About the Author

Ryan Cox

Ryan Cox is the Program Manager for Sourcing at ArrowStream. Prior to joining, Ryan worked as a buyer for a large national burger chain where he managed multiple categories and explored sourcing tools to  create a more efficient RFP process. After searching for the sourcing tool for over eight months, he then joined ArrowStream to design and build it himself.

 

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