Approved Buying Lists Deliver Greater Control on Spend

An approved buying list (ABL) is a pre-approved, controlled list of products that a company would purchase in order to deliver its services to customers. The theory behind this is to help decentralised companies to better manage the products they purchase at an agreed price and volume, across any location. For example, a contract caterer might operate across multiple locations so having an ABL ensures each location buys exactly the same products at the same pre-agreed prices.

Why are ABLs becoming so important in today’s climate? Rising costs for one, mean catering businesses are having to work smarter when it comes to controlling spend and monitoring costs in and out of the company. An ABL not only helps to control spending patterns, but it can also help to shape consistency and improve quality of service delivery. These lists can also improve cashflow as they may lead to price reductions on high volume purchasing, while also removing low purchase high-cost items. ABLs can also help a business to maintain its customer base because the quality of its products are verified, which in turn delivers service consistency regardless of location.

ABLs bring multiple benefits from a wastage and sustainability perspective too, helping to minimise carbon footprint by reducing the number of deliveries made by suppliers to multiple locations. The cashflow benefit of ABLs comes from centralised purchasing. Without a properly controlled ABL, purchasing is often sporadic and more costly. ABLs reduce the volume of suppliers that the company deals with, which helps improve quality because the regular products purchased will be more consistent i.e., if purchasing meat, it may have less fat or bone in the product.

In the early days of my previous role within the care sector, we had less than 10 care homes to manage and each one had its own suppliers, product likes and dislikes. This meant that prices, quality and wastage would vary. As part of the growth strategy at the time we realised there must be a better way of managing this, so we pulled together and analysed all of the product buying lists from every home. This was quite an eye opener, with many of the same products being purchased from various suppliers at a variety of different prices and volumes.

Once we rationalised the products, we were able to negotiate better prices on high volume purchases with our suppliers, as we had reduced the variety of the products and the brand / own brand products. Using a controlled ABL meant we were able to monitor quality of service and wastage far better, because there was consistency of product being used across each care home. From these projected savings, we were then able to implement a P2P (Purchase to Pay) system to help monitor volumes, prices and quality of service from our suppliers.

When creating an ABL the starting point is to collate all of the purchasing and pricing data from around the business and consolidate it in one place. Then you need to prioritise the most important products, those most used, the price and quality, whilst removing low use high price products. This will likely lead to reduction in the supplier base itself. Once an ABL is created, the business will have a list of products and the estimated quantities that will be purchased and can begin negotiating prices with remaining suppliers. Once agreed, the ABL is ready for use across the business.

Rolling out an ABL to the wider business without a P2P system in place, would involve creating a spreadsheet to manage the process. Although a spreadsheet might work initially, over time, products and prices change, so control issues will likely start to creep back in. Talking to a P2P supplier will help identify the savings that could be made by creating an ABL – it is likely that the savings made would partially or fully fund the licence cost of using a P2P system.

The introduction of a centralised P2P system such as Caternet, gives quick access to improve cost control, recipe planning, product quality, stock levels across locations and food service, whilst being fully aware of what it is being purchased and at what price, how much food wastage there has been, what the allergens and nutritional values of menus are, and where potential operational issues exist. Technology like this is designed to make people’s lives easier. As CFO at Zupa myself, it is great to be able to see exactly how much is being spent, whether there are variances to the budget, and who is performing well and who is not.