Every restaurant owner, manager, and employee knows the importance of having what you need when you need it. Whether it be fresh produce ingredients or other supplies such as napkins and coffee stirrers, it’s vital to make sure these items remain stocked. So, how can you ensure a fully stocked restaurant in the most streamlined and cost-effective way? Many purchasers turn to standing orders from their wholesale distributors in order to keep things running smoothly.
These distributors can include restaurant food distributors and beer and wine distributors. Offering standing orders to customers helps them ensure the items they want are always in stock.
Both those who are new to the restaurant industry and seasoned experts could benefit from understanding when placing a standing order is the most advantageous option. In this post, you will learn the definition of standing orders and their advantages and disadvantages. This way, you will understand when it makes sense for you to place a standing order with your wholesaler.
What Are Standing Orders?
A standing order, or standing purchase order, is an order for a product that the wholesaler regularly fulfills and automatically charges to the client's account. This standing order definition reveals some key points: automation and regularity.
Restaurants place standing orders with wholesale distributors to make sure that a predetermined amount of an inventory item gets delivered to the restaurant on a regular basis. The wholesale distributors can include a microgreens supplier, wholesale spice distributors, wholesale meat, and bulk fish distributors. These repeated orders are in the same amount and are often charged at the same price every interval.
Wholesalers deliver standing purchase orders at an interval that suits both the supplier's and purchaser's needs. This can be daily, weekly, monthly, or another interval.
Standing purchase orders differ from manual purchase orders because restaurants set up automatic orders instead of relying on placing manual orders when they run out of an item. While manual orders can change in amount, frequency, and price, standing orders remain consistent in these aspects throughout the duration of the purchasing agreement.
A standing order example would be a Mexican restaurant placing an order for 100 bags of tortilla chips every week from their wholesale supplier. Instead of calling or going online at the beginning of each week to order the tortilla chips, a standing order means that 100 bags of tortilla chips are delivered every week on a certain day and automatically charged to the company’s account.
While there are many benefits to placing standing orders from your wholesale distributor, such as improved inventory management and cost efficiency, there are a few disadvantages. Let’s dive deeper into the advantages and disadvantages of standing orders versus other types of purchasing orders.
Key Takeaway: Standing orders are helpful to streamline your wholesale ordering process. Utilizing standing orders will allow you to save time from manual orders and improve cost efficiency.
Advantages of Standing Orders
Standing orders can save your business time and money. They also have other advantages such as better relationships with suppliers. Understanding how these advantages apply to your restaurant will help you make the best decision when it comes to standing orders.
Standing Orders Improve Inventory Management
Improved inventory management is another advantage of standing orders. Because of the regular purchasing pattern required of many inventory items, an effective standing order allows for the purchase and delivery of the correct amount of inventory. This keeps things running smoothly. When done correctly, a standing order ensures that there’s always the correct amount of ingredients and goods on hand for the forecasted demand.
Additionally, standing orders allow for consistent purchasing patterns. Consistency is helpful in gaining control and stability within restaurant operations and ensuring optimal inventory management. This serves to benefit many different aspects of the business beyond inventory.
Maintaining control over effective inventory management is key to ensuring items are not over or understocked. Control over inventory management also serves to improve financial planning and menu planning.
Standing Orders Reduce Costs
Standing orders reduce costs in multiple ways. One way they do this is through bulk order discounts. The repetitive nature of standing orders and the large quantities purchased from wholesalers means that standing orders are often the most cost-effective way to purchase fast-moving inventory items.
Delivery costs are often cheaper with standing orders because it’s possible to consolidate frequent deliveries into a larger and more consistent order. This saves money on transportation fees associated with delivering inventory.
Standing orders also reduce costs by avoiding late fees or other processing fees for payment that can occur with manually placed orders. They automate the process on scheduled payment days leading to savings on the labor costs incurred by employees manually placing orders on a regular basis.
Further, standing orders can offer protection against price changes due to the fact that prices are pre-determined for an extended amount of time. Inventory management is streamlined through standing orders, saving money on the costs of holding goods and labor costs of dealing with inventory issues.
Due to the repetitive nature of standing orders, planning out dishes and menu items is often easier. It’s possible to plan out menu items far in advance and account for any additional items that are required for seasonal menus or special dishes because of the regularity of the orders.
Standing Orders Create Good Supplier Relationships
Another benefit of standing orders is the ability to create a strong relationship with the wholesale supplier, also known as supplier relationship management. There are many advantages to having a good relationship with a supplier.
For example, a positive relationship means there’s a higher likelihood of securing better prices and priority service from suppliers. This could come in the form of a better delivery schedule or prioritized customer service.
Establishing a standing order with a wholesale distributor often means securing the best price on products. The repeated and often longstanding nature of standing orders with wholesalers is conducive to receiving a better price on products.
After creating a relationship with a supplier through a series of standing orders, it is possible to negotiate better terms on the purchase order, ultimately lowering costs.
Disadvantages of Standing Orders
Although there are many benefits to placing standing orders as opposed to manual orders, it’s not necessarily the correct choice for every purchasing situation. Sometimes standing orders can be inefficient.
Lack of Flexibility
Standing orders can be positive because they bring consistency to the ordering process. However, they can also be negative because they are rigid and don’t allow for much flexibility.
Once the wholesaler receives and processes the standard order, it can be difficult to change aspects of the order such as quantity or frequency. Oftentimes, making a change to the order means it’s necessary for the purchaser to cancel the current order and recurring payment, and create an entirely new order.
This is not ideal when working with seasonal changes in menu items or changes in customer demands. Unexpected changes in demand for certain items mean that a standard order may be inefficient, as the quantities and products the wholesaler is delivering are no longer accurate.
Price and Product Commitment
Another downfall of standing orders is getting locked into a commitment for product selection and pricing. Standard ordering from a wholesaler means ordering a product in bulk for a predetermined amount of time. But, what if the menu is re-written, or there’s a sudden uptick in demand for a certain dish?
A standard order can result in getting stuck with a certain item or ingredient for longer than desired. This can lead to a lack of change or innovation within a restaurant.
While locking into a price point on a standing order can be an advantage, it can become a hindrance. If industry prices decrease or a better-priced competitor comes into the picture, then the price with the current wholesaler may not be the most cost-effective option.
Beyond simply committing to a price point and product, placing a standing order also means you are committing to the supplier themselves. While this can be beneficial in terms of supplier relations, it can turn into a disadvantage in some situations.
There isn’t much flexibility to try other suppliers who may offer special offers, better service, or a more optimal delivery schedule. Additionally, there is a possibility of getting stuck with an unreliable wholesaler. It’s vital to do research about suppliers ahead of time to ensure you’re not locking yourself into an order with a suboptimal supplier.
Inaccurate Ordering
Correctly done, standing orders can be incredibly efficient. However, what happens if the forecasted demand for certain products is inaccurate?
A restaurant can be overstocked or understocked with inventory if the demand planning is inaccurate or consumer demands and trends change. This hinders inventory management and brings additional costs associated with remedying an understocked product or holding large amounts of overstock inventory.
Changing a standing order due to inaccurate ordering may not be easy and could result in canceling orders, which could harm the relationship with the wholesaler. Inaccurately predicting consumer demand when placing standing orders with wholesale distributors can prove especially disastrous considering the large quantities of inventory that the wholesaler delivers.
Standing orders can be a very effective tool to optimize inventory management, reduce operating costs, and create strong supplier relationships. It’s important to keep in mind the shortcomings of standard orders such as their inherent rigidity, price and product commitments, and the possibility of inaccurately ordering inventory.
Now that you fully understand the definition of standing orders, as well as their various attributes, you can make the most effective decision about whether or not to place a standard order with your wholesale supplier.
Frequently Asked Questions About Standing Orders
Standing orders are a wonderful tool to improve efficiency within your organization. Read the frequently asked questions below to answer any lingering questions you may have.
What is a standing order?
A standing order is an order for a product that the wholesaler regularly fulfills and automatically charges to the client's account.
Can I change a standing order?
In order to change a standing order, you must contact the distributor. Oftentimes, you must cancel the order and place a new one in order to change a standing order.
How do I keep track of my standing orders?
The easiest way to keep track of your orders, standing or otherwise, is through BlueCart. BlueCart allows you to efficiently order, track, and change orders with your supplier.