What are Food Broker and Distributors?
Naviteer, Inc. - October 10, 2022
Food brokers (also called sales and marketing agencies, SMAs) and distributors are key players in the supply chain that connects manufacturers and suppliers with customers. They use their expertise and knowledge of the market to build strong relationships with customers, whether they are in the industrial or retail sector. By acting as the intermediary between the principal and the customer, they ensure that the right products are delivered to the right place at the right time.
In addition to their role as a traditional food broker, some brokers also act as consignment brokers. In this case, the broker is responsible for distributing the product, but is only paid a commission or brokerage fee for the sales that they make. Consignment brokers are usually required to manage sales at the distributor level, which involves overseeing order management, inventory control, purchase management, warehousing, delivery, accounting, and other aspects of the sales process.
Food distributors play a critical role in the supply chain by purchasing products from manufacturers and suppliers and taking on the responsibility of selling them to customers. This involves managing a range of tasks, from order and inventory management to warehousing and delivery. As such, distributors need to be highly organized and efficient in order to ensure that products are delivered on time and in good condition. Effective management of the distribution process is essential for ensuring customer satisfaction and building strong relationships with suppliers and manufacturers.
Why does a food broker or distributor company need a database application?
Naviteer, Inc.- October 10, 2022
While manual record keeping or spreadsheets may be sufficient for small or start-up food brokerages, it becomes cumbersome to manage all the sales as the business grows. Therefore, it is only advisable to use manual record keeping to determine how records should be transferred to an electronic process. Instead, a well-designed database application provides a powerful analysis method and simplifies extensive report creation.
In a database, orders are connected to tables, eliminating the need for replication of information on each order. The links join all the information together, making it available for sales analysis and accounting. On the other hand, a spreadsheet requires programming of links for all entries or excessive repetition of information.
Naviteer Broker and Distributor efficiently connects orders to suppliers and their products to customers by salesperson, making all the various tables joined together, providing crucial information for sales analysis and accounting. This simplifies extensive report creation, including principal, product, and customer sales, with dashboards for a quick review of business progress. For distributors, additional extensive reports for inventory, warehousing, and finances are available.
For food broker sales, the application should account for the total sales dollars and commission. The principal invoices the customer for the sale, except for consignment brokers, and returns the commission to the food broker company. To ensure payment for all sales sent to the principal, the food broker should track sales.
A consignment food broker invoices the total sale to the customer, posts the receipt to the principal account when paid, and automatically transfers the commission to the food broker company.
For food distributor sales, the application operates like a standard sales accounting program. At the time of the sales transaction, the amounts that are recorded are known as “gross sales.” Adjustments such as discounts, sales returns, and other allowances are subtracted, and the sales become “net sales.” The difference between the net sale and the cost of goods sold (COGS) is the net profit. Naviteer uses accrual accounting where revenue is recorded as a sale after delivering the goods to the customer.
In conclusion, a well-designed database built on a solid platform like Naviteer is necessary for food brokers or distributors to run a well-organized business.
Why do Brokers need to keep track of orders?
Andrew Sweigard - October 18, 2022
Food brokers connect customers to products to buy. The products are owned by principals who are represented by the food broker. The food broker takes the purchase orders and should keep track of the orders. Principals may have different names (Vendor, Manufacturer, Distributor, Supplier, etc.), but they are all entities that want their products sold, so for this writing, all will be referred to as principals.
A question arises then. Why do brokers need to keep track of orders, if the customer sends the order directly to the principal via email or EDI processes? Some food brokers do not keep track of orders. Their rational is that the main part of their job is selling, so they will just sell. No need to track. These brokers will cite a good relationship with their principals and/or that they receive a statement at the end of the month/quarter that tells them what they are due order by order. These brokers will say that their job is to sell, and it is the principal’s responsibility to keep track of orders.
The food broker acts like an internal sales team as they are told by the principal company their sales objectives. Food brokers are supposed to be liaisons between the customer and the principal. That means they need to take care of the customer as well. If they are not kept in the loop as far as what is going on with the purchase order, then they cannot take care of the customer very well. As far as the customer is concerned, the food broker is their point of contact for those products. If a broker doesn’t keep track of them, they won’t know if a product is on backorder, or the truck was delayed with that order on it. The food broker must keep good relations with their customers to keep them buying through them. If the food broker does not take care of the customer, then the customer will find another food broker, try to buy directly, or buy from a different source.
A company is made up of individuals. The same is true for the principals that the food broker represents. The principal has employees who have to decide whether a sale is an internal sale or belongs to the food broker. Some principals do a good job of making sure their brokers get credited for the sales that they deserve. That is usually a credit to the people entering the sales for that principal. The broker may have an incredible relationship with the current individuals, but companies don’t always have the same people. If those people get a different job, move to a different position in the company, or retire, the people who replace them may not do as good of a job at giving the broker credit for the sales they deserve. Food brokers need to keep track of their orders even with the best principals because of mistakes, changes in their opinion of the broker, changes in leadership, and different employees.
A food broker acts as a liaison between the customers and the principals they represent. Brokers need to keep a record of orders for everyone’s benefit. There is work in doing so, but the effort will make you a better broker to customers and make certain that you are getting credit for every order. This will help the food broker thrive because of the money associated with those orders, as well as the prestige of getting more sales by having numbers to present to new principals to represent your company’s success.
Why keep orders organized under a contract?
Andrew Sweigard - March 2, 2023
When running a business as a food broker or distributor one of the tools used in sales is contracts. This paper will discuss their usage in the food industry as well as their advantages and disadvantages. Contracts have many names, commitment, obligation, guarantee(d), etc. For this paper contract will be used for all.
What is a contract and how does it come into being? A contract is an agreement between two parties. The supplier supplies product(s) for a specific time-period at a specific price to the customer who receives and pays for that product. As the broker you would negotiate those terms. As a distributor you may negotiate those terms.
Contracts can be beneficial to both parties. It can be beneficial to the customer because they buy the product at a fixed price. This lets the customer know their costs further out. It can be beneficial to the supplier because they now have a predictable line of revenue and income. The customer can also have a product quantity discount because of the size of the contract. However, the contract lets them receive releases of that product over time for logistical reasons like storage, shelf life, and expiration of product. Every time a customer wants the product that they contracted out, they order a release of that product to go against the contract quantity. A contract needs to ensure that all orders connected to the contract are priced correctly, not to exceed the quantity of the contract, within the time-period of the contract—unless both parties agree to an exception.
There are some possible drawbacks of contracts. During large changes in price of product one party is going to be unhappy with the contract. If the market price of the product rises, then the supplier will find the contract unprofitable. If prices drop, then the customer may not want to fulfill the quantity they agreed to.
Regional Contracts are just like contracts, except they are for a specific region. Regional Contracts are used by large, multi-locational customers that have districts that get different prices and quantities. They could have many regions such as N, S, E, W. These could have any number of customers in each region. The North Region will have orders that come in for all the different locations within that region. They would need to be linked to the correct contract.
Near the end of a contract, the supplier and the customer will have to decide how they want to move forward with the contract. They can extend the contract, renew the contract, go to market pricing, or the customer may not want to buy that product anymore. Any of these options are possible. The job of the broker or distributor is to get the best deal for the principal while taking into account the customer’s needs and concerns in the transaction.
Contracts can be beneficial to both parties. Everyone needs to be acutely aware of what is on the contract. Contracts can be regional for specific customers. Contracts can be very complicated and are best handled with software that can keep track of the releases, date ranges, and product left on the contract.
