Smart sourcing: Preparing now for the impact of tariffs on the supply chain

While no one has a crystal ball to predict what could happen with trade policy in a new White House administration, procurement pros are preparing now for tariffs and other factors that could disrupt supply or add to operating costs.

As the world’s largest food Goup Purchasing Organization (GPO) with $42 billion in annual purchasing power, Entegra is uniquely positioned to help you create a contingency plan. The goal: prepare now for whatever may come your way.

Potential impacts of tariffs on the foodservice industry

Consumers are already disgruntled over the cost of dining out. Can operators pass along additional higher costs on imported ingredients to their customers?

From avocados to alcohol, the U.S. imports about 15%* of its total food supply from overseas. Of that 15%, Americans consume a large share of these foods from other countries:

• 32 percent of fresh vegetables
• 55 percent of fresh fruit
• 94 percent of seafood

If tariffs are placed on these menu mainstays, businesses will have to make some hard decisions on how to handle the costs. Pass them along and hope that consumers will continue to buy? Absorb some or all the costs and take a hit to your bottom line? Neither option is beneficial.

How to prepare your hospitality-driven business for tariffs

Many of the United States’s biggest trade partners supply the everyday items used in the industries Entegra supports: restaurants, lodging, golf, leisure and senior living.

Entegra’s supply chain experts recommend taking action now to ensure that you have a continuous supply of the foods and supplies your business needs to operate. Being aware, informed and nimble are key skills that can help you make choices today to help your business in the future.

Solution #1: Watch commodity prices on your most-purchased products

Monitor the forces that impact the price you pay food and supplies. Entegra publishes the Cost Outlook report quarterly to give you a baseline to understand what’s happening to the most common commodities. Register for the Cost Outlook webinar.

Solution #2: Set up relationships with additional suppliers.

This can be a huge undertaking, especially for a small team. A GPO like Entegra helps by doing the heavy lifting of sourcing and vetting suppliers.

A GPO also negotiates pricing and contracts so that you’re benefiting from the true power of group purchasing – lower prices on nearly everything you purchase.

Solution #3: Find product substitutions that match quality and budget requirements

While you can gather a list of suppliers and go through the RFP (Request for Proposal) process, whittling cost and selection down to a few, this also requires a lot of time and effort on your part. A better way? Work with a team like Entegra Culinary Consulting (ECC).

On-staff chefs, procurement experts and supply chain insiders work hand-in-hand with your in-house team. You can even tap into the Entegra Performance Kitchen for tastings to find the perfect product.

Solution #4: Source locally

Local and regional suppliers can fill your needs. In addition to produce, the U.S. imports textiles, machinery and furniture from partners like Canada, Mexico and China.

Could you source those items closer to home? Entegra has a network of local and regional suppliers in addition to direct suppliers under the Local and Direct Savings Program. From flowers to mattresses to fresh meats and fruits, Entegra has established relationships with suppliers beyond the large broadline distributors.

Solution #5: Think about the customer’s overall experience

Setting your business up for success by providing stellar service and an unforgettable experience will be more important than ever in the face of new tariffs and rising costs.

“Operators need to up their game with service,” says Entegra’s Head of Culinary Chef John Csukor. “With pricing pressures and consumers looking for value from their dining out dollars, the entire package takes on more importance. Think about the customer experience from the moment the customer enters your business, not just about the price or what’s on the plate. You have to ask if you’re earning the business in every way.”

The benefit of a GPO when prices increase

Being more flexible and resilient in case of product, cost or availability shifts is critical to preparing for potential tariffs.

“Entegra has contingency plans across the supply chain,” said Director of Supply Management Bobbie Moorman. “We’re staying close to the ground on this one, talking with suppliers, economists and businesses to help our clients.”

If you’re looking for a partner to help your business operate smoothly while navigating uncertain times, contact Entegra and speak with a member of our team.

^{*https://www.fda.gov/food/importing-food-products-united-states/fda-strategy-safety-imported-food#:~:text=American%20consumers%20seek%20a%20safe,of%20its%20overall%20food%20supply.}