You Don't Have a Pricing Problem. You Have A Buying Model Program

Hey Reader,

Most teams think they have a procurement problem when they really have a buying model problem.

That matters because the model you use determines who has leverage before the first price quote ever hits your inbox. If most of your volume is bought through spot buys, you are not staying flexible. You are paying for uncertainty. If most of your volume is bought through Bid & Quibble, you may feel like you are negotiating hard. That does not mean you are winning.

Why Most Purchasing Strategies Quietly Lose Margin

Spot buying is useful for fill-in volume. It is not a smart default strategy. You are buying whatever is available in the moment, with limited negotiating room. Your outcome depends on how much unsold product a supplier is sitting on.

Bid & Quibble is more structured, but still transactional. You submit volume. Suppliers quote. You negotiate. But packers are using their own forecasts, their sold position, and their view of USDA direction. They often have more information than you.

Negotiated formula is different. It is strategic. You establish USDA-based pricing with a tighter supplier pool. You can structure single formulas or volume tiers. The biggest advantage is predictability. Locking in even 40 to 60 percent of your weekly volume this way reduces bad buying decisions made under pressure.

The Three Buying Models and Where They Actually Win or Lose

Spot Buy​
Good for: Fill-in volume
Risk: Paying premiums when supply is tight
Reality: You are reacting, not managing

Bid & Quibble​
Good for: Testing the market
Risk: False confidence from negotiated quotes
Reality: Suppliers often hold the advantage

Negotiated Formula​
Good for: Core volume stability
Risk: Requires discipline and forecasting
Reality: Best lever to reduce blended cost over time

If You’re Not Beating USDA, You’re Losing

The teams that consistently win do one thing well. They measure purchasing performance against the right benchmark.

Retailers like Walmart and Kroger are buying below the USDA average. That means someone else is buying above it to create that average.

If you are not measuring your price against a weighted USDA market based on your weekly volume, you do not know how well you are buying.

There is another issue. USDA is a report of last week’s prices. It is not a forecast. As more volume moves to formula pricing tied to USDA, you need multiple inputs to understand where the market is going next.

The best operators do not guess. They estimate. They use forecasts, supplier positions, and historical patterns to build an edge.

Same Product Name, Different Economics

This is where most teams lose money.

Same item name does not mean same product.

If your sourcing team cannot read and interpret packer specs, you are exposed. If you are not validating yield differences between suppliers, you are guessing on your true cost.

A small difference in yield can wipe out any quoted savings.

A nickel cheaper raw material can turn into a fifty-cent higher finished cost.

The $0.20 “Savings” That Cost Us Real Money

At Kroger, one of my facilities flagged an issue with bone-in center cut pork loins showing up out of spec.

They expected 8-rib center cut loins. Instead, they received whole loins.

We called the supplier. They said the product was correct. That was their spec for a center cut loin.

Sourcing had awarded the business because the supplier was $0.20 cheaper.

But the item was bid incorrectly. Compared to whole loin bids, that supplier was actually higher. Worse, the spec mismatch created excess assorted chops, forcing retail adjustments to move product.

The cheaper buy increased total cost.

A Smarter Way to Structure Your Buying Strategy

1. Segment your buying model​
Lock in 40 to 60 percent of steady volume under negotiated formula agreements. Use Bid & Quibble selectively. Use spot buy only for gaps.

2. Score performance the right way​
Measure your actual price against a weighted USDA market by week. Review quarterly and annually.

3. Validate specs and yield before awarding volume​
Align product definitions across suppliers. Test yield differences. Make sourcing accountable for finished cost, not just purchase price.

Quick Test: Is Your Procurement Helping or Hurting?

• How much of your volume is still bought on spot?
• Are you beating or trailing the USDA market on a weighted basis?
• Can your team explain spec differences across suppliers?
• Are you measuring yield by supplier or assuming consistency?

If you cannot answer these quickly, there is margin opportunity sitting in your procurement process.

Get the Scorecard and Find Your Gaps

If you want a structured way to evaluate your procurement strategy and identify where you are leaking margin, use the Operational Health Assessment Guide.

Or reply with MODEL and I will send a simple scorecard to break down your current buying mix and performance.

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​Judson Armentrout​
FreshOps | Practical Insights for Fresh Food Operations

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