Speed of Business
As the restaurant industry changes to meet the ever-evolving needs of millennial and Gen-X consumers, the need for efficient and effective sourcing and supply chain technology, processes and best practices has become a business imperative.
Traditional supply chain management tends to move much slower than today’s leading restaurants require, often contributing to the already mounting pressures from the food industry overall.
Those mounting pressures represent unprecedented challenges for restaurant companies today. Competition is increasingly fierce in a mature industry. Consumer expectations for fresh, organic, locally and humanely sourced food continue to rise, however, they consistently resist price increases. Increased SKUs and commodity volatility, combined with expanded regulatory compliance mandates, have driven complexity throughout the supply chain. As smaller chains gain market share, traditional restaurants have drastically reduced go-to-market time for limited-time offers (LTOs), promotions and new products.
While driving the food industry to new heights, the current environment requires an unparalleled level of precision from restaurants. Top initiatives among food service distributors include local sourcing (89 percent), animal welfare and human treatment (78 percent), product and ingredient safety (78 percent) and traceability (78 percent), according to a study by Technomic.
Today, the supply chain is not only expected to maintain low costs but also support agility, speed, innovation, quality and reliability, while adding to the bottom line. In discussing the in’s and out’s of innovation, food business leaders must identify new sourcing approaches, resources and solutions that help to meet these demands.
The good news is technology has made it is easier for restaurants to:
- + Create farm-to-fork visibility. Technology has made it possible for restaurant companies to see real-time data on critical factors such as where products are sourced, cost and margin forecasts, available capacity, commodity trends, and inventory at various locations.
- + Automate planning and execution. With technology, information can be shared in real time across restaurant departments, distributors and suppliers. Changes to plans can be instantly propagated, enabling departments to operate in sync and eliminate costly execution delays.
- + Understand the impact of changes in demand or supply. When an LTO’s forecast changes, the commodity manager needs to understand how much more (or less) they need to hedge. When an ingredient is changed, finance managers need to understand the impact on restaurant margins. With today’s technology, these and other changes can be understood in real time, and managers can respond instantly to ensure adequate supply and to protect margins.
- + Evaluate tradeoffs. Too often, supply managers overstock inventory to guarantee supply for LTOs and promotions, inevitably resulting in obsolescence when the predicted demand fails to materialize. Effective scenario analysis enables sales and operations planning (S&OP) managers to determine optimal tradeoffs between inventory, capacity, and contingency sourcing options for different demand forecasts.
- + Collaborate with suppliers to create new value. Consumer pressure has driven restaurants to establish numerous health and animal welfare initiatives, such as cage-free eggs, antibiotic-free chicken and gestation-stall-free sows. A collaborative, strategic supplier relationship allows companies to share the investment and benefits for these initiatives.
In the absence of the kind of technology that creates the benefits listed above, companies cannot create an efficient supply chain that gives them the ability to innovate ahead of industry trends. Falling behind competitors who remain relevant in the eyes of consumers, food companies with average supply chain management ultimately become ineffective, and the company becomes reactive instead of proactive. Today, an accurate industry and financial forecast, flexibility, and agility are the keys to bringing confidence to the supply chain. It is crucial for food service suppliers to meet customer demand for customization, as many are searching for food that tells a story, from farm-to-fork. Meeting customer demand for customization will lead food service suppliers away from the “bundle” menu items and consequentially, will put additional stress on the supply chain.
Clearly, the food industry is moving quicker than ever. Planning with efficiency and reacting to ever-changing consumer needs while controlling costs requires both robust technology and strong leadership in the supply chain. Innovation happens when supply chain leaders are armed with visibility and supported by technology-driven collaboration, while keeping the company’s overall business goals front and center.