Do you want an Integrated Restaurant Supply Chain Solution? Here’s what you need to know.
Managing a restaurant supply chain using spreadsheets, paper invoices, and/or multiple electronic systems can cause staggering monetary losses that may remain almost invisible. How? Supply chain management is a complex process, individual losses are small and can occur at many different points, and without an integrated system the timely tracking of these inefficiencies is almost impossible. It’s like a miles-long oil pipeline which can only be serviced on foot, that’s leaking from many tiny holes. Non-integrated systems also make it hard to be responsive to food quality and safety issues, both critical to ongoing success. An integrated approach that ties the back office system to the supply chain solution has wide ranging benefits, and enforces order and accountability across the enterprise.
It Pays to Integrate
In a company that does $50 million in annual sales, a supply chain automated with the proper software can mean savings of $500k – $2 million or more… every year.
To illustrate the complexity of managing a supply chain without an integrated solution, let’s see how that approach affects a simple hot dog stand. The stand owner has a supply chain process to deal with, and must answer important questions every day:
Process and Questions
|Plan for purchases||Buy goods and services||Take Delivery||Troubleshoot problems|
The process is complicated, but the hot dog stand owner has three critical advantages:
- A simple menu
- One person makes all the business decisions
- One person has visibility into all aspects of the operation
But take this approach and apply it to a restaurant chain managing hundreds of products across dozens of markets, and it becomes substantially more difficult to execute efficiently, due to 2 main factors:
- Multiple people are involved in the process, but none have visibility to every part of the system, making truly informed decisions an issue.
- Tracking inventory from the negotiation stage to procurement, delivery, and on through use, in real time, is almost impossible. Proper cost control is paramount.
Typical Restaurant Supply Chain Problems
Following are typical problems in a restaurant supply chain managed without an integrated software solution:
- Accurate sales forecasts based on historical data and current trends are difficult and time-consuming to generate, which leads to under-ordering (and unhappy customers) or over-ordering (and increased waste).
- Prices paid for goods may be too high, due to:
- Problems “normalizing” prices during vendor price comparison (i.e. one vendor sells by the pound, the next by the case). Spreadsheets offer a poor vehicle for comparing the cost of various items from multiple vendors, creating a time-sink of data entry and manual formatting.
- A lack of centralized control of order guides and approved vendors, allowing restaurants to engage in unauthorized spending at non-negotiated pricing.
- Ordering outside of business rules (e.g. below minimum quantities) may trigger premium pricing.
- Orders may include unapproved vendor substitutions at higher costs.
- Menus may be unprofitable due to inaccurate or non-existent cost-modeling, whether for LTOs or everyday items. Any item with poor margins that’s sold 500 times a day will crush a bottom line.
- Manual ordering and receiving generates reams of paper and mistakes.
- It makes comparing orders and invoices to their underlying negotiated contracts so difficult that many companies skip the process altogether. Contract non-compliance is a major source of lost cash.
- It wastes an enormous amount of managers’ time, virtually every day.
- Data should never be entered twice, as it dramatically increases errors; for example, orders shouldn’t be placed via a vendor phone, FAX or website, and also entered into a back office system.
- Without an easy, centralized way to give feedback on the quality of food delivered, and the service during the delivery, there’s no way to correct poor vendor performance.
- Manual maintenance of allergen and nutritional information is tedious at best.
Historically the problems above were so pervasive, and so expensive, that ultimately they led to the creation of the integrated supply chain software industry! In our work with some of the world’s great brands, the implementation of integrated supply chain solutions has resulted in savings of 1% to 5% of sales. In a company that does $50 million in annual sales, a supply chain automated with the proper software can mean savings of $500k – $2 million or more… every year.