Restaurant Supply Chain Solutions and How You Can Improve Yours

What is a Restaurant Supply Chain?

A business that pays scant attention to its supply chain management has a slim chance of success. A supply chain starts with raw materials delivered by the primary producer. The product then undergoes value addition at every stage, and finally reaches the end consumer as a finished item.

For example, a farmer growing wheat sells the produce to mills that turn the wheat into flour. The flour then reaches retail shops from where it is purchased by restaurants and bakeries (among other clients) that make bread from the flour, and the bread is eventually served to customers. Restaurants may also purchase bread from bakeries and use it in various ways to prepare menu items like pizzas, burgers, sandwiches, or rolls.

Every stage of this supply chain comprises a number of specialized entities. So if we take the bread supply chain, there are farmers, grain merchants, grain distributors, transporters, those in charge of managing warehouses, retail shops, bakeries, and restaurants that help in moving the food from the farm to the table. The raw product gets incrementally refined at every step. A supply chain, therefore, involves an end-to-end link between producers and consumers. It needs to be actively monitored to maximize efficiency and value and ensure that sales and profits are strengthened.

For a restaurant, supply chain management entails striking a deal with food suppliers like farmers; wholesale distributors; and vendors selling paper bags, takeout containers, cutlery, and so on; and locating partners willing to take the raw materials to the restaurant. At the restaurant, chefs turn the raw materials into delicious meals.

The finished product now has to be served to customers. This may involve servers who take the ready meal to the customer's table, or -- as has become more the norm in the post-pandemic world -- it may involve a third-party delivery partner dispatching the food to the customer's doorstep.

In a nutshell, a restaurant supply chain is a complete network of people, companies, activities, resources, and technologies involved in bringing food to the diner's plate.

The Importance of a Restaurant Supply Chain

An efficient supply chain management system allows restaurants to ensure a steady flow of food items so that they are always ready with stocks to churn out meals for their customers. Stockouts, especially of popular menu items, can be disastrous for food businesses, hitting their sales, and crucially, their image, which could have a long-term adverse impact.

Restaurant supply chain management also allows businesses to identify issues that could spiral out of proportion, plan in advance for them, and conceive ideas to solve them when, and even before, they emerge. Efficient supply chain management can save restaurants the embarrassment faced by KFC in 2018, when its UK outlets suffered a massive chicken shortage thanks to supply chain disruptions. Back then, irate customers even complained to the police and legislators.

Robust management of the supply chain also helps restaurants strike favorable deals with vendors, select vendors that offer them the biggest benefits, quickly search out alternative supplier networks, do away with wasteful purchases, and make their logistics and transportation systems more resilient.

Types of Restaurant Supply Chain Solutions

There are different aspects of restaurant supply chain management. These solutions together ensure that restaurant supplies are safeguarded and bottlenecks removed. The various restaurant supply chain solutions are-

1. Demand forecasting- An accurate projection of customer demand based on past and present sales figures, upcoming events, changing tastes, and so on allow restaurants to make changes to their menu. Digital supply chain management systems, in this regard, help businesses discover fast and slow-moving menu items and decide on which items to keep and promote and which items to offload in order to maximize profits. Demand forecasting also allows restaurants to optimize kitchen resource usage, and slash overall grocery costs.

2. Vendor management- A restaurant should necessarily choose vendors that offer the best products at the most reasonable prices. With the help of software, restaurants can identify the best supplier partners.

3. Purchase order management- This becomes especially important when a restaurant operates across multiple locations and the consumption of supplies depends upon the consumer eating habits and footfall which may vary from one location to another. Therefore the type and amount of supplies required and the time of requirement would be different for different franchise outlets. With the help of software purchase orders can be placed with the relevant suppliers by the central kitchen, which does away with the possibility of mistakes when orders are placed by separate outlets.

4. Inventory management- When you are in the food business, you need to know exactly when you need to place orders, what needs to be ordered, and what quantities need to be ordered. You should ensure that you have enough supplies to serve the customers without disruption and also avoid buying more than is required, causing supplies to rot on the shelves, and wasting money on storing ingredients that have slim prospects of being utilized.

5. Consumption and variance management- The actual and expected consumption of a product may not match. Therefore, when the physical stock or currently counted stock level is at variance with the ideal stock level, you know that something is amiss. Underutilization of supplies may point toward food waste, while overutilization may point toward poor recipe planning and demand planning. Either way, the cost projections of the company would be messed up.

Restaurant Supply Chain Challenges

1. Unexpected disruptions- Such disruptions occurred in the wake of the COVID pandemic, when panic buying, lost sales, and stalled operations caused many businesses to shut down for good. This resulted in massive quantities of unsold stock stuck with suppliers, which meant unrestrained wastage and losses across the food supply chain. Unforeseen supply chain disruptions are also created by war. A Vox report pointed out that the ongoing Russia-Ukraine conflict can destabilize the global food supply chain, ramp up Food Prices and exacerbate global hunger.

2. Demand for transparency and traceability- There is an increasing demand among consumers to have full visibility into the supply chain process in its entirety. Foodborne diseases often begin and proliferate with the supply chain and lack of traceability and transparency gives rise to blindspots that make consumers susceptible to food safety hazards. On the supplier side, the lack of traceability messes up brand integrity, erodes customer loyalty, decreases sales, and creates room for litigation.

3. Communication gaps- A global supply chain involves a massive network of people and organizations spread across different geographies, with different cultures, languages, and methods of transportation and communication.

4. Excessive regulations- Official regulations may have the stated purpose of ensuring food safety, but they are often the unwitting source of trouble, acting as barriers to the smooth functioning of supply chains. Take for instance the Electronic Logging Device (ELD) law that requires the installation of an ELD by carriers for daily documentation of driver service hours. This law has resulted in several carriers cutting back on driver hours and smaller carriers going out of work altogether. The ELD law has resulted in higher shipping rates, disruptions in driver availability, and supply delays.

5. Dishonesty and faulty handling- Counterfeit and illegal goods may be transported in the garb of food supplies. Food fraud results in stricter regulations, and hence, more bottlenecks. Faulty handling of supplies and concealing facts may result in food poisoning and death. Food suppliers have therefore to be mindful of the temperature and moisture requirements of shipments.

Strategies to Improve Your Restaurant Supply Chain

1. Restaurant Supply Chain management can be improved by employing digital tracking systems. This helps in producing actionable insights, identifying shifts in demand, adjusting supply forecasts, and coordinating with vendors to ensure appropriate and adequate restocking of products. Cloud-based software ensures that these activities can be done in real time.

2. The management of supply chains can be made more efficient by proper logistics and warehouse management and simultaneously optimizing inventory and transportation costs. A distribution network that is demand-driven works better than one that functions in terms of a fixed schedule.

3. Restaurants should at all times ensure the safety of the food they serve. So if its supplies are related to disease outbreaks, they need to be able to determine exactly where the outbreak happened. With the help of automated software, restaurants can flawlessly track the source of supplies and purchase orders.

4. To ensure the success of promotional campaigns, restaurants must see to it that they have sufficient supplies to fulfill their promise. Automated software keeps a tab on depleting products and ensures that restaurant shelves never get empty.

Top 3 Supply Chain Software Solutions for Restaurants

1. Zip Ordering-
This is a robust yet simple purchase order management system that helps you consolidate all orders on a single platform. It links businesses with suppliers, looks up their product catalogs, and helps identify local suppliers. Zip Ordering, therefore, ensures that your supplies are not disrupted and your operations carry on seamlessly. It also maintains your order records, produces reports, and links with third-party systems. It allows you to monitor your operations from any location, and at any time. This software solution can be purchased from the Hubworks restaurant app store.

2. Oracle Netsuite-
Oracle offers an integrated restaurant management system, which includes a system for supply chain management. Apart from taking care of menu planning and restaurant supply, it facilitates coordination between different outlets of large organizations. With the help of the analytics tools offered by Oracle, businesses are able to optimize their supply chain management, inventory management, and point of sale (POS) systems. Oracle's supply chain management system integrates with other business management solutions too.

3. E2Open-
This is a cloud-based platform for supply chain management. It offers features like supply chain tracking, analytics, suggested orders, supply chain planning, demand planning, order processing, and much more. The E2Open software solution links with third-party restaurant management systems that ensure complete operational efficiency.

Conclusion

When restaurant supply chains are managed well, efficiencies are created that give organizations a sustainable and competitive advantage. A supply chain that is well-managed also lets best practices be implemented across a wide range of roles and responsibilities.

Tech-enabled supply chain management provides a view of customer behavior and demands across the entire supply chain network, and does away with information silos created by inadequate communication between the various sections of the supply chain. Software also ensures that sales and demand projections and operational planning and execution are strong.

Technology also helps in improving inventory management, logistics management, order management, vendor management, and strengthens collaboration between organizations and individuals.

Robust supply chain management also prepares organizations to respond quickly to risks and disruptions. Moreover, it automates tedious, yet crucial tasks such as monitoring stocks, communicating with vendors, reordering supplies, and tracking supply deliveries. Therefore, the ways to improve a supply chain depend to a large extent on the adoption of supply chain technology solutions.