5 Simple Ways to Leverage Your Supply Chain Management System

The Restaurant Supply Chain Explained

Intricate' and 'intertwined' are two words that best describe a restaurant supply chain. If you're in the food business, you already know the significance of having a reliable supply chain network. Everything fails if the supply chain fails. But what exactly is a restaurant supply chain? In a nutshell, it's a system that delivers food and other necessary items from a host of suppliers to the restaurant.

Many players are involved in a restaurant supply chain -- from farmers and manufacturers to distributors and retailers. Each supply chain link has an important role to play in ensuring a restaurant has the products it needs to deliver every item on its menu to its customers.

Consider this- an order of Fettuccine Alfredo is placed at a restaurant, but the chef finds they have run out of Parmesan because of a mismanaged supply chain. The problem could have resulted from an unexpected shortage of dairy products or a logjam at the port. The result- a dissatisfied customer.

My Place Restaurant in Canada took to Facebook recently to inform its followers that the high cost of lettuce has pushed them to ditch their salad options temporarily until prices improved. That's how one end of the supply chain can affect the other end.

A restaurant supply chain begins at the farming and manufacturing stage. Farmers grow crops and raise livestock, while manufacturers create products like cooking oil, condiments, and other supplies. The next stage involves transporting these products from farms and factories to distribution centers, usually by trucks, trains, and shipping containers. At the distribution center, products are sorted and stored, and delivered to restaurants either directly or through wholesale and retail stores.

The process is long and risky because food items are perishable. Therefore, each step in the process must be monitored with diligence to make sure no contamination, decay, or spoilage occurs. For example, farmers must use clean water, follow sanitation, and maintain good agricultural practices to ensure a safe harvest. They must also regularly test the soil for contaminants, use only approved pesticides and fertilizers, and maintain clean facilities. Farmers may also participate in government programs that help to monitor and regulate food safety.

Similarly, a food manufacturing business has to ensure that its food handling and preparation areas are clean and free from contaminants. It has to use appropriate food storage methods to prevent spoilage and contamination and label its food properly to indicate potential allergens or other risks.

The supply chain is an intertwined process because each party must follow several measures to safeguard its products until it reaches its destination -- the restaurant. Any shortcoming at any stage can be detrimental to businesses down the line.

Importance of Good Supply Chain Management

Running a successful restaurant is the effort of different departments coming together -- chefs and cooks, servers and baristas, managers and marketers. But without efficient supply chain management, the whole operation would all apart. Behind every great dish a restaurant serves, a team of suppliers works tirelessly to get the freshest and best ingredients to the chef.

Supply chain management involves maintaining a healthy relationship with suppliers, ensuring that orders are placed on time, and shipments are closely tracked. Here are some of the important reasons good supply chain management is vital to restaurants-

1. Keeps the kitchen well stocked with necessary ingredients.
   
2. Food waste, a big problem in the restaurant industry, can be controlled with better supply chain management. It can be done by ensuring that only necessary ingredients are ordered and delivered.
   
3. Reducing food waste and maintaining efficient operations can help a business significantly save costs.
   
4. By working closely with suppliers, restaurants can ensure that they receive fresh, top-quality ingredients.
   
5. Knowing what ingredients will be available and when can help restaurants plan their menus around seasonal produce or specific customer requests. It can also help with menu management.
   
6. A well-managed supply chain ensures that customers receive great food with shorter wait times. And they are likely to be more satisfied with their dining experience, leading to repeat business.

Supply chain disruptions usually result from weather conditions, factories going out of stock, political unrest affecting transportation routes, natural disasters, or a Covid-like pandemic. These can have devastating effects on a restaurant business. But efficient supply chain management can help prevent such disruptions or at least minimize their impact.

Common Challenges to Supply Chain Management

Chipotle faced a major supply chain disruption late 2015. The fast-casual chain had started to procure ingredients from local suppliers with set standards for sustainability, animal welfare, and accountability. The supply chain did well for the most part. But sourcing locally grown ingredients is a tricky process that requires complete visibility into every link of the supply chain. And Chipotle failed to do this.

A health emergency followed an E.coli outbreak in nine American states linked to Chipotle's food. The chain took full responsibility and cooperated with the authorities during the investigation. But in a year, it had to hike its food prices to improve its supply chain management and adopt better technology.

Chipotle isn't an isolated case. Many restaurants, even those with deep pockets and robust technology at their disposal, have struggled to manage their supply chains effortlessly. A case in point is KFC. It switched to a new logistics partner in the UK in 2018, but the new partnership ended badly when a delayed delivery of chicken to its stores forced the chain to shut down or scale back its operations at several locations.

The global restaurant supply chain (and Demand Planning) was badly impacted by the pandemic. Acute labor shortages, bottlenecks in transport routes, and other problems impacted restaurants massively.

While some disruptions in the supply chain are unavoidable (as in the case of a pandemic or war), minor hiccups can be avoided with a little attention to detail. And this depends on tighter inventory control. To streamline operations and reduce costs, it is essential to clearly understand what ingredients are needed by a restaurant, how much should be ordered, and when they have to be delivered.

Another common obstacle in a supply chain is poor communication between various supply chain team members. Clear communication makes it easier to coordinate deliveries, track their progress, and make changes when needed. Inadequate demand forecasting is another problem that can lead to disruptions in day-to-day restaurant supply chain management. By failing to anticipate customer demand or properly forecast inventory levels, restaurants run the risk of running out of popular menu items or being forced to over-order perishables that will ultimately go to waste.

Lastly, not all restaurant staff may be aware or trained in supply chain management procedures. This lack of knowledge can lead to confusion and error when ordering from suppliers or tracking inventory levels. It always works well if staff members have basic training in inventory management and handling supplies.

Let's look at a few ways in which a supply chain management system can be leveraged.

1. Find the Right Software

Technology has drastically changed the way businesses are run. Unfortunately, the restaurant industry hasn't been very proactive in implementing technology, but it is coming around, thanks to the pandemic that threw up a host of challenges.

There are various software programs designed to help with specific aspects of running a restaurant, and supply chain management software (SCM systems) is one of them. Unsurprisingly, there are many options available. The first and most important step is to find the right software that meets the specific needs of your business. It should be able to track inventory, orders, suppliers, and other data points.

The SCM solutions should also be able to identify areas where costs can be saved, stock orders optimized to prevent shortages or surpluses, and delivery schedules streamlined. In addition, it should provide real-time visibility into every stage of the supply chain process, making it easier to anticipate and address problems as they arise.

Also, most restaurant businesses use different restaurant software solutions -- like enterprise resource planning or ERP software, inventory management software, a point of sale system, workforce management software, and so on. The supply chain management software should be able to integrate well with each one of them for smooth operations.

2. Train Employees

Once you have the SCM system in place, it's important to train your employees on how to use it. They should be familiar with all of its features and functions so they can make the most of it. It is also important to ensure that the SCM software you choose is easy to use and navigate.

3. Monitor Supplier Performance

Suppliers play a crucial role in supply chain management, so monitoring their performance is important. Track on-time delivery rates, quality issues, and other factors that could impact your business. Use supplier performance metrics to identify areas where you can improve efficiencies. Tracking supplier performance will also help you determine which suppliers meet your expectations and which need improvement.

4. Streamline Processes

Utilize technology to automate tasks whenever possible. Take a close look at your supply chain management processes and identify areas that can be automated. By automating tasks such as order processing, shipment tracking, warehouse management, transportation management, etc., staff members can be freed up for other work. This will improve efficiency and reduce costs. Many businesses are now using robotic process automation (RPA) to automate repetitive tasks such as data entry. It decreases the loss of productivity due to human error or boredom from performing mundane tasks. Setting up an RPA system requires an upfront investment, but it has great benefits in the long run.

5. Track Changing Customer Preferences

An efficient restaurant supply chain management system can respond quickly to consumer behavior and trends while minimizing waste and maximizing efficiency at every stage -- from sourcing ingredients to delivering finished dishes to customers. For example, if there's a trend in healthier eating, restaurants need a supplier to provide them with the right ingredients. The process may require the supply chain team to ensure that the right mix of products is available, deliver items promptly, and stock shelves with popular items.