supply chain management | 15 mins read

How To Stay Ahead of the Competition With Superior Supply Chain Management

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Debdutta Bhattacharjee

By Debdutta Bhattacharjee

What is Supply Chain Management in Restaurants?

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Every business has to practice efficient and effective supply chain management (SCM) in order to flourish, and restaurants are no different. If a restaurant doesn't have total control over sourcing, procuring, and purchasing raw materials and supplies, it won't go far.

A supply chain begins with the delivery of raw material from the primary producer to the manufacturer. The finished product reaches the end consumer after value addition at each stage of the supply chain.

For instance, a farmer, who grows wheat sells his produce to mills, where the wheat is turned into flour. The flour then reaches retail shops like grocery stores, where it is bought by bakeries or restaurants, and finally served to the consumer as bread.

There are numerous specialized entities at each step of the supply chain, like grain merchants, distributors, and transporters that facilitate the movement of food from the farm to the table. The bread supply chain may be even more complex, with restaurants buying the bread from bakeries and transforming it into pizza, sandwiches, burgers, and so on.

Supply chains, therefore, deal with an end-to-end connection between the producer and consumer. Supply chain management refers to the active monitoring and managing of supply chains to maximize value and efficiency, and ultimately, boost profits and sales. For a restaurant, supply chain management starts with identifying and negotiating contracts with food suppliers, like farmers and wholesale distributors, and vendors who sell takeout containers and paper goods. Then the restaurant owner has to find partners who will deliver the raw materials to the restaurant. The raw materials are then turned into meals.

These products now have to be distributed to the customers. This may simply involve the server bringing the food from the restaurant kitchen to the customer's table. It may also involve a third-party agent delivering the food to the customer's home. There is a final part- keeping track of supplies received and used so that the restaurant is always well-stocked to serve what customers demand.

A restaurant supply chain involves this entire network of individuals, resources, companies, activities, and technologies, and capable supply chain management ensures that several business objectives are fulfilled.

For instance, keeping a close eye on the manufacturing process makes sure that the product quality is up to scratch, the risks of recalls and lawsuits are minimized, and a strong consumer brand is created. Shipping procedures have to be monitored to be able to improve customer service by avoiding costly shortages and inventory oversupply.

Supply chain management also helps companies improve their profits and cut costs. Large companies managing global supply chains, therefore, need to always be on their toes.

What is the Role of a Supply Chain Manager?

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A vital cog in the SCM wheel is the supply chain manager, who specializes in operations management and looks after the nitty-gritty of the supply chain. A big part of the job comprises troubleshooting. Here's what a supply chain manager is expected to do-

  • Create effective business plans in collaboration with departments like Operations and Finance.
  • Analyze shipping and delivery processes to identify and remove bottlenecks and handle issues like delays in delivery, accidents, etc.
  • Develop and execute safety guidelines in all aspects of the supply chain.
  • Focus on cost-effective solutions.
  • Coordinate with vendors to make sure that all operations meet quality and safety standards.
  • Evaluate and report on the key performance indicators (KPIs).
  • Keep track of logistics and ensure smooth functioning.
  • Maintain inventory and records.
  • Supervise, train and guide other employees.
  • Make sure that the SCM process is in sync with legal requirements.
  • Negotiate with vendors to strike more profitable deals.
  • Engage in strategic purchasing of materials.
  • Organize transportation routes by combining shipments wherever possible.
  • Organize the return of defective and unwanted products.
Supply chain managers often work with supply chain analysts, who can help in optimizing the functioning of the supply chain. A good supply chain manager is the quintessential all-rounder, who ensures that the entire supply chain functions like a well-oiled machine.

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8 Supply Chain Best Practices

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1. Restaurants should look for suppliers who can take care of more than one aspect of the supply chain. For instance, food suppliers, who provide ingredients and also deliver them to restaurants should be preferred over those who ask the restaurants to pick the supplies up themselves.

2. Always be on the lookout for better deals. This would involve evaluating the prices offered by the food suppliers and logistics service providers at least once a year, and comparing them with those offered by other vendors. For the sake of profitability and cost reduction, a restaurant should be open to changing its vendors if better deals are available elsewhere.

3. A restaurant promising timely clearing of payments, and quick problem-solving could make vendors compete for a contract. This may help the restaurant score a better deal.

4. A restaurant must have sufficient supplies to handle promotions. It would lose credibility if it aggressively promotes a dish but runs out of the ingredients to prepare it just when demand surges. Dissatisfied customers would spell disaster.

The restaurant must have more than a rough idea of whether the demand will sustain and for how long. It has to closely monitor supply forecasts to make sure there is, for instance, an adequate supply of beef for a high-demand sandwich, or enough potatoes for its much-advertised knishes. It also has to be careful to avoid excess stocks, which may lead to wastage of food and money.

5. Tracking supplies to the source is crucial for food safety. This would ensure if a disease outbreak is linked to a particular raw material and supply is disrupted, the restaurant is not caught off guard and can switch its supply orders. A restaurant would do well to stay tuned to agricultural reports from the regions that supply its ingredients.

6. Restaurants should also be mindful of supply disruptions in general, as happened in the wake of the Covid-19 pandemic and the ensuing lockdown. These disruptions would cause food supply costs to go up. This, in turn, would force restaurants to hike their prices too. For instance, the price of beef jumped by 20% between March and June 2020, according to the U.S. Bureau of Labor Statistics. Inflated costs can discourage diners, resulting in lower revenues.

7. Technology helps in automating many tedious, yet important, tasks like monitoring stocks, reordering supplies, communicating with vendors, and tracking supply deliveries. These processes are made faster and easier with the help of supply chain management software, and POS systems with built-in inventory management and supply chain solutions.

Furthermore, restaurants relying on automated inventory ordering systems are able to trace raw materials to their source digitally. A digital and real-time food supply chain tracking system would also allow restaurant businesses to detect changes in demand, correct supply forecasts, and coordinate with suppliers on appropriate restocking.

8. A restaurant owner has to carefully decide which steps of the supply chain must be kept in-house, and which should be outsourced. For instance, a food and beverage business may pay its suppliers a premium to deliver raw materials to its doorstep for the sake of convenience. But it may want to save money and build customer loyalty by fulfilling its own food deliveries, rather than relying on a third-party agency like Postmates.

Benefits of Inventory Ordering Software

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1. Stamp out human error- Manual tracking of stocks becomes extremely difficult to manage and error-prone, especially with demand and supply changing throughout the year and stock levels constantly fluctuating. Automating inventory ordering with the help of technology allows entrepreneurs to stay in control of their businesses without spending too much time and effort, and without having to worry about stocks running low or going bad on the shelves.

Restaurant employees are also freed up to devote more time to customer service, while the inventory management software does its job surely and silently.

2. Reduce food wastage- According to a report by Statista the annual per capita household food wastage in the United States was 59 kg in 2020. The 'Food Waste in America in 2021- Statistics and Facts' report published by RTS points out that the U.S. discards more food than any other country nearly 40 million tons every year. This is 30-40% of the entire food supply. Such a colossal waste has deleterious humanitarian and monetary effects.

Restaurants often witness food being wasted when the expected demand does not match supply. Efficient inventory management can help cut down this wastage.

3. Cut food costs- Typically, food costs make up 28-35% of the revenue of a restaurant business. Wanton wastage pushes up this financial burden. With better management of stocks and more judicious purchasing, a restaurant is able to control spiraling food costs.

4. Greater profits- By reducing food wastage and costs, and removing underperforming items from the menu and focusing on popular items, a restaurant is able to substantially increase its profits.

5. More data-driven decisions- An effective inventory management software offers invaluable sales data, which provides a better understanding of the demand-supply dynamics. It also helps predict sales trends better, and generally allows a restaurant to make more prudent strategic business decisions.

By revealing the inventory turnover rate, inventory management technology helps identify opportunities for reducing the amount of inventory held and lowers inventory carrying costs. It gives a restaurant a more competitive edge.

6. Improved vendor management- Inventory and order management software with batch-tracking features gives restaurant owners better product traceability. It tells them which suppliers are benefitting the business the most, and which are not. It also gives restaurateurs wider legroom to negotiate trading terms and even exclusive deals with vendors. With the help of technology, payments and purchases can be better managed.

7. Customer satisfaction- Timely inventory-tracking backed by technology prevents embarrassing situations from occurring, where a restaurant is unable to dish out a menu item despite high demand for it due to a shortage of key ingredients. This would mean unhappy customers, and a loss of sales and reputation.

8. Easy handling of food recall- Product recalls become unavoidable on occasion. For instance, an allergen that renders food unsafe may be discovered. In such cases, tracing affected products would consume effort and time without easy batch-tracking. Inventory management systems can solve this food supply chain issue.

  • According to a Statista report, around 20% of logistics professionals said that their supply chains were disrupted by the Covid-19 pandemic in 2020
  • Around 11% of respondents said that their orders were canceled as a result of it.

Top 3 Inventory Ordering Software for Restaurant

1. Zip Ordering- This software, available on the restaurant app store Hubworks, is one of the best supply chain solutions in the market. It allows restaurant owners to instantly connect with suppliers and import their product catalogs. Time can be saved by combining separate supplier orders into one consolidated order guide. Custom inventory order guides can be created and saved for later, when restaurants need to restock.

Vendors and products can be selected, and multiple orders placed with just a click. Price totals are listed by the vendor for easy calculation. The mobile app lets product order guides be created on the fly and sends orders to suppliers instantly. This software solution allows customization of product orders.

The supplier search feature of this supply chain solution allows a business to discover local vendors and view their catalogs. This provides an alternative for when stocks run out or a restaurant's regular suppliers bungle a delivery or deliver late. Zip Ordering also ensures a restaurant has the ingredients it needs for new menu items.

2. MarketMan- This is a cloud-based inventory and vendor management software designed to support food and beverage businesses. This supply chain solution allows restaurant owners to set the maximum food cost threshold for each recipe, with alerts if the ingredient cost shoots up. It also lets the opearator decide if they want to hike the price of the menu item or find a vendor who will supply cheaper ingredients without compromising on quality.

MarketMan also allows orders to be sent directly to its sales representatives. Restaurant employees can be assigned specific access levels so that more employees can help manage cumbersome tasks like the weekly physical counting of stock.

Furthermore, all the recipes can be compiled into an easy-to-handle cookbook, which can be accessed both virtually and physically. These cookbooks ensure recipe consistency across multiple locations. MarketMan can be operated on Android and iOS devices and can be integrated with accounting software like QuickBooks, Sage, or Xero. It also supports integrations with leading POS systems like TouchBistro, Revel, Squirrel, Aloha, Lavu, Square, Toast, Upserve, and others.

3. Upserve- The POS and inventory management features of Upserve are suited for small and mid-sized restaurants looking to automate administrative tasks like ordering and receiving supplies. Upserve generates low stock alerts and prompts reordering. The operator can review these suggestions and place new orders with just a click.

The inventory app can be downloaded from App Store and Google Play. It allows the smartphone camera of a mobile device to be transformed into a barcode scanner for recording and counting inventory items. Upserve utilizes its POS system's powerful offline feature to support stock counts on mobile devices. When internet connectivity is restored, the user is able to sync changes with the cloud.

Color-coded order alerts, comprehensive reporting, and fully-integrated POS inventory management are some of its other standout features.

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How can a Good Supply Chain Improve Sales?

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Expert supply chain management helps in creating efficiencies that can, in turn, provide a business with a sustainable competitive advantage. A well-managed supply chain management system allows organizations to implement best practices across a range of functions. These include demand planning, procurement, logistics, inventory management, information systems, compliance, distribution, risk management, and contingency planning.

The efficiencies created can help a company increase revenue and decrease costs. A company with good supply chain management can identify potential problem areas, plan beforehand, and think on its feet to solve issues when they arise.

Expert supply chain management professionals are able to bargain hard with vendors and score a good deal for their companies. They are also skilled in managing the complexities of the global supply chain. Roadblocks can appear at any point along the supply chain, and a supply chain manager who can clear those efficiently can deliver big profits for the company.

Restaurants that are able to maximize customer value by being adequately stocked and adapt to changes in demand and supply stand to do well. They should be able to rely on an alternative supplier network, enhance the resilience of transportation and logistics, and eliminate wasteful buying. An unwieldy restaurant supply chain system is a sure-shot recipe for failure and businesses have to guard against these.

An Apicbase study pointed out that a whopping 75% of restaurants in the U.S. are struggling to rake in profits because of their failure to keep food costs down. According to the report, restaurant operators who calculate inventory turnover every weekthereby minimizing over-and under-orderingadd 2-10% to their bottom-line.

Furthermore, results collected from Apicbase users showed that inventory mistakes and overstocking could be cut down by 17% with the help of dedicated inventory management software. It was also reported that 75% of the restaurant inventory shrinkage in the U.S. happens due to thefts by employees, which costs restaurants about $20 billion every year. These findings underline the importance of a strong inventory management system.

A business can run smoothly and risks can be mitigated by adopting restaurant supply chain solutions powered by cutting-edge technology. In fact, according to Apicbase, 95% of the restaurant operators said that technology helped to boost the overall efficiency of their businesses.

Supply Chain Management FAQs

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1. What causes supply chain disruptions?

The main causes of supply chain risk and disruption include poor response to technology trends, natural disasters, faulty planning and forecasting, government regulations, and fluctuations in the cost of transportation.

2. What is meant by supply chain digitization?

Supply chain digitization (or supply chain digital transformation) is the method of changing analog supply chain processes into digital ones. This is done by establishing dedicated master data that brings together information from across the supply chain, as well as information related to historical sales data, POS consumer data, unemployment rates, Google Trends, and competitor prices.

3. What is logistics management?

Logistics management deals with planning, implementing, and controlling the forward and reverse flow and storage of goods, services, and related information between the points of origin and consumption in order to meet customer requirements.

4. How is warehouse inventory management different from inventory management?

Warehouse inventory management monitors and optimizes the transportation, storage, and tracking of inventory in and around a warehouse. On the other hand, inventory management software takes a macro view of inventory planning and optimization across multiple locations along the supply chain.

5. What points should be considered before choosing food suppliers?

Some of the major points to be considered before selecting food suppliers are minimum and maximum order requirements, discounts offered for bulk orders, quality of deliveries, the suppliers' delivery schedules, payment terms, whether the suppliers add value to the orders, whether the suppliers have mobile apps, and so on.

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