Supply Chain Solutions- Tips and Best Practices for a Restaurant on the Rise
Restaurant Supply Chain Management- What is it?
For a restaurant to effectively manage its costs and revenue, it is important that the supply chain should be cost effective and deliver results on time. Supply chain can be described as the process of procuring raw materials, turning them into goods to be sold and delivering them to customers.
The supply chain for a restaurant starts from buying raw food products, cooking the items, completing placed orders, billing among other processes. An effective supply chain can help improve a restaurant's competitiveness and help in saving money.
Supply chain management for a restaurant is tracking and controlling the supply chain to maximize efficiency and involves developing and managing relationships with food vendors to get supplies for producing meals to meet customers' demand.
A fine-tuned chain management process can help a restaurant boost sale and ultimately profitability. The management process helps better flow of information which helps in better collaboration and effective functioning of a restaurant by reducing risk and saving money. Efficient supply chain management also helps reduce the cost of inventory management as the process gets streamlined and helps a restaurant owner make better business decisions.
An efficient supply chain also makes it easier to provide better customer service. If there is a shortage of a certain product in the market, an efficient supply chain management helps you identify it early and put alternates in place. Thus the menu can be juggled to ensure that customers are not left wanting.
Online Supply chain: Approximately 12% of restaurants are currently opting for online third-party sellers to stock up their restaurants
40% of restaurants purchase supplies from online services on a monthly basis
Components of Restaurant Supply Chain Management
As discussed, the success of a restaurant's smooth functioning depends on efficient supply chain management. Let us know look at the components of an efficient supply chain management process.
1. Forecasting demand- The supply process starts to fulfil a demand. Hence accurate demand forecasting is the first step for an efficient supply chain management. A restaurant needs to accurately predict the customer demand to change and tweak the menu. Nowadays, there are many software available in the market which can provide insights about customer preferences highlight best-selling items on menu. It also helps in inventory management and overall costing.
2. Finding the right vendor- Getting the right vendors is crucial for efficient functioning of supply chains. A vendor supply poor quality food materials can affect the overall quality of the meals being served in the restaurant and damage the restaurant's image. A vendor supplying good quality raw materials at a high cost can affect the bottom line of the restaurant. An efficient supply chain needs a vendor who can supply good quality food material at the price within the restaurant's budget.
3. Managing purchase orders- In order to ensure smooth supply chain management, a restaurant has to streamline the process of managing purchase orders. A restaurant having multiple locations will have different purchase orders as per the raw material demands and trends of that location. A restaurant can invest in a good supply chain management platform which will allow all the purchase orders to be processed centrally. This will reduce any errors and discrepancies in orders and can also help in bulk ordering certain food items. Centralising purchase order management also helps a restaurant maintain the quality of the raw materials being procured.
4. Managing inventory- A well stocked inventory is the mainstay of restaurant management. A restaurant has to ensure that there is enough inventory to meet demand but not tie up money in maintaining obsolete stock. A smooth supply chain should be able to provide the optimal inventory management to a restaurant. Managing inventory properly also ensures that the restaurant is able to meet the customers' demands as unhappy customers can damage a restaurant's brand.
5. Variance and consumption management- An efficient supply chain is able to reduce the consumption and variance gap. Variance management deals with managing the gap between physical inventory and ideal inventory. Efficient chain management can ensure that the gap is kept at the lowest. Consumption management is managing the food preparation standards set by a restaurant.
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Supply Chain Solutions- 8 Tips and Best Practices
Supply chain management is a Business Process of keeping goods and services moving efficiently through the supply chain network. A restaurant needs to optimise the supply chain to reduce the cost of manufacturing, storing, and moving goods. As per data, restaurants with optimized supply chains have 15% lower costs and at least three times faster cash conversion cycles. A restaurant needs to implement supply chains solutions that will optimise the end to end chain management process. Here is a list of supply chain solutions and practices that will help optimise the process-
1. Vendor management- Build and maintain a long-term relationship with your vendors as this will ensure constant exchange of information which will help in creating a more streamlined and effective supply chain. Build a collaborative relationship to get feedback on how best to use their products or services.
2. Keep overall costs in mind- Always keep the total procurement cost in mind while deciding between suppliers. The cost in the purchase order is only 25-40% of the total cost. The remaining money is spent on warehousing, transportation, and operating costs.
3. Consolidate transport and warehousing- One of the chain solutions to a better supply chain management is to optimize transportation and inventory costs. Opt for a demand-driven distribution rather than one on a set schedule.
4. Optimize inventory management- More than 50% of the cost of the item is spent on maintaining stocks. Use demand forecasting to ensure optimal inventory management and predict seasonal demand.
5. Track supplies- As a restaurant, the food you serve determines your reputation. If the food is not of good quality it can affect customer service and your image. An efficient supply chain helps a restaurant track the origin of any item used in the menu.
6. Act on changes in real time- A proper supply chain management process helps a restaurant track if there is any change in demand or shortage of a particular item. The restaurant can then correct any supply forecasts and coordinate with suppliers on restocking the products in real time.
7. Perform audits regularly- Establish a system that ensures regular audits at the restaurant and supplier's warehouses. These audits can be used to track inefficiencies and bottlenecks that prevent a streamlined supply chain process and then make improvements and ensure compliance.
8. Use software to streamline process- A good supply chain management software can help a restaurant automate processes such as inventory management which can optimise the supply chain management. As per data, by 2030, 59.6% of companies will use big data analytics to optimise supply chain.
3 Key Supply Chain Strategies
A restaurant needs to effective supply chain solutions to have an optimal chain management process to maximise value which is linked to supply chain profitability. Profitability can be defined as the difference between the total revenue generated and the overall supply chain costs.
Here are key supply chain strategies which help a restaurant maximise profitability-
1. Procurement planning- The process of deciding what a restaurant needs, who will provide the products and when orders will be fulfilled is called Procurement planning. The process is necessary to minimize purchase costs while maintaining quality standards. An ideal procurement plan identifies and defines realistic product expectations like fulfillment time, cost and product quality. A business can aim to reduce ordering stocks and labor costs without impacting the quality. Procurement planning maintains efficiency within the supply chain and can streamlines future procurements.
2. Production planning- The process of creating an efficient process for production according to customer and business needs is called production planning. A company looks at the big picture rather than the level of the individual product or item. Production planning helps optimise customer-dependent processes such as on-time delivery and customer-independent processes, such as production cycle time. It helps minimizes lead time, which is the amount of time that passes between the placing of an order and the completion and delivery of that order.
3. Inventory management- A restaurant needs just the right amount of inventory to ensure that there is enough stock to fulfil customer demand and not tie up space and money holding stocks. Efficient inventory management can enhance supply chain and improve operations. Proper inventory management helps you decrease food waste, work with vendors, decrease the overall cost of goods and increase profits.
Stages of food supply chain:
How Can Efficient Supply Chain Management Benefit a Business?
As we have discussed, an optimal Supply Chain is a crucial to the smooth functioning of a restaurant. Here are some benefits of implement supply chain solutions that ensure an optimum chain management process-
1. Managing risks- An optimal supply chain can give a business view of the risks involved such as potential quality control problems and disruptions in supply. Once the risks are brought out in the open, a restaurant can work on solutions and processes to reduce the risks and optimise the supply chain. Statistics show that 87% of companies can reduce their inventory by 22% by having better supply chain visibility.
2. Reduced overhead costs- Optimal supply chain activities such as demand predictions and inventory management can help reduce overhead costs for stocking and slow-moving inventory. Better supply chain solutions can also help reduce transportation costs as orders are streamlined and can be placed in bulk.
3. Increased efficiency and profits- Efficient chain solutions optimise processes like managing the movement of raw materials which prevent delays in manufacturing and increase productivity. By reducing overhead costs a restaurant can increase its overall profits.
4. Increased output- Optimal supply chain management can help develop better alignment of needs, more options, better pricing and timely completion of orders. A restaurant which has well-stocked menu results in happy customers and help in growing the business.
Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.
3 Top Restaurant Supply Chain Management Software
After discussing the benefits of an optimal supply chain management, let us look at the best options a restaurant has to manage its supply chain process-
Hubworks- It is a back-office solution for restaurants which offers individual apps to handle supply chain management, inventory management and food safety compliance. It offers apps like Zip Inventory which can keep track of inventory goods on periodic basis.
MarketMan- It is a cloud based supply chain management system which provides features like inventory counting, budgeting, purchasing, food costing, and vendor management. The system allows for placing supply orders via mobile app without worrying about errors.
xtraCHEF by Toast- A cloud based restaurant supply, inventory and vendor management app which also offers a free subscription tier for supply order management and invoice uploads.
Supply Chain FAQs
Questions to ask for optimal supply chain management
1. Does the restaurant have strategy to ensure that supply chain grows along with plans?
2. Is the restaurant using software which can provide dependable processes or is it depending on luck and human effort?
3. Has the restaurant been able to adopt success stories of structured supply chain operations as per scale?
Problems of supply chain management for restaurants
1. Non transparent supply chain process and food safety/nutrition information
2. Uneven supply chain due to lack of communication and collaboration
3. Stringent regulations can adversely impact freshness and safety of food items
4. Manufacture of counterfeit food items and fraud firms producing food items