Disruption Is Finally Reaching the Restaurant Supply Chain
February 13, 2018
Food service operators are pushing for change in the restaurant supply chain world, spurred by shifting consumer interest, competition-worthy limited time offers (LTOs) and other pressure points.
Chain leaders have started to use their buying power and partnerships to clean up their menus, remove artificial additives and provide fresh, sustainable, safe foods.
This shift provides an opportunity for other operators to follow their lead. Restaurant supply chain issues remain, but here are ways some food companies are seeing significant improvements.
Transparency, Food Safety
Quality controls, which are a top priority for supply chain managers, are growing to cover ever broader terrain. To track and trace products in the event of a quality issue or recall, robust real-time data must be harnessed throughout the restaurant supply chain.
Food service companies have published and adopted the GS1 standards to increase end-to-end traceability with unique global barcodes, consistently pinpointing the “what” and “where.”
Chipotle Mexican Grill made an effort with its “Food with Integrity” mission, forging new ground in the farm-to-table movement quickly and on a large scale. But subsequent food safety issues forced Chipotle to implement a GS1 traceability program. The company also had to change both internal and external operations to increase food safety and operations efficiency.
Traceability programs help brands protect their reputations and deliver on their sustainable, local and animal-welfare promises. Such programs also provide massive amounts of data around cost savings, product capacities, forecasting and potential disruptions.
Menu Disruption and LTOs
Restaurant chains keep adding new or limited-time items to their menus. Consumer demand for LTOs can generate bursts of income for operators, but predicting demand is still tricky.
Operators can end up losing money on excess ingredients or turning customers away because they exhaust the supply — which is what happened with Subway’s Reuben LTO in 2016.
But thanks to a communication and collaboration initiative spearheaded by the International Foodservice Manufacturers Association, Subway worked with its suppliers using a set of best practices for managing restaurant supply chain challenges, according to Forbes. The company ran the promotion successfully in the fall of 2017, not having to turn customers away for the first time in years.
Church’s Chicken switched up its product commitment process between stores and distributors, requiring each store to individually specify how much product is needed for an LTO with corporate, then placing one large order.
Since the new process allocates product by location, any surplus or shortage is managed by each store, making it easier to clear dead inventory out of the distribution center and close the books at the end of the promotion.
Off-contract purchasing opens cost and consistency issues that can impact a brand, including quality and food safety. Compliance triggers should alert corporate if any operators venture afield before they cause any harm. Invoice audits and third-party verification are just two strategies to ensure a supply chain remains stable and profitable.
McDonald’s has the No. 2 global supply chain, according to research and advisory company Gartner, ensuring the same product across almost 200 countries.
But the company has been slow to change to fresh products, which its operators fear would open food-safety risks and service delays. It’s working with supplier partners to make gradual changes instead, using strong relationships rather than cost-cutting to ensure the suppliers are dedicated to delivering value.
Marco’s Pizza is using a predictive costing system that tracks ingredients and provides cost analyses based on monthly forecasts, according to Pizza Marketplace. The company expects the tool to help franchisees take advantage of the best commodity values for their menu promotions as they occur.
Technology and efficiency will increase over time as supply chain processes streamline and the GS1 standards become more widely adopted.
For now, operations looking to enhance menus or boost differentiation should talk with distributors, manufacturers and producers.
Collaboration and flexibility are crucial to ensuring suppliers are committed to the best brand experience.
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