How to Manage Supply CHain in a ReStauRant - eRestaurant

How to Manage Supply CHain in a ReStauRant - eRestaurant

How to Manage Supply Chain in a Restaurant The Guide to running a Successful Business By: Steve Ngo DISCLAIMER © All Rights Reserved No part of thi...

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How to Manage Supply Chain in a Restaurant The Guide to running a Successful Business

By: Steve Ngo

DISCLAIMER © All Rights Reserved No part of this publication may be reproduced in any form or by any means, including scanning, photocopying, or otherwise without prior written permission of the copyright holder. The Author has strived to be as accurate and complete as possible in the creation of this book, notwithstanding the fact that he does not warrant or represent at any time that the contents within are accurate due to the rapidly changing nature of the Internet. While all attempts have been made to verify information provided in this publication, the Author assumes no responsibility for errors, omissions, or contrary interpretation of the subject matter herein. Any perceived slights of specific people or organizations are unintentional.


table of contents

Preface...................................................................................................................................................... 4 CHAPTER 1 What is supply chain?.............................................................................................................. 5 CHAPTER 2 How to choose the right software............................................................................. 7 CHAPTER 3 The management of your restaurant’s supply chain...................................17 CHAPTER 4 Ways in which you can improve your supply chain.........................................26 CHAPTER 5 Paying attention to the buyer’s needs.....................................................................33 CHAPTER 6 Some common problems and their solutions....................................................35 Afterword..........................................................................................................................................38



In more ways than one, it can safely be said that the modern restaurant industry is defined by numerous paradoxes. When it comes to demands, your consumers ask for high quality food but they are not willing to pay high prices for it. Similarly, the freshness of the culinary product is mandatory but seasonal availability of quite a lot of the food items are never taken into consideration. Also, the cost of the food and customer services is counted as one and the same thing, even though they are two completely different entities. On the other hand, there is a constant competition between menu selection and supplier selectivity. Restaurants will constantly demand supplies that are not being delivered by Mother Nature in that season.

To look at the situation from a broader perspective, restaurants constantly demand quick replenishment and the consumers demand quick delivery of their orders. So when it is said that ‘you can have it your way’, that is not just a tagline, the expectations are quite real. This constant tug-of-war between market and consumer pressure keeps the restaurants hanging in the middle. This makes supply chain the only factor on which both the parties can rely on, in order to strike a balance and to derive much needed profits at the same time.


chapter 1

What is Supply Chain? 5

Supply chain is the emerging force which was previously regarded as just a mere purchasing party. With changing times, the potential of this pivotal element of the industry has gained recognition. This is the engine that is responsible for sourcing every material that is needed by the industry. Be it raw material or carrying out contract provisions, supply chain is the backbone of the industry. This is the part of the industry that handles everything and makes all the necessary materials available for you in a timely manner. In short, if you have a successful supply chain, there is nothing that can stop you from becoming a successful business.

The mechanisms of supply chain are the heart of any successful business operation. This means that you should place immense importance on quality, efficiency and safety in order to make sure that you run a successful business. For many restaurant operators, the cost of food is the greatest cost that they pay. With increasing food prices, it is of paramount importance that restaurants develop wise strategies that pertain to the ever-important supply chain management.

One fact that commends paramount importance is that supply chain is, in fact, the critical component that makes or breaks a business. The entire concept of managing a profitable business is based on the successful management of a strong and stable supply chain. It is important to understand that supply chain has more meaning than just a ‘purchasing party’. The realization of this fact is all the more important, especially in difficult economical times, when the growth of your business is more likely to plummet. It is also of tremendous importance that you employ wise management of your financial structure.


chapter 2

How to Choose the Right Software



The traditional methods of utilizing spreadsheets, electronic systems and/or paper invoices can mean tremendous amount of latent financial losses. You may not even be aware that you are losing valuable cash at the back hand. How is that possible, you might want to ask? Well, supply chain works via more than one complicated process. During the various steps of the many processes involved, the occurrence of small individual losses is quite frequent and it can occur at any given point. In the absence of an integrated system, keeping track of all these inefficiencies, is impossible, to say the least. Even if they are detected, it is mandatory that the detection is timely, in order to avert any losses, which is rarely the case. To cut it short, it is a futile attempt at achieving the impossible. Non-integrated systems, given their nature, are also unresponsive to factors such as the quality of the food as well as all the safety issues. For obvious reasons, both the afore-mentioned factors are crucial to the success of your business. The benefits of using an integrated system are numerous to say the least. The most appealing quality of a supply chain management software is that it forms a direct link between your restaurant operation and the supply chain system. This provides for an orderly system that enforces both accountability and order across the entire expanse of the enterprise.


Case Study: A Small Business without an Integrated System In order to grasp the true importance of supply chain, let us take into consideration a hot dog stand and how it operates. The owner of the hot dog stand has to deal with the supply chain process and is perturbed by various questions in a single day: ü What should be offered to my customers?

ü Am I getting the correct articles that I ordered?

ü How much profit will I be able to make?

ü Is the service good?

ü What do I have to buy and where from?

ü Why do I run out of some supplies while others seem to last?

ü Where to find cheap and reliable vendors?

ü Why is a certain order or item missing?

ü Are the prices right for the products? Needless to say that the entire process is both very time consuming and complicated. Given the complexity of the nature of the job, the owner, however, does have three advantages to his favor: ü He has a simple menu to deal with ü He is the only one who has to make all the decisions for the business ü He is the person in charge for the security of all his items and finances


Imagine applying the same approach to any other restaurant operation in the market and just think of the countless problems it will pose. For obvious reasons, it can be seen that this approach will reduce the efficiency of the entire system and compromise the profits at various levels. The reasons for this are many, but two main factors hold the most importance: 1. There are a large amount of people involved in the business but not even one of them has a hundred percent idea of how the business is operating. This compromises the success of the business and makes it next to impossible to make informed decisions. 2. It is difficult to track inventory from negotiation to procurement. Efficient cost control is greatly compromised.


What are the specific problems to be addressed? Given below is a list of all the problems that are faced in the process of managing supply chain of a restaurant which does not utilize the benefits of integrated software.

Problem #1 It is difficult to establish what the currents trends of the market are and how well the sales will turn out based on historical performance. Even when they are generated according to your requirements, you will find that it is an incredibly tedious process. This will eventually lead to under-ordering of inventory and will make you have unhappy and dissatisfied customers that will think twice about paying your restaurant a second visit. Another possibility is that you may over-order but do not utilize that food, resulting in wastage.

Problem #2 You may end up paying higher prices than what their original worth is. This is so because there are certain rules that are followed during the process of vendor price comparison (using different currencies for the buying and selling of a given commodity). Numerous normalizing measures are taken to help the market gain stability and prices are sometimes increased without you realizing it. When you use spreadsheets for measuring and comparing these prices, your tools and the scope for accuracy are poor. The scenario stays this way as multiple comparisons are drawn from various locations and vendors for a large list of items. Overall, the situation is time consuming and lacks accuracy to quite an extent. The creation of a time-sink in terms of data entry and the manual formatting process, therefore, is inevitable. This entire situation gives rise to a loss of centralized control of approved vendors as well as order guides. This is the move that triggers restaurants into paying higher prices than the goods’ actual worth. The non negotiable pricing stays its ground and premium pricing increases manifold as ordering outside of the business rules commences. Additionally, these orders may also include vendor substitutions at higher prices that have not been approved by authorities.


Problem #3 The menu of your restaurant may result in low or no profits at all. Inaccurate cost-modeling for LTOs and items of everyday need or one that is not existent at all; is responsible for giving rise to this scenario. For obvious reasons, any item that makes a sale more than 500 times a day will eventually crush the ground and so the existence of a poor margin should certainly not be taken as a surprise.

Problem #4 When restaurant operators order inventory manually, and when those orders are received manually as well, a lot of problems are generated by the use of the conventional pen and paper. It makes the comparison of orders and invoices to respective underlying approved contracts tremendously difficult. This makes several companies bypass this step altogether. One of the leading causes of losing cash is contract noncompliance. This factor is also responsible for the wastage of the manager’s precious time almost daily. This is why it is necessary that the same data is not entered twice in order to reduce errors dramatically. For instance, it should be made a strictly followed rule that the orders are not placed through a vendor phone or even through fax or a website. Another rule that should be followed is that all details regarding an order are entered in a system at the back hand of the office.

Problem #5 Submitting feedback is not a convenient process in many outlets. In order to rectify this problem, an easier and centralized system should be established. This will bring a lot of improvement in the arena of food delivery as well as increase the quality of food.


Problem #6 Manually maintaining information regarding nutrients and allergens is a very tedious task to say the least. Integrated supply chain management has the solutions to all the above listed problems. It has not only helped to rectify these problems but also, in accomplishing the prime purpose of your business: bringing in lots of profits. According to past performances, management systems such as eRestaurant has resulted in savings of around 1-5%.

Business Plan

Let us take an example to clearly elucidate upon the profits of the integrated supply chain management. Let us suppose that a company makes 50 million dollars annum with manual mechanisms. If, however, an integrated management software is installed for the management of its supply chain, the savings of this company will amount to $500k to $2 million, or may be even higher than that.


The pre-requisites of a Supply Chain Management Software If your software has the following functions and features, you will be able to generate substantial profits and savings. These are also the key solutions to all the aforementioned problems. An integrated supply chain management system is essentially composed of: 1. Menu engineering functions- This is required for recipe remodeling. It is here that the effects of substitutions, price changes of ingredients and also, the usage amount can be accurately predicted. For optimum profits, the various aspects of a recipe from conception to production should be carefully analyzed before roll out. This step is of pivotal importance in order to eliminate expensive trial and error. 2. Precise forecasting tools – These should be able to facilitate the delivery of the right amount of inventory at the right point of time and should also allow for the easy incorporation of adjustments for factors such as LOTs, holidays, various events and weather. These forecasts should also be linked to labor scheduling and these tools will make the forecasts specified by sales dollars, dine in vs. take out, guest counts and several other elements. This increased amount of flexibility is synonymous to accuracy which ultimately means a lot of profits. 3. Vendor bid analysis – This feature allows for the convenient comparison of ‘normalized’ costs (a process by which the costs of all given commodities are converted to a universal unit e,g. per case or per pound) for all given items in multiple vendors and markets. This move ensures the birth of competition in terms of price at all locations, a feat that is virtually impossible for restaurants that do not have a supply chain management software. 4. Optimized ordering – The software should allow for end to end ordering that is electronically carried out. In addition, it should be able to make the generation of suggested orders with 100% accuracy and should rely on sophisticated forecasts in order to do so. This maneuver will reduce costs and save a lot of time.


• The system should also be capable of generating automated alerts whenever a high order quantity, that exceeds order range, is entered. This move will help your business in avoiding drastic and lethal mistakes. It is always best to enter a given order only once. Entering it in both your back office system and also on the vendor’s website will result in unnecessary confusion and hassles. The system, therefore, must provide for minimal substitutions along with a single point for the entry of data. The fix should allow for visibility into the basic level of inventory. 5. Inaccuracies are to be noted- When it comes to noting down information, all the inaccuracies in terms of quantities are to be entered in the system. This move will save a proportion of the manager’s time per delivery. Profits can be gained by the ability of the software to juggle many tasks at the same time e.g. receiving the order, registering the electronic invoice and developing the physical receipts for items. The advantages are great across the enterprise. 6. Centralized order guidance- The presence of these at the corporate level is necessary for vendors. This is because it is through this system that a limit can be placed on orders that are made by the restaurants. This limit can also be applied to the source with whom the order is being placed by the restaurants. The effectiveness of this move at the prevention of rogue expenditure at non-negotiated pricing. Apart from this move, the system should also make possible the implementation of contract compliance amongst vendors. 7. Tracking of manufacturer’s LOTs- This should be carried out from the very initial step of the purchase of a given item right through to its usage. This feature will clear the way for quick response to recalls and countless other food safety concerns. This will ensure the protection of both the consumer as well as the customer. 8. Centralized score-carding for vendors- This should be made possible for all vendors with the help of a centralized database which will record and share information quickly between the corporate office and the restaurants. This move will also amplify the visibility of damaged goods reports; fill ratios and also, the quality of the service of the delivery people. What this motion will help prevent is wastage of money and time. It will also help the enterprise avoid those inefficient vendors and will make sure that accountability reigns supreme throughout the system.


9. Automated credit alerts- It should be a prime feature of the software that it is capable of the generation of automated credit alerts at a time when invoice prices exceed the contracted price. This will provide for automatic loss recovery. More than the recovery of lost costs, it provides for such foolproof efficiency that losses are very rare to begin with. Additionally, accuracy in the inventory costs is also heightened as a result. Ultimately, what you are able to deliver to your happy customers is better food quality, with extra savings for your business. A number of times, it so happens, that the opportunity to reap in great profits is nullified as a result of various factors. Elements such as multiple vendors, numerous purchasing agents, wide range of goods, several restaurant locations and oft-repeated maneuvers during the various processes of the business amongst other reasons; make you lose potential financial gains. It is a pivotal function of the various helpful tools of supply chain management that makes it possible for you to make huge profits by nullifying or greatly reducing any chances of inaccuracies. These mistakes can happen at any given time from the placement of an order or at the time when vendor bid comparisons are drawn. It is easier to ensure the enforcement of accountability and business rules, allow substantial visibility into the intricacies of the supply chain process and eventually making sure that the business saves up on a lot of money and time during the entire course of the process. The software also addresses all hindrances by providing the restaurants with a passage into the development of exact business rules centrally. Additionally, these rules will be enforced by the software uniformly throughout the enterprise. Generally speaking, however, cost solutions are individually designed according to the specific needs of the restaurant in question. For instance, it would not be considered a good idea to use the same ideas that you have utilized for a casual dining restaurant to an eatery with a quick-serve motto. The reason for this disparity is that there is increased room for inventory and the number of weekly deliveries is comparatively less as that of the latter. Whereas a prominent feature of quick-serve restaurants is that they are driven by volume and the cooler/freezer space is quite restricted.


chapter 3

The Management of Your Restaurant’s Supply Chain Because knowing where your food comes from is of pivotal importance.


Quality and food safety are the primary aims that every restaurant focuses on despite the fact that cost reductions are an important factor in determining the success of the eatery in question. This is because the consequences of food-borne diseases are often more expensive as compared to the precautionary measures that are pivotal in the prevention of these ailments. Also, once ensured that the food being served is safe for human consumption, a tremendous amount of monetary losses are prevented that become inevitable as a result if product recalls. Thus, this is the reason why food chains and restaurants across the world are proactive when it comes to the exploration as well as the creation of new ways and higher safety standards along all the numerous steps of supply chain. Given the devastating scenario of the recent few years, which featured back to back incidences of the negligence of food safety standards by some individuals of supply chain, massive losses have been incurred on quite a few well-known names in the industry. The reason for this being that some of the farmers or the food processors gave up on keeping a vigilant eye on the quality of the food items. This compromised the standards of the food articles to quite an extent resulting in terrible repercussions for those restaurants. Being extra careful about the safety standards of your food is of pivotal importance so as to prevent the occurrence of food poisoning and similar other


conditions which can turn lethal in some cases as well. For a restaurant owner who has suffered such a calamity, it could mean the end of business for him. This is why the best precaution is to know the source of your food and how it is being produced so as to avoid the occurrence of any untoward incident. Having an in-depth insight into the various happenings of supply chain is immensely important as it gives you a clear idea as to what is going on within the business. This will enhance your capability of making good decisions as well. But for this maneuver to be effective, it is mandatory that you have a keen eye on the functions of every single component of your supply chain, beginning from the growers and the suppliers all the way to the distribution centers as well as the stores. All these objectives can be easily achieved when you make data available to all the components of your supply chain equally as well as instantly. Take the example of walking through a dark tunnel that you know is straight. Regardless of the knowledge about the lack of twists and turns in the passage, you will find it to be quite a task walking through the dark tunnel. But if you turn on the lights, you will find that there is absolutely no hindrance when it comes to traversing the said passage. In this scenario, not only would you be able to precisely know where you stand and where you are headed but also, all the partners in the journey will have a clear overview of the happenings all around them. The same is the case with supply chain management. If all partners are well acquainted with the progress that is being made in terms of the business, they will be able to contribute more efficiently and bring in bigger profits.

The Various Intricacies of Food Supply Chain As you go through the various steps and processes that are involved in a given food supply chain, you will find out that it can become quite complicated as it grows. The entire pathway from the farm to the restaurant table consists of a range of mechanisms that are quite difficult to keep track of. To provide you with a clear understanding of the mechanisms involved in the entire pathway, the following citations will prove to be of immense help:


Ø Food items are transported from the care of the farmer to the restaurant where they are served to the customer. Ø Edible articles are conveyed from the farmer to the food processor. From here, they are they are sent onto the restaurant where they are presented to the client. Ø The final pathway is where the farmer sends the edible articles to the food processor, who relays them to the food distributors or the warehouse from where these goods are relayed onto the restaurant Finally, you get your desired business by serving it to the client. By all means, it goes without saying that quite a lot of the processes involved in the chain have been omitted in the above citations. Moreover, a majority of the restaurants have a heavy reliance on using propriety ingredients as well as require franchisees which are yet another link in the network of food supply chain. The addition of any link at any given point in the supply chain adds more likelihood of potential risk factors and compromises on the safety standards of the food items involved as more hands are added to the manufacturing process before the food reaches the consumer. The management of compliance will be a factor that the restaurants will have to carry out in accordance with the requirements of the business as the trend towards local sourcing spreads; regardless of whether the restaurants are dealing with growers directly or vetting coops as well as the distributors who bring in their own preferred set of requirements and standards. When it comes to an efficient supply chain, the supplier is able to deliver such a product that comes with a long shelf life and is able to come up with the creation of as product that makes the consumers feel content. This is how the supplier will ensure that he keeps getting good business. Hence, it comes as no surprise that supply chain management is the primary means through which the owner of a restaurant can enhance the quality of his goods as well as ensure methods that will increase the safety of the concerned goods. Also, the owner is able to reduce the costs as well in due course. Both of these factors seem to be quite the opposite and this is just one of the peculiar features of the food industry.


No matter how many hands are involved in the process, it is the sole responsibility of the restaurant that the served food items are safe to eat. Any resultant case of food poisoning because of compromise on the quality of the edible items is enough to tarnish the name of the restaurant in question, be it an isolated event even. Moreover, once the case has occurred, it would now be a concern for the authorities to find out the point of actual contamination. In order to avert the happening of such an event, there are quite a few methods that the restaurant can employ: Checking the supplier’s background- It is a well known fact that the regulation of all food suppliers is carried out by either the USDA or the FDA. Also, the inspections out by these bodies are periodically carried out. An ideal way to check your supplier’s background is that you can check the supplier’s concerned local health department and find out whether they are in compliance or not. Another element that should be checked simultaneously is whether your supplier has the HACCP certification or not. This parameter refers to the fact that your supplier employs vigilant record keeping methods and follows healthy food safety practices. Carrying out the inspection of all food shipments- This is, perhaps, the best way to make sure that not a single contaminated item enters your restaurant’s kitchen. Strict inspection, of every item that comes to your restaurant, will reveal any potential threats to your business and will help you make sure that you are not faced with any hindrances while running your business. The parameters of accepting or rejecting seafood, poultry and fresh meatOver the last couple of years, food operator services have changed the way they function and have become increasingly proactive in the way they handle cold food. A vast majority of restaurants have a routine of running temperature checks. This is carried out for both core and ambient elements for every food item that is kept in a refrigerated environment.


It is also becoming a norm these days that the managers are required to produce a log that signifies the conductance of regular temperature checks. Although the trend has changed to quite an extent, there are a few distributors who do not abide by accuracy when it comes to conducting these temperature tests. If you have a hint of anything untoward, the following factors will help you in making the right decision as to whether you should accept or reject the said meat: ü The employment of a blast chiller comes in handy when a reduction in the food item is your motive. The process, thus becomes faster and more efficient, and also brings about an overwhelming reduction in minimizing the time that the edible items are supposed to spend in the danger zone. ü You may also keep the food item in a container and then set it in an ice-bath. Submersion of the container in an even manner is advised to keep the temperature low throughout. ü You should also place the food items inside a commercial refrigeration unit whose main objective is to store the food items either at 40°F or below. ü The utilization of a probe thermometer also commands pivotal importance in the determination of accurate temperatures during the course of reduction in the meat’s core temperature.


A general indication regarding the quality of the meat can easily be given by the color of the meat. In case you are dealing with fresh beef, lamb or pork and you see that the meat is of bright cherry, bright red and pink with edges of white fat respectively, then the given meat is ready to be accepted and utilized in your restaurant. However, for all the three meats listed above in that order, if you find that the color features brown, green purple, black or white splotches, then the food should not be accepted at any cost. Additional factors that should render the food rejected; is if the cartons are not sealed properly and if you find that the wrappers are either dirty or torn. In case of fresh poultry, only accept meat that is firm and possesses the tendency to spring back at the slightest touch. If you find that the meat has an odor with the texture of the meat being sticky as well as being flabby and possesses purple or green discoloration, then do not accept this meat. When it comes to fresh fish, the indicator of freshness is bright and clear eyes with the meat possessing fleshy texture and the product is packed in layers of self-draining ice. If, however, you find that the fish hat has been supplied to you possesses foul odor and the eyes as well as the gills are dry and sunken with your finger imprint staying on the flesh of the fish once pressed, then all these factors are clear indicators that you should reject this fish and promptly order new meat, as needed. Clear indications regarding the freshness of shell fish are also easy to recognize. If you see that the shells of all the fish are closed and that the shells are firm; then acceptance of such meat is safe. If, however, you find that the shells of the shell fish do not snap shut when closed and give off an offensive odor with a remarkably soft shell, then reject this order promptly. All the above cited conditions are for meat kept at or below 40*F. Being updated about all food recalls- It is the duty of both the FDA and USDA to send out periodic updates regarding all kinds of product


updates. It enjoins upon various restaurant owners to receive various kinds of product recalls from the sites of both the authorities. This is an effective way that catches all kinds of potential hazards that might reach your customer’s plate and incur devastating problems on your business. Reach out to the producer directly- Evidently enough and as mentioned previously, the higher the number of hands involved during the production as well as the delivery process, the higher the risk of contamination. Without a doubt, the best and the most effective way is to go down to the producer directly and making the purchase yourself. The elimination of the middle man will reduce many potential risks that may become the biggest reason of the destruction of your business. It is pivotal to remember at every step of your business that not everyone is as careful as you will be and that not everyone takes the ownership of their work as a responsible restaurant owner would do. Also, consider the fact that if the supply chain of your restaurant is comprised of only two elements i.e. your eatery and the farmer, then the risk of a potential health hazard is greatly reduced, almost to the point of non-existence. Additionally, if a case of food poisoning does occur even after the minimalistic approach to the formation of your supply chain, you may still be able to trace the source of the contamination quite easily thereby reducing the risks of complete shut down as well as the implementation of the absolute prevention of any sort of infections is ensured. The development of good relations with your suppliers as well as the distributors is the key feature that ensures that the restaurant is running smoothly. This is the element that is most sought after by the supply chain executives of successful restaurants. Becoming a full-fledged business now, the individuals working in supply chain management are the backbone of the entire industry and can no longer be regarded merely as the purchasing parties that will buy and deliver articles from one point to another. In today’s times, you must have all the necessary requirements of your business delivered at the right spot in a timely manner by the establishment of the restaurant itself. It is now a widely recognized fact that an effective supply chain management is imperative to the success of a restaurant business. It has now become a requirement of the highest order to attend to the increment in food, the location of the source of all the ingredients as well as the traceability of all products that are utilized in the business. Alongside all these factors, the


assurance that quality will be provided at every step, in every edible item is also of monumental significance in determining the success or failure of the business. Strategic suppliers also play an immensely important role in furnishing the restaurant operators with the best of products. It is important for the business to be on a lookout for all the events that bring costs down. Effective communication –plays a massive role in determining whether the business will grow or will be reduced to states of stagnation. In order to prevent any untoward happening, it is necessary that all the partners and the components of the supply chain understand each other and are given a fair share of insight into the functionality of the enterprise as a whole. It has also been suggested by numerous experts of this field that being outspoken and voicing their opinions should be widely encouraged amongst all the individuals who work in the supply chain. Voicing their concerns to their authorities will give them a better sense of achievement and significance in the entire chain of hierarchy. This is so because the prices of several commodities have risen so high that it has created an environment of distrust amongst the various elements of the enterprise. The experts also point out the significance of the opinions of supply chain executives in terms of menu planning. It goes without saying that all the factors of supply chain management should have an impactful say in the workings of the enterprise.


chapter 4 SOLUTIONS

Ways in which you can improve your Supply Chain 26

Using multiple vendors It is pivotal for restaurants to control food costs. One way to do so is to employ strategic purchasing programs. The case with successfully running a restaurant SCM is the same as with other businesses. You should have more than one supplier as well as vendor to ensure that the supply of your products is smooth and steady. It is mandatory to have contact with a variety of suppliers and vendors to make sure you encounter no hiccups during the course of your business. This is an effective way to make sure that you keep maintaining profit margins without having to increase the prices. It so happens that prices of various commodities in the market change without prior warning. This is one of the primary reasons that the bestlaid purchasing plans are disrupted. Nonetheless, to combat such a situation, efficient supply chain management formulas will compensate for both short and long term changes in all supply costs.

How to manage your inventory One way through which you may decrease the amount of wastage produced by your restaurant is through ensure that you only order items that are required by the business. This is a challenging step, but once mastered it will prove to be immensely fruitful for your business. It is crucial for restaurants to be vigilant about the various functions of their inventory for them to accurately anticipate food costs and to manage them. With the passage of time, tracking inventory records in a digital manner is fast becoming the standard. Restaurants have also started to use the integration of sophisticated software along with the utilization of mobile devices both for servers as well as restaurant managers. Also, it will be helpful for your business to know precisely when you need to buy a certain food article and how much quantity will be required by the business collectively. This knowledge will save you from a lot of hassles caused by sudden increases in food costs.


Specialties are important Every business has their own tools that they use to distinguish themselves from the other constituents of the business. This is where the role of specialty courses comes in. But this does not necessarily mean that you should add up price to make your food item appealing. What it does mean is that just adding prime rib to your menu will not make your restaurant stand out. The specialty shouldn’t be priced to high, nor can it be a run-of-the-mill dish. Also, you do not have to pile up on expensive ingredients to generate a substantial food cost to profit margin ratio. You can also try to push all low cost-cost products in a considerably high volume. You may also want to move cheaper products with decreased built-in overhead with the help of daily specials as well as LTOs (Limited Time Offers).

How having good communication helps With tremendous technological advancements in the field of information technology, several companies have now become capable of sharing two very critical points with all of their suppliers: one of them is the actual customer demand whereas the other one is a measure of the amount of inventory on hand. This POS (Point Of Sale) offers pivotal significance in triggering the order of inventory. Additionally, if the suppliers have access to the POS data of the company, a clear understanding as well as anticipation of when the customer is more likely to place an order can be estimated with tremendous accuracy. This is possible even before the customer actually places the order. This is so


because the bar coding in the inventory is responsible for facilitating constant monitoring of the entire scenario throughout the various components of supply chain. Also, various concepts such as the CPFR (Collaborative Planning, Forecast and Replenishment) also strive to augment supply chain integration by amplifying the visibility of the actual demand at every single point throughout the supply chain.

The management of the outsource inventory With the passage of time, an ever growing number of companies are now making it a point to put the responsibility of managing their inventory on the suppliers. This maneuver is widely termed as Vendor Managed Inventory (VMI) and is fast becoming quite the norm for some of the major retailers of the industry. This is how it works. Some shelf space is provided by a major retailer in a store to a supplier. Since the supplier already has the retailer’s POS data, restocking all the necessary articles is easy. In fact, it can be done without even needing the direct involvement of the retailer. This saves the precious time of the retailer as well as his valuable finances. However, it is mandatory that trust is bestowed upon the supplier if VMI is expected to work efficiently. The company must provide the supplier with all the essential POS data so that the business can function efficiently. In certain special cases, the supplier is also supposed to supply competitor retailers. This is especially true for areas of retail. This could be the reason that details regarding your business are inadvertently provided to your competitors by the supplier. Hence for a sound relationship to exist between you and the supplier, trust and integrity are the two vital components that you should rely on. Moreover, you should be certain of the fact that your supplier is properly acquainted with how to manage your inventory efficiently. Also, it is necessary that your supplier has the skills to perform all the technical obligations of the job as well.


Another aspect that you should take care of is that the computer programs that both of the components use i.e. you as well as your respective supplier, should be in complete accordance with each other as compatibility will ensure that you are able to achieve the success that you look for. It is only through this measure that the proper execution of the VMI will be able to take place.

Simplification of the chain by the consolidation of shipments The process of managing supply chain can take a turn from being relatively simple to quite complex within a short span of time. And this is precisely why many companies prefer to cut down the number of suppliers that they utilize. For instance, let’s take into consideration the heavy reliance of a restaurant upon the services of food distributors. It is for precisely this reason that a small burger joint just down your street needs several articles in order to put together a decent meal for its customers. In case the restaurant in question uses different suppliers to get each article of need, then the amount of unnecessary traffic at the site of the burger joint is best left to your imagination. Thus, to summarize, the restaurant’s supply chain is the focal point where all the various factors of the business meet to give rise to a smooth and productive business. All in all, the meat providers, vegetable suppliers, as well as the bread


and condiment suppliers will all contact the supply chain management of your restaurant in order to get their goods delivered and get their payment. Even the paper good supplier has to contact supply chain management to conduct their business with you. Because of these reasons, and more, supply chain management is considered the backbone of enterprises such as yours. It is also important to know that many businesses have such supply chains that no longer rely on a wide number of suppliers and their respective specialty support. Now many all-in-one supply chains have emerged that can perform all the functions that are necessary to run a profitable business. These have greatly simplified the process of material management for many restaurants. Let’s call this category of suppliers tier one for the purpose of simplification. Tier one purchase various goods from the core suppliers (name them tier 2). These goods are later delivered on to the restaurants to cater to their needs. It is very helpful to reduce the complexity of the supply chain so as to ease the burden of stockpiling various ingredients and supplies on the management of the restaurant. This means that there will be fewer trucks making trips to your restaurant and you will be able to avoid a lot of unwanted traffic and maintenance of records. With traffic congestion and the number of goods delivered at your restaurant reduced to a considerable extent, you will be able to have enhanced visibility and undivided attention towards the actual aspects of your business that will yield you profits. Yet another method for the simplification of the way supply chain works is by cross-docking. This brings down the inventory levels f the company and minimizes the need for warehouse space. Cross-docking is, by far, the most effective approach of logistics networking and is very effective at minimizing the costs of warehousing and bring about a reduction in the inventory. This is a very well known process for big


retailers as well as successful grocery store chains. There is a specialized dock for keeping all the goods that are transported by incoming trucks. Here the trucks are parked until the inventory is off loaded. But instead of placing all these goods inside the storage warehouse, these are put directly onto the firm’s truck or that of the supplier which will deliver all the goods to the facility directly. This is how the end delivery truck will end up getting goods from various suppliers. Cross docking also reduces the traffic of pipeline inventory and also diminishes the need for any warehouse space. It functions in ways that are quite similar to that of the simplified supply chain where all the various parties join together at the focal point of supply chain management. But one aspect where cross docking overtakes the simplified supply chain is that it does not give the direct control of the entire supply chain in the hands of an all-in-one supplier which acts as a middle man of sorts. Instead, the Original Equipment Manufacturer (OEM) is in charge of all the control.


chapter 5

Paying attention to the buyer’s needs 33

Some restaurants have started leveraging supply chain in order to attract more customers. This move is especially helpful in reigning in the younger generation which is prone to have sustainability issues. You will see McDonald’s celebrating their suppliers in their ad campaigns and Chipotle relying on in-store menus to gain momentum in the market. The impression left by these considerations is quite noticeable. Leveraging supply chain, hence, is an effective marketing tool that you can utilize to your advantage. This clearly points to the situation that restaurants these days have a better understanding of what goes inside the minds of the customers. One of the primary deciding factors for restaurants is of course, the cost of the products involved. But in special cases, restaurants are apparently willing to pay for the additional costs that will guarantee them quality. A good example for this case is that of Chipotle Mexican Grill. This chain buys food at an increased price and therefore chooses to charge its customers a higher rate. This stance is uncontested by the customers since they know that unparalleled quality is being delivered to them. Also, Chipotle has plans to source around more than 10 million pounds of produce that has been obtained locally- this includes a variety of articles such as bell peppers, red onions, oregano, romaine lettuce and jalapenos - which were worth 5 million pounds just two years ago. As a result of this program, food is procured from farms that are located within 350 miles of the restaurants where they will be served. Fresher products and considerably reduced transportation charges are the two major benefits that Chipotle receives as a result even if the enterprise has to sacrifice in terms of economies of scale. So the nest time that you try to pick out vendors for your enterprise, do not make your choice based purely on the price that you have to pay. Without a doubt, trying to find the right balance between quality and price will work best for your restaurant. It is also necessary to remember that what might work for one firm might not always be the success formula for the other.


chapter 6

Some Common Problems and their Solutions 35

It is a constant job for operators to keep looking for trustworthy food suppliers if they are interested in getting better and new products for their restaurants. Recent news about stolen meat that reached different restaurants causes bitter resentment in the market. It is also quite extraordinary that operators attempt such monumental risks and put their businesses at risk. Moreover, it puts the safety of the customers on the line as well. This is what misguided trust in the capabilities of questionable suppliers will lead to. When you begin to count on the same people that you rely on to bring in cost reductions, the scenario presents with a hard to miss opportunity to cash in on. This may also put the supplier in a position where they have to choose between two crucial things: either to stay in for the short term benefits by taking the opportunity to utilize an article that might have fallen off the delivery trucks or choose to stand by their principles and do the right thing of tracing the sources of the perishable items and return them back to their owners. There are many operators that will never choose to entertain any kind of offers that require purchasing questionable products. Nonetheless, there are major risks involved with the sources of the various food supplies that are bought by the restaurant. Any operator who has had to deal with E.coli will narrate tales of such agony that you would never want to compromise to the slightest degree when it comes to the source of your food items. Hence, the location and carrying out sustained business with a trustworthy supplier is a job that has no end and if carried out properly, will only yield positive results for the reputation of your business and make it grow. This is the primary reason that you should never give up looking for newer suppliers. The search for better and quicker suppliers should never cease. This will also make sure that your restaurant keeps gaining momentum and stays a fresh in the market for as long as you wish to continue your business. The case is the same for current products even. While you evaluate current products, always be watchful for a supplier that can deliver you the exact items that you are looking for. It is also good to have a safety net of sorts to avoid any loopholes and potential threats. So in cases of discontinuation of the supply of goods or the sudden termination of contracts or in any untoward situation, you will always have another vendor ready that you can resort to and keep your stockpiles of goods replenished.


Also make it a point to look for a sound company when you are going through your referrals for new vendors. This company should also have an excellent record for delivering quality every time it conducts business with you. Looking for companies that are vertically integrated is very helpful. This is particularly true for meat providers which are responsible for controlling their product throughout the various steps of the process. Using the following set of criteria to evaluate the nature of your supplier will help you tremendously in carrying out smooth performance and bringing in steady profits for your restaurants. Find out the total number of years that your supplier has been in business prior to conducting business with you. Check whether they have ever worked with quick-service restaurants or not. Make sure that you ask for samples before signing a official deal and lastly, make it a point to get detailed internal feedback from your product development department. This step is of high importance before actually placing your product in front of your customer and making the wrong move in the market. For obvious reasons, price considerations are supposed to be put ahead of everything else. This strategy should be used every time that you look for a new supplier. Sometimes it so happens that as the suppliers get comfortable with your business with the passage of time, their prices tend to go higher than the initially quoted figures. You should also keep in mind that you do not end up conducting business with a supplier that has been in financial troubles for more than once during the course of their career. This is a wrong move if you choose to do so. When it comes to business, you simply cannot take a risk of that proportion. Establishing business ties with a firm that will not be able to provide items of your need for your restaurant is a move that will deteriorate and tarnish the reputation and the name of your enterprise. It is also advisable that you avoid all forms of correspondence that rely on emails and fax. It is always better to keep the doors of healthy communication open and make sure that you communicate with the suppliers verbally. This move will make sure that there are no misunderstandings between the two sides and your business will not be compromised as a result.


Afterword The importance of an efficient supply chain management cannot be emphasized upon more than stating that it is the axis around which your business revolves. By maintaining a healthy supply chain management, you can ensure that your business remains profitable and successful. The most efficient approach to achieving this is through a supply chain management software. Visit for a comprehensive restaurant management software that includes managing supply chain.