In an industry that is increasingly more complex, more competitive and facing inflationary pressures, chain restaurant leaders are looking at the potential impact that their supply chain groups can have in achieving the next level of success largely by transitioning from procurement agents to strategic leadership positions.
A recent State of the Restaurant Supply Chain study conducted by HAVI Global Solutions and Technomic found that outside of a handful of “supply chain leaders” that have already made this organizational shift, most chain restaurants are in varying stages of evolution. While many chains reported that their supply chain organizations were in some form of a formal transition, the speed and urgency of real change is tempered by the need to support immediate business priorities. Most chains agree that effective change has been achieved in an evolutionary manner.
Supply Chain Organizations are in Transition
The reality is that cost management and stable supply of quality product are still consistently among the top strategic objectives regardless of the size of the organization, the degree of supply chain complexity or the maturity level of the supply chain function. Beyond these two core drivers, organizations report a wide spectrum of priorities driving their focus:
A Few Supply Chain Leaders Have Emerged
The truly world-class restaurant supply chains work within a collaborative business planning framework to deliver competitive advantages. A crucial learning from these chains, the “supply chain leaders” in the study, is that they all began their journey by formally making Supply Chain a strategic function within their respective organizations. Following are a few characteristics and capabilities that such organizations share:
All chains agree that managing cost inflation and commodity price volatility are big challenges facing the industry. The leaders, however, realize that this has to be achieved while delivering innovation and better quality. They are focused on making supply chain a partner in business planning as opposed to merely negotiating the best price.
Leading chains are also building processes and leveraging technology to get near real-time visibility across their entire supply chain—manufacturer to store—along with POS data. With this data they are able to move from running the business assuming everything operates as an ‘average store’ to running the business with better plans driven from restaurant-level information, and forecasting at the restaurant level.
In the most advanced organizations, Supply Chain is getting involved sooner in the ideation, experimentation and sourcing processes so they can add more value. They own the demand and supply plans with strategic guidance from Marketing and R&D and drive a cross-organizational plan review and refinement process. They have seen that partnering reduces execution failures related to inventory management, wasted and obsolete inventory and franchisee disillusionment with corporate guidelines. The State of the Restaurant Supply Chain study suggests that developing and executing against a roadmap of initiatives based on organizations’ highest priorities will help demonstrate progress while building support for future initiatives.
Please note that this commentary was originally published as a Technomic Viewpoint co-authored by:
Sandeep Malhotra brings over 10 years management consulting experience to Technomic where he is responsible for professional service engagements for foodservice suppliers and operators focused on operating systems, concept/menu development, supply chain and procurement strategy, and marketing strategy and planning. He is also co-owner of Marigold Restaurant, an award-winning independent full-service restaurant in Chicago.
Jim Woods is the Executive Vice President of Analytics & Supply Chain Services for HAVI Global Solutions (HGS), where he leads the business unit that provides managed services for supply chain integration and business analytics. Under Jim’s leadership, HGS has developed a Supply Chain Integration platform, utilizing POS and key supply chain and marketing data to drive retail replenishment, inventory planning and analytics.