Webinar Notes: On the Menu: Advanced Sourcing for Restaurant Supply Chains

This week’s featured event was presented by CombineNet and looked inside the operations of regional and national restaurant chains. The event is available on demand, as is an accompanying case study.

The success of restaurant chains is tied directly to their ability to provide consistency, traceability, and efficiency throughout their locations. This effort is complicated by mixed ownership models, combining corporate-owned and franchised locations with the role of third party or consortia purchasing activity. Failures in the restaurant supply chain bring risks beyond disruption, and when something goes wrong it tends to be publicized spectacularly.

There are four main restaurant supply chain challenges CombineNet addressed in the webinar, all of which apply to a number of organizational models, including quick service (take-out), casual, fast casual, co-ops, holding companies, and food service companies. The need to manage costs is driven by a model similar to the retail industry, where margins are low as are individual transaction values. According to the National Restaurant Association’s National Restaurant Association’s Fast Casual Industry Council, the average check is between $8 and $15 but customers still expect quality ingredients and upscale décor.

1. Food cost pressure – with these ‘direct’ spend categories, cost modeling is they key, and the more granular the data is the better. As companies face variable costs with raw materials such as corn, they must manage variability that would be negatively perceived by customers.
2. Logistics – time and temperature sensitivity require that restaurant supplies move fast but economically. Best practices include looking at supplier capacity on multiple levels, considering their capabilities across product type (chicken) as well as process (grilled and sliced or cubed v. breaded)
3. Global v. Regional strategy – aggregating spend across locations and operations provides a cost advantage but companies should not pursue this approach at the expense of preferences or advantages associated with local suppliers. A solutions approach to striking this balance aggregates as much data as possible while still supporting granular scenario and award analysis.
4. Strategic contracting – another balance to be struck in a restaurant supply chain is between long-term supplier relationships and the agility that is necessary for innovation to take place. Capturing the value behind this decision requires insight into the non-cost based components of a bid, including capacity advantages, contract terms, and alternate item proposals.

We also took the opportunity to ask a few advance questions of CombineNet, so if you are interested in more on food safety, applied big data, or the opportunities represented by optimizing product, packaging, and transportation, read our recent interview with Vice President of Marketing Jennifer Sikora.