Restaurant Supply Chain Strategy with 7 Best Practices

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Managing your restaurant’s supply chain is challenging — many fail to satisfy customers’ needs for reasons such as poor supply chain management. Meanwhile, 79% of companies with effective supply chain management systems are experiencing higher revenue growth than non-adopters.

Strong restaurant supply chain management lets you focus more on what your customers want instead of worrying about inventory levels. However, developing an effective strategy is complicated because even one error can lead to chaos in the whole system.

But don’t worry! In this article, we talk about a restaurant’s supply chain management in detail and mention a few best practices you can follow to elevate your restaurant’s supply chain strategy. Read along!

What is Restaurant Supply Chain Management?

The supply chain management (SCM) process involves the flow of goods and services. It begins with procuring raw materials and ends with delivering the completed product to the consumer.

Similarly, a restaurant’s SCM involves various activities, from identifying and negotiating with suppliers to managing inventory, logistics, and food safety.

A restaurant’s supply chain example would be sourcing raw materials from reputable vendors, transporting and managing them properly, turning them into complete dishes, and delivering them to the customers, whether as take-out or eat-in.

Key Components of the Restaurant Supply Chain

A successful restaurant supply chain management system must have the following six components:

Sourcing: It is the process of locating and acquiring raw materials and commodities.

Manufacturing: It is the process of producing or converting raw materials into complete dishes ready to serve customers.

Distribution: It is the process of getting the dishes to customers on time.

Inventory control: It is the process that helps you keep track of raw materials, ingredients, and supplies.

Customer Service: It is the process of providing outstanding service to customers.

Transportation: Moving things such as raw materials and ingredients from one point to another.

Challenges in the Restaurant Supply Chain

The key challenges that most restaurants face in managing their supply chain are:

Labor Shortages: A shortage of qualified labor can make it challenging to handle inventory, leading to poor service quality. It can also lead to higher labor costs and longer product delivery times.

Cost Control: Restaurants must find high-quality ingredients and supplies within budget. To do this, they must competitively source high-quality materials and supplies while minimizing transportation and logistical costs. Another difficulty is the fluctuating cost of components due to seasonal and worldwide market patterns.

Quality Control: Restaurants must guarantee their items are safe and fresh and fulfill quality requirements to avoid bad customer experiences, reputational harm, and legal difficulties. For this, you must employ a thorough supplier vetting and communication procedure.

Supply Chain and Inventory Management

Inventory management is an essential part of the supply chain. It assists you in keeping your clients satisfied and your kitchen working efficiently.

The inventory management process involves keeping track of the amount of raw materials, fresh ingredients, and other supplies you have on hand. It influences your purchasing and demand decisions by helping you accurately predict when you’ll run out of items and need to reorder.

According to a study, 87% of businesses can lower their inventory and related costs by 22% if they have better visibility over supply chain. Also, it’s easier to order what you need when you make purchasing judgments based on data and realistic estimates.

Importance of Restaurant Supply Chain Management

An effective restaurant supply chain management can reduce the cost of goods and services. It allows you to negotiate better terms with suppliers, reducing waste, and improving inventory management.

Some other reasons why having a restaurant SCM is important are:

Improve quality: It can help you identify and build relationships with reputable suppliers, ensuring that your restaurant receives high-quality ingredients and supplies.

Reduce risk: By collaborating closely with vendors and developing contingency plans, you can reduce the risks associated with the supply chain, such as shortage of labor or traffic delays.

Enhance customer satisfaction: It ensures that you consistently deliver high-quality food to your customers on time, enhancing their experience. This will also lead to them returning more frequently, recommending the restaurant to others, and contributing to a positive brand reputation.

7 Best Practices for to Improve Restaurant Supply Chain Management

You should be able to respond swiftly to changing market trends and consumer preferences, ensuring that popular items on your menu are always available. For example, more and more customers are looking for organic food options recently. So, your supply chain should be robust enough to adapt to this changing customer preference.

However, to ensure this, you need to have an efficient supply chain that reduces overhead costs and increases customer experience. Here are seven restaurant supply chain solutions that can help you do just that.

1. Review Your Vendors’ Prices and Value

Along with working with trustworthy vendors, it’s also necessary to consistently reevaluate your relationship and the value the vendor brings to your restaurant.

Here are some questions you might ask when reviewing your vendors:

Are my requirements the same as when I began the contract?

Has my provider given me what I requested?

Is the service I’ve received satisfactory?

Is there anything I’m not happy with, and why?

Also, focus on more than just price when choosing vendors for your restaurant. This is because lower prices may signal lower product or labor quality. Instead, prioritize vendors who help meet your needs and are willing to be open and honest about their inventory schedules and updates.

You can start by asking them for updates on:

Amount of stock available and whether there is a shortage

When quality is being compromised

When they have internal problems, such as a shortage of drivers or trucks that may impact delivery time,

2. Track Inventory Before Running Promotions

Make sure that you have enough inventory to meet high demands before you plan on running promotional campaigns. This is because if you have to deny a customer an item they want due to insufficient supply, it will leave a bad taste in their mouth.

For example, you might offer a combo deal of burgers, fries, and Pepsi but run out of Pepsi cans. This means that you would have to say no to the customer, which might lead to them leaving negative reviews of your restaurant.

To avoid this, discuss your requirements, such as the number and quality of ingredients, with your vendors beforehand. This way, you can always postpone your campaign if you don’t have enough inventory.

3. Forecast Demand Accurately

Accurate demand forecasting is crucial for maintaining optimal inventory levels and avoiding stockouts or overstocking ingredients.

To do this, you can analyze your restaurant’s past sales data, consider seasonal trends, and factor in upcoming events (Christmas or Thanksgiving) to predict future demand. Moreover, you can use inventory management software to streamline forecasting and track the supply of raw materials.

For example, if you are a pizza chain, analyze historical sales data to predict demand for pizza during specific hours. You can then adjust inventory levels for ingredients accordingly to avoid running out.

4. Implement Just-In-Time (JIT) Inventory Management

JIT inventory management involves receiving inventory just-in-time to meet demand, reducing storage costs, and minimizing waste.

Let’s understand this with an example. Suppose you are a sushi restaurant that uses a JIT inventory system for its perishable seafood ingredients. Doing this ensures you get fresh, high-quality seafood while reducing storage costs and wastage.

5. Conduct regular audits and reviews

Regularly audit your supply chain processes and procedures to identify areas for improvement. You can start by evaluating the performance of your current suppliers, considering factors such as product quality, delivery reliability, pricing competitiveness, and adherence to food safety standards.

Based on these findings, you can establish clear expectations, negotiate better terms, and provide regular feedback to foster stronger supplier relationships.

6. Use Automated Solutions

An automated restaurant supply chain management software can significantly enhance your restaurant’s revenue and scale operations. It helps you manage your inventory by letting you track your inventory levels to figure out the sources of inventory wastage.

A restaurant SCM software also allows you to manage different vendors by keeping a record of quotes for different raw materials, streamlining the process of issuing purchase orders to vendors.

Furthermore, you can invest in software that integrates with your existing kitchen display (KDS) or point-of-sale (POS) system to help you track your stock levels.

7. Ensure Purchase Compliance

Did you know that off-contract spending can account for up to 3% of your contracted spending? According to surveys, you’re likely spending 12% more for these off-contract items.

So, whether buying off-contract was caused by an issue in the supply chain, having complete insight can lessen the effect of non-compliance.

Begin by addressing prohibited retail purchases and distributor substitutions to improve cost control while maintaining product quality.

How Supply Chain Efficiency Can Boost Profitability?

You can boost customer satisfaction and build customer loyalty by ensuring your supply chain is efficient and capable of meeting customer requests. Not only that, but an efficient supply chain allows you to deliver your dishes to the customers swiftly and efficiently, which can contribute to improved sales.

Here are a few ways an efficient supply chain can help boost your profits and sales:

Enhance Savings

You can significantly enhance your profits by cutting down supplier costs and optimizing your supply chain management. For example, you can look into your supplier’s arrangements to see if you can get the same ingredients or kitchen equipment cheaper elsewhere.

You can also employ efficient purchasing techniques such as negotiating payment terms and buying in bulk, examining your spending habits, and identifying areas where you can save money.

For example, you can propose a deal to make early payments in exchange for a discount or negotiate a long-term arrangement.

Reduced Costs

By streamlining operations across the entire supply chain, from procurement of raw materials to inventory management, restaurants can significantly reduce costs and improve efficiency.

To start with, you can implement a centralized purchasing system across multiple locations, allowing for better pricing negotiations with suppliers and reduced procurement costs. You can negotiate freight rates with transportation providers to secure better pricing and improve logistics costs.

Enhanced Customer Satisfaction

A streamlined supply chain ensures that the right ingredients and supplies are readily available to prepare and serve food to customers, meeting their expectations and enhancing customer satisfaction.

This leads to increased customer loyalty, positive word-of-mouth, and repeat business, contributing to sales growth and increased profitability.

To achieve this, you can start by improving order fulfillment accuracy, reducing delivery times, and maintaining consistent product quality.

Conclusion

The best practices in supply chain management, such as forecasting demand and tracking inventory, can help you create a cost-effective supply chain strategy.

Restaurant supply chain management is an essential aspect of every restaurant’s lifecycle and necessitates effective communication across all chain parts. Moreover, an excellent restaurant SCM can help you reduce inventory costs by giving current information on suppliers, prices, and food costs.

You can also share information with your team members to better control your organization and quickly alert your customers when a specific menu item is out of season.

Frequently Asked Questions

1. What is a supply chain in simple words?

The supply chain is a network of activities that transforms raw materials into completed products. It begins with the procurement of raw materials and ends with the delivery of the final product to the end customer.