Dealing with the Supply Chain concern

With commodity prices becoming an increasing concern and food safety and traceability securing the top position of mind, managing supply chain issues has evolved as a major concern for the restaurant industry. However, supply chain issues are problems with the supplier that has no control.

Managing your restaurant day-to-day is going to rely on fresh ingredients being delivered to your kitchen exactly when you need them. This definitely doesn’t happen by magic. Great suppliers and distributors are definitely out there, but you need to plan carefully to set up a system that works for your business.

Making the supply chain factor more fractured is the increasing use of limited time offers (LTOs) which make the demand challenge more complicated. Needless to say, this is a huge problem as inadequate forecasts for LTO demand combined with poor supply chain visibility results in restaurants ending up with either running out of stock for promoted dishes, which leaves customers unhappy, or building too much stock, which increases food waste.

“Sourcing is done mostly with vendors within city limits and few of the ingredients are outsourced from outstation. Logistics is a challenge when ingredients need to be sourced from outstation as minimum order quantity comes into play which gets added to our cost,” said Riyaaz Amlani, CEO and MD, Impresario Entertainment & Hospitality.

For the greater ROI, it is important that the network integrates both logistics planning and warehouse execution, which allows partners to optimize inventory and transportation cost at the same time. Adding more to it, Prasad Rao, Asst. F&B Manager, Renaissance Mumbai commented, “Logistics is a big challenge as sourcing revolves around seasonality, financial cost and lack of availability/supply. And part of logistics includes building operational time and nailing the price upfront which is largely affected by the above-mentioned challenges of sourcing.  While managing costs is an important challenge, our top priority will always be quality and safety.”

Solving the major part of the supply chain problem can be the use of local ingredient sourced from the local vendors. Also, the hotel giants on the other hand has started in-house farming of certain vegetables in order to promote organic food. “Trial and error method has been applied to a variety of vendors, local or international, before selecting the best one. In order to promote organic and healthy food, we have also resorted to in-house farming for certain vegetables,” adds Rao.

Sourcing locally, however, can be a major logistical problem for food service operations. Dealing with dozens of local farmers and suppliers isn't a cost-effective process. Instead, the economies of scale derived from doing business with one of the major food service wholesalers makes better business sense. The solution to this problem is thus matching the demand for locally grown foods with restaurant buyers who want one-stop shopping, which is emerging as the concept of ‘food hub’.

“Logistics is a challenge in case of perishables mostly. Most of the long shelf life ingredients can be transported easily. We lay a lot of emphasis on cold chain being maintained throughout. All our perishables must not face temperature shocks. We insist our vendors on maintaining cold chain and delivering the perishables below 10 degrees C,” said Chef Vineet Manocha from Lite Bite Foods.

Today, some leading restaurant chains are embracing digital business networks. Similar to a social network but used for conducting and transacting business, restaurant chain owners are implementing a single platform that brings together restaurants, franchises, distributors, and suppliers into a single operating network to improve both visibility and course corrections. These networks are providing instrumental value to all parties and are quickly gaining in popularity when done correctly.