Restaurant Supply Chain: The Secret Weapon Against Diner Defection?

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“Maybe we should try somewhere else tonight.”

That’s something you as a restaurant company manager would never want your loyal customers to think, let alone say, and yet it happens all the time.

Your customers love your food and the service, but it’s a delicate thread that binds them to you. All it takes is one or two disappointing meals; or their favorite menu item is sold out; or, the food is not as fresh as it could be… and one day you realize that you haven’t seen that family in a while.

Quite possibly they were on their way to visit you when someone uttered the dreaded words…

“Maybe we should try somewhere else tonight.”

Today’s consumers are more adventurous and fickle than ever before. A recent study by Thanx analyzed 18 million merchant transactions and found that in fact most customers never come back. The study concluded that: 70% of previously loyal customers are “at-risk” and unlikely to return.

Target Marketing Magazine had a good headline a few years ago, that highlights the issue, “Retention is the New Acquisition”. Since it costs 5-7 times as much to acquire a new customer as it does to keep one, the smart companies focus just as much (if not more) on keeping their current customers happy.

“64% of revenue is contributed by 25% of the customers.”
–Thanx, 6 Critical Stats for Customer Loyalty

How do you go about thrilling your customers each and every visit, given the challenges restaurant companies face today?

The challenges are formidable. The industry is in the midst of a “restaurant recession,” suffering from low-to-no growth. Customers are more health-conscious than ever before, and demand fresh ingredients and top quality meals, on-demand every time. Restaurant companies need to service 100% of their customers’ orders at the lowest cost-per-meal, if they are to remain competitive and successful. And on top of that there’s the need to ensure food safety and full traceability from farm to fork.

“One of the most important aspects of building and running a successful business is learning the art of agility. The slow and stubborn simply can’t survive in today’s world.”
– Scott Ford, president of Goodsense Franchise Systems

Traditional Restaurant Supply Chain Technology Puts Profits at Risk

The simple truth is that restaurant companies have been using technology that is not suited to running a complex restaurant chain.

Just getting these systems up and running is a challenge. They have to be connected within your enterprise and across all your supply chain partners. That is tedious, costly and time-consuming. And once connected, batch processing between siloed systems means the supply chain is plagued by delays, stale data, inefficiency, and poor decisions.

Poor planning based on stale data, combined with execution of a plan that doesn’t reflect the current reality, compounds the problem. Restaurants are left juggling shortages and excess supplies, while trying to effectively manage Limited Time Offers (LTOs) and new menu item introductions. The cost to serve the customer skyrockets and customer satisfaction suffers.

This takes a big bite out of your profits, erodes customer loyalty and market share, and can lead to disaster in a market environment where growth is hard to come by.

Revitalizing the Restaurant Business with Digital Supply Networks

You need to respond rapidly to volatile consumer demand and optimize the flow of supply to your restaurants, to serve 100% of consumer demand at the lowest cost per meal.

Slow and siloed enterprise technology cannot meet this requirement.

According to CIPS, just 6% of firms have achieved supply chain visibility.

Restaurant operators need to learn the lesson of AirBnB and other disruptors, and adopt real-time networks that connect, flow and match supply and demand in real time.

A network connects restaurant suppliers, distributors, and logistics providers,  and enables trading partners to manage the supply chain in real time. These networks flow consumption data at the ingredient/restaurant level back through the network in real time, allowing trading partners to monitor and manage the supply chain as real world conditions change.

The networks provide real-time visibility to orders, supplies and shipments across the network. The more advanced networks autonomously optimize orders and inventory, and enable real-time collaboration with distributors, suppliers and franchisees.

In particular, these networks enable much more accurate forecasting and ordering solutions. Since critical data flows in real time, these forecasts and orders are precise and up to the minute. But importantly, they are not static, they are dynamic and are automatically adjusted as conditions change.

This is a very big deal. Consider what it means…

It’s the difference between throwing a spear at a moving target while trying to guess where it will be in a few hours; versus firing a guided missile in the target’s general direction and letting the AI lock on and track it in real time to deliver its payload with pinpoint accuracy no matter where the target wanders.

This AI-powered, real-time “course correction” can be used to drive many of the services that are available on a real-time network.

An Example: Restaurant Forecasting and Ordering

A forecasting and ordering system on a real-time network can provide many benefits, here’s a sample:

• A “single version of the truth” of customer demand at the restaurant/day/menu item level, automatically translated into requirements for ingredients and supplies, and shared over the multi-tier delivery network, from restaurants to distributors and manufacturers.
• Highly accurate consumer-driven demand forecasts for menu items, ingredients and supplies. Machine Learning agents that continuously optimize the forecast based on actual near real-time demand.
• Integration of event planning, such as LTOs and new Menu Item launches.
• Accurate restaurant perpetual inventory system based upon actual POS and delivery receipts.
• Accurate and automated suggested restaurant ordering system, which ensures that the right ingredients are ordered in the right quantity at the right time to satisfy demand 100% of the time.
• Integrated order management, replenishment and shipment processes, which ensure delivery of the right ingredients and supplies to the right restaurant in the right quantities at the right time.
• Traceability of ingredients from farm to fork.
• Real-time visibility and collaboration across all trading partners, to drive faster, highly efficient and more profitable decisions.

All these capabilities and more are delivered on the network, providing real-time data and alerts to all parties (e.g. restaurant managers and planners, distributors, suppliers and carriers). It also enables all parties to optimize the entire process, from forecasting to ordering, shipping and receiving.

The Impact of Real Time Restaurant Supply Networks

What restaurant companies can achieve with this technology is impressive. As Juan Guerrero, SVP Global Supply Chain, Bloomin’ Brands Inc. explained:

“Our POS data is being fed into a demand forecasting engine in real time, and that demand engine adjusts the forecast as sales are occurring, with built-in smart agent technology that allows the forecast to be adjusted daily. That feeds our distributor and our suppliers, so they see this in real time, and it has basically eliminated the bullwhip effect.”

This dynamic, pinpoint accuracy of forecasts and inventory levels based on actual consumption is obviously a huge benefit that drives up service levels while driving down costs.

By seamlessly connecting the restaurant supply network in real time, restaurant operators can get some dramatic results. Here are some typical examples:

• Forecast accuracy increased to 85-90%.
• Cost of Goods Sold (COGS) reduced by 5-10%.
• Inventory levels reduced radically across the entire network, including by as much as 50% at the restaurant level.
• Available shelf-life increased by 50% at the restaurant level.
• Waste reduced by as much as 75%.
• Near perfect fill rates.
• Reduced cycle times for ordering, replenishment and delivery.
• Improved sales and margin performance for LTOs and new menu item launches.

If restaurant companies want to revitalize the restaurant business, there’s no better place to start than by modernizing the outdated supply chain technology that underlies much of the business today. This technology is decades old, unfit for the task, and is dragging down margins, profits and customer service. Given the results we are seeing in the restaurant industry, the companies that embrace a real-time, multi-party network will have a much greater chance of profitably seizing a larger share of the market than their competitors.

Learn More About Bloomin’ Brands Digital Transformation

Bloomin’ Brands, the company behind top brands such as Fleming’s, Outback Steakhouse and Carrabba’s, will be discussing their digital transformation in an upcoming webinar: Reshaping the Restaurant Supply Chain in the Digital Age

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Nigel Duckworth

Content Director at One Network Enterprises

Nigel Duckworth is a writer and Content Director at One Network. He focuses on innovation and how companies can achieve business value from technology.

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