Foodservice Trade Promotion Drives Supply Chain Transformation

Posted on March 14, 2018 by Caitlin Orosz under Foodservice 101

How do you drive supply chain transformation in the foodservice industry? Focus on something the foodservice industry can exercise control over – logistics. Sync up operators and suppliers by focusing on the data, prioritizing forecasting and planning, and fostering collaboration.

The restaurant industry’s sales picked up in 2017; the National Restaurant Association projected industry sales of $799 billion. Consumers who dine-out are looking for convenience, variety and fresh ingredients, creating a need for collaboration in the foodservice supply chain.

Larry Oberkfell, President & CEO of IFMA, says the consumer votes with their feet, and if a restaurant wants “to win their dollar then all players in the supply chain must work together to give them what they want. And there is a lot at stake to do so.”

Despite advances in transportation and warehouse management technology, operators, distributors and suppliers don’t share unified view of logistics. Without visibility, from the continued lack of data, there’s a lack of collaboration.

The top three business concerns about the foodservice supply chain  are cost related;

  1. Commodity cost pressure
  2. Commodity price volatility
  3. Customer price sensitivity
  4. Logistics
    • Although ranked fourth, logistics is  one item that foodservice companies can exercise control over.

With these challenges in mind, operators, distributors and suppliers can better evaluate how to optimize supply chain practices with the goals like driving cost and inefficiency out of the supply chain, ensure purchasing protocols and compliance, and developing supply chain strategy to broaden the availability of foods.

Creating a supply chain where operators and suppliers are in sync is no easy task. But you can start with these steps:

Focus on the Data.

Without reliable data, you can’t be expected to operate efficiently. The problem is that distributors, operators and manufacturers are leveraging different methods of data collection and circulation.

Many foodservice supply chains are focusing on uniform data networks, says Eric Pfeiffer, HGS Senior Director of North American supply chain integration. There are subscription data systems such as GS1 as well as independent systems companies are using.

Dot Foods, a redistributor, has taken a leadership role with its Dot Expressway, which uses the GS1 Global Data Synchronization Network (GDSN). The manufacturing supplier provides item attributes (case dimensions and weight, marketing details and nutritional information) to the Expressway through the GDSN, giving distributors access to shipment detail. Core item data is currently available for 70% of Dot’s product inventory.

“Time is so valuable in the foodservice industry, and the Dot Expressway resource allows us to get immediate answers for our customers,” says Dana Krajacic, Sales Training Manager, Kuna Foodservice. “Having this data available at any time without having to rely on someone else to provide the information is extremely conducive to a sales representative’s lifestyle.”

Prioritize Forecasting and Planning.

The drive to get more collective visibility into what’s happening throughout the supply chain is an important initiative. When all participants do not have transparency into the various operation activities, it’s hard to accommodate changes in demand.

Foster Collaboration.

“The best in class collaborate with all supply chain partners,” says Cullen Andrews, VP of National Accounts at Dot Foods, Inc. “When they take a collaborative approach, there tends to be more information shared among business partners, which leads to a reduction in waste (cost) and better service when the product is at the right place at the right time at the right cost. In general it is a more quality supply chain.”

Support among restaurant brand marketing groups and supply chain teams to work downstream with suppliers to centralize the flow of goods for peak promotional events. Jeff Schroeder, Managing Partner, Kinetic 12 explains, “There is a lot of costs and waste associated with inefficiencies in how promotions are handled today. With better collaboration, the industry should be able to optimize the supply chain. All good news if you are a consumer.”

Turkey producer, Butterball, has been preparing pallets in its own warehouses so foodservice customers can cross dock. “We’re doing more and more DSD preparation for the foodservice carrier,” says Daniel DiGrazio, Senior Director of Logistics. This includes placing completed bar codes on the pallets before they leave Butterball’s facilities.

Supply Chain Efficiency:
What You Can Learn from McDonald’s

McDonald’s sells more than 1 million pounds of beef and more than 500 million cups of coffee each year. Globally, the company buys 3.4 billion pounds of potatoes every year, and serve more than 9 million pounds of French fries every day.

What is McDonald’s Supply Chain Philosophy?

Ray Kroc, founder of McDonald’s, decided on a long-term, win-win relationship among restaurant owner/operators, employees and suppliers. His supply chain system was established based on trust and loyalty, eliminating a too commonly used siloed structure. He figured, for one to prosper, each must prosper.

McDonald’s targets business relationships that drive value. Kroc was determined to work with suppliers that had perpetual thinking, a supplier that will take accountability to meet McDonald’s food standards, allowing the restaurant to focus on the customer.

Pete Richter, President, Global McDonald’s Business Unit for Cargill and Chair of the US Supplier Advisory Council, affirms, “The trust and confidence in the future means we shift a majority of our resources to driving innovation, quality, supply chain optimization, and investing in future growth initiatives. This takes trust on both sides of the table, but once you establish, it creates amazing leverage vs. the traditional arm’s length RFP type approach.”

McDonald’s creatied highly transparent pricing protocols. The goal? To reduce total cost, not total price and optimizate processes across the foodservice supply chain. The restaurant and its suppliers revise pricing protocols every 1-3 years based on category and region. When pricing is discussed, it is not done in the conventional cycle of bid and deal renegotiation. Suppliers don’t worry about the security of their business or profitability – suppliers spend their energy aligning pricing protocols that provide a competitive advantage for the McDonald’s.

Kroc’s supply chain system continues to set records, even after 50 years. The process has been adopted by more than 100 countries and 33,000 restaurants serving more than 68 million customers a day.