10 Keys to Effective Supply Chain Management

Two restaurant chains may have similar concepts, similar menus, and similar go-to-market strategies, but one may regularly outperform the other. A better-managed supply chain is often what makes the difference. If you want to perform a quick supply chain performance audit of your organization, consider how well it follows these ten key practices.

  1. Be Transparent

The primary commandment in supply chain management is to seek transparency across a company’s full range of sourcing, procurement, and logistics relationships. Transparency is essential to managing costs and to defining and meeting expectations. Transparency builds trust among supply chain partners. Over time, it establishes the kind of strong, reliable relationships that undergird every successful business.

“If there is one word that sums up the essence of supply chain management, it is transparency,” says Frank Lucero, III, vice president of supply chain for SpenDifference.

“Transparency allows you to see beyond the ‘funny money’ pricing that is common in foodservice and to get at the true costs of procurement and of doing business in the market,” he adds. “You strive for full transparency in all your sourcing and logistics relationships, but it is essential in your strategic partnerships. That’s where a restaurant brand and its key suppliers must act as if they are in business together, and it is what drives true efficiencies across the entire supply chain.”

  1. Manage Risk

Strategic supply chain management is not just about obtaining products and services at the best price—it is also about planning for contingencies and reducing a brand’s vulnerability if the unexpected happens.

Sound risk management means that critical commodities and ingredients are dual-sourced; that you fully understand the strengths, weaknesses, and capabilities of your suppliers; and that your sourcing arrangements have redundancies in cases of regional disruptions. It also means having formal contingency plans that can be put in place immediately in case of product recalls or other kinds of supply chain disruptions.

  1. Honor Contracts

Contract compliance goes without saying, right? Yet complex supply chains always require ongoing compliance audits, invoice reconciliations, and evaluation of freight costs, cost-plus clauses and other contract details. If compliance is allowed to slip, it immediately adds costs to the operation. This is not a process that can be hit or miss: hire the talent and invest in the technology to manage it tightly.

  1. Communicate

Consistent, two-way communication is what keeps the different parts of your supply chain playing well together in the same sandbox. It is one thing to purchase a product at an attractive price, and another entirely to get it to end users on a timely and reliable basis.

As commodity prices go up and down, as weather variances affect crop yields, as a product moves from processor or factory to warehouses, as LTO demand makes inventory needs rise and fall… communication back and forth between the players keeps them all in the loop and on schedule. Supply chain management is just a buzzword if you don’t ensure that suppliers, service providers, logistics managers, and unit operations all communicate effectively, on a regular basis.

  1. Leverage Technology

Managing a brand’s logistics, formula pricing, contract compliance, and distribution service levels are complex jobs. Technology is what makes them manageable, and what provides the actionable data you need to drive sound decision-making. Make sure you or your supply chain provider has the technology in place to head off logistics problems before they happen, and to provide you with the customized dashboards and reports you need to manage your cost of goods sold and unit operations.

  1. Collaborate

If suppliers, distributors and operators are gears in the supply chain machine, collaboration is the clutch that lets them interact effectively to drive results. Collaboration between culinary R&D, procurement and suppliers ensures the right product is available at the right price for the envisioned menu application. Collaboration between culinary, marketing and operations is what drives successful promotions.

Collaboration is also essential if procurement specialists are to know how a supplier’s raw material costs are affected by yield, labor and margin needs. The ability to negotiate the best pricing and distribution contracts depends on such information, but it only comes from knowledgeable collaboration among suppliers, customers, and logistics players.

  1. Understand Who’s Accountable

An attractive contracted purchase price is only part of the sourcing/procurement story. Transportation costs, redistribution and freight forwarding costs, fuel surcharges and other factors are all part of the supply chain cost picture. Variances in the cost of regional distribution are another complicating factor when it comes to analyzing the total cost of ownership to a national brand. Expert supply chain oversight sorts these issues out so that they can be managed and accounted for, helping keep a brand’s food costs predictable and under control.

  1. Manage Relationships

Every multi-unit brand knows the importance of managing relationships with unit operators and franchise holders. Corporate relationships with vendors and distributors require the same kind of attention, with regular performance reviews, top-to-top meetings and joint business planning to strengthen partnerships and achieve greater efficiencies.

“Greater transparency is never achieved all at once,” adds SpenDifference’s Lucero. “True sourcing and supply chain partnerships evolve over time. The mutual transparency increases as the relationship deepens and the two parties better understand the value and business each can bring to the other. For that to happen, the relationships need care and nurturing along the way.”

  1. Require Customization.

When restaurant brands rely on proprietary products to distinguish their offerings and add value to their menus, supply chain relationships become even more important. Strong supply chain management helps a brand identify reliable sources for customized products and distribution networks to keep them stocked. It will also customize data reports to match the unique needs of a restaurant’s brand management. Every brand is unique and an effective supply chain needs to reflect that.

  1. Hire Specialists

It takes specialized knowledge and experience to manage the different parts of a supply chain and to effectively understand and take advantage of commodity market trends. Successful chains hire the best talent available in each specialty area, from strategically sourced protein categories to logistics and distribution management. They either hire a specialized team with needed, top-drawer experience in those areas, or a third party provider that already has that kind of team in place. Relying on procurement generalists will never achieve the same results as a team with a full range of critical competencies.

As a result, many successful restaurant chains have teamed up with SpenDifference and taken advantage of their best-in-class technology and category expertise to help navigate all aspects of the supply chain. To learn more about how a partnership could positively impact your business, please contact us here.