Break Down These Silos if You Want to Optimize Multi-Unit Growth

Ensuring that a chain’s marketing initiatives are coordinated with its supply chain strategy is critical in a growth-challenged environment. Here are six high-payoff reasons why.

Brand leadership is the defining mark of every successful chain restaurant.  Restaurant concepts grow and expand because their marketing strategies establish clear brand positions in consumers’ minds and then drive repeat visits with satisfying customer experiences and ongoing promotions and offers.

The contribution of supply chain management is less visible but no less important. That’s because even as promotions drive traffic, supply chain strategy ensures that product to support those promotions is purchased on time, is in stock, and delivered as needed at planned cost. When promotions end, a well-run supply chain operation keeps obsolete inventory to a minimum and has the product pipeline already geared up for the next promotional period.

A Whole Greater Than the Sum of Its Parts

But all that occurs only if both marketing and supply chain functions work together in a productive way. It’s a classic example of how the whole can be greater than the sum its parts.

At many multi-unit organizations there’s a tendency for both functions to operate in their own silos, communicating with the other only on an as-needed basis. When coordination suffers, so do promotional, purchasing and distribution efforts, with implications like these:

  • Distributor inventories that don’t match unit demand;
  • Units that run short of key ingredients during peak traffic times;
  • LTOs that end with high levels of obsolete inventory in stock;
  • Failure to update manufacturer partners when demand exceeds forecast, disrupting plant production schedules;
  • Commodity pricing or availability that becomes volatile before a promotion begins. LTO profitability can be at risk if forecasts and product needs require additional shipments to meet demand.

In contrast, when marketing and supply chain groups work together effectively, the overall functionality of both groups is improved. Purchasing leverage is maximized because supply partners have greater confidence in the game plans of their multi-unit customer.

Six Key Benefits

Still not convinced this approach is worth the effort? Boiled down, here are six top- and bottom-line benefits which ensures your supply chain and marketing people work closely together with common purpose:

  1. When marketing and supply chain planning are coordinated, it builds trust among trading partners, corporate management, unit operators and front line staff.  When all players are in the same information loop, the commitment level to a promotion’s success increases. It makes for more productive supplier partnerships, execution confidence at the unit level and more enthusiasm among servers doing suggestive selling at tableside. It also tells prospective franchisees that chain management is fully prepared to support new entrepreneurs in the system.
  2. When marketing and supply chain decision makers work in tandem, costs are more effectively controlled and value offers are more effectively created. When new menu items are developed, culinary R&D chefs can have greater insight into the pros and cons of alternate ingredients and suppliers. This flexibility makes culinary and cost planning more effective even as it lets marketing develop better-positioned promotional offers.
  3. Marketing drives new business, but supply chain strategies keep the business profitable. Key product margins can be volatile and commodity supplies are susceptible to seasonal and other variables. Cost-plus and other contracts with manufacturers and distributors are subject to change. When LTO planning involves supply chain management, such risks can be better understood, hedged-for or avoided.
  4. An efficient supply chain system keeps inventory in stock but not overstocked. It also helps reduce “obsolete” inventory. Every promotional program has its uncertainties and even the best forecasts are subject to wide variations when execution is underway. Demand will always vary, but a tightly managed supply chain can adjust product flow to match it. This allows marketers and operating management to focus their energies on the next seasonal promotion or event rather than cleaning up after the last one.
  5.  Sound supply chain management helps avoid product substitutions and assures ingredient and menu item consistency across regions. Now, brand management can focus on a consistent customer experience and food that meets and exceeds menu expectations.
  6. Restaurant brands may face risk, but coordination of these two key functions can minimize that risk. One of the biggest risks occurs when demand and supply side performance are mismatched and restaurants are forced to tell some customers the heavily promoted special isn’t available.

Ask yourself: are the marketing and supply chain functions in your organization working together as well as they should? Are they delivering the results that they should? If not, look for ways to break down those silos!