Once the low-hanging fruit has been harvested, restaurant chains’ efforts to protect their margins and drive customer value can become increasingly difficult. SRM strategies offer an alternative way to enhance the bottom line.
Chain restaurants have traditionally relied on marketing and promotional strategies to grow sales while depending heavily on volume-based procurement leverage to cut costs.
But as the competitive landscape has intensified, brands that rely only on price-based supplier relationships find that this approach quickly reaches a point of diminishing returns. Alternatively, embracing SRM strategies can result in sustainable value.
Moving beyond Price
SRM—Supplier Relationship Management—strategies are a recognized way to move beyond price centric supply chain relationships. With SRM, the emphasis becomes one of reducing a chain’s Total Cost of Ownership.
- Reduction of operational and transactional inefficiencies
- Leveraging supplier Chefs for menu innovation and optimization
- Partnering to shorten lead times for LTO’s and menu changeovers
- Development of custom tools and dashboards to manage short and long-term exposure
A Change in Focus
With SRM, the emphasis is on creating mutual value for both a brand and its suppliers. Companies that embrace SRM become ever nimble at developing and rolling out new offerings, continuously improving operations, negotiating stronger procurement contracts and obtaining favorable distribution and logistical terms.
The benefits of this change of focus are well established. White papers from leading professional services companies like Price Waterhouse Coopers, Deloitte and others go into great detail about how SRM can give companies a better “big picture” understanding of where competitive advantages can be had and costs can be reduced across an organization.
In practice, SRM requires that a restaurant brand adopt a different approach to the way it interacts with key suppliers. Rather than emphasizing transactions, the focus is on creating trust, open communication, information sharing and collaboration with a strategically limited number of trading partners.
SRM Best Practices
Successfully adopting the SRM model requires both operational and cultural changes in an organization. On the cultural side, it requires inter-company collaboration and information sharing, and on the operational side, core tenets include:
Adoption of a centralized data platform.
SRM requires detailed tracking of all vendor and supply chain data—item specifics, purchase orders and volume, delivery and pricing data—in a centralized location. Avoiding organizational silos improves coordination and reduces costs.
Strategic consolidation of suppliers.
With information centrally housed and accessible, a brand can analyze the full costs of product acquisition to reduce the inefficiencies of dealing with multiple suppliers for similar items.
Frequent and Effective Communications.
Companies committed to SRM put processes in place that ensure regular meetings are scheduled to review line item performance, culinary and food price forecasts.
Effective implementation of SRM also requires that brands clearly identify individuals within their organization who will be tasked with “owning” each strategic relationship.
Embracing the idea that Supplier Success is Your Success.
Partners in an SRM relationship recognize that the business success of each benefit both. In contrast, companies where this is lacking, frequent churning of suppliers increases the total cost of ownership.
The value of a shared supply chain service provider
A partnership with a shared service provider such as SpenDifference can help you capitalize on all the benefits of SRM to help you compete more effectively in an ever-challenging business environment. To learn more, talk with one of our Supply Chain experts.