Restaurant supply chain issues may have began with the start of the COVID-19 pandemic, but since then the challenges have kept coming. Geopolitical strife, international trade issues, and inflation have all been blamed for supply chain woes in the last few years.
On top of that, a food supply chain can simply be complicated.
“Today’s supply chain is not a linear ‘chain,’” says Are Traasdahl, CEO of Crisp, which provides retail analytics software for food suppliers. “It’s an interconnected, multi-layered network of producers, suppliers, sub-suppliers, and multi-level manufacturing points.”
And some elements of a supply chain may continue to become more complicated. “Climate change continues to be a critical issue impacting food supply chains,” Traasdahl says. “Companies are facing growing pressures to improve transparency and report the full scope of climate impacts across their supply chains.”
Unfortunately, there is no sure-fire recipe for improving a food supply chain. But kind of like making the perfect meal in a kitchen, you can always experiment.
1. Improve Your Demand Planning
Smart demand planning – the process of predicting future sales – has never been more in demand as a service.
And it’s vital that food businesses get a handle on demand planning, says Manolo Reyes, the senior vice president of retail and alternative channels global at ProducePay, which specializes in working with businesses to develop a more connected and sustainable fresh produce supply chain.
“The rise of e-commerce has transformed the way people buy food, making it difficult to forecast the required volume of food on a monthly or even weekly basis,” Reyes says. “This becomes even more difficult when dealing with fresh produce.
“Quantifying the number of shipments, their frequency, and the number of suppliers needed to meet demand is increasingly challenging,” Reyes says. “Unfortunately, the result is massive amounts of food and economic waste, mainly for lack of synchronization between the demand and supply.”
It’s a lot easier to diagnose the problem than come up with solutions, but working with a supply chain management company that specializes in demand planning may help. Good communication with your suppliers or any stakeholders who work within your supply chain is vital, so you can constantly share pertinent information, helping to continually strengthen your supply chain.
2. Simplify Your Supply Chain
Simplifying your supply chain can be increasingly challenging. After all, the bigger your company, the more complex your supply chain. But there’s some logic in trying to make things simpler.
“The average piece of produce can travel up to 1,600 miles, is handled four to eight times and marked up three to six times,” Reyes says. “Having a more direct path for food can ensure that it gets to buyers – restaurants, supermarkets, retailers – and consumers in a timely manner while maintaining the desired quality and nutritional attributes.”
The future for supply chains is how we can get more reliable, resilient and responsive.
—Kristi Kingery, senior vice president of supply chain, Tropical Smoothie Cafe
Ideally, the food you’re offering customers should have as few stops as possible on the way from where food starts to where it ends up, especially if the food is fresh produce. That's not always practical, but some business owners make it work. Michael Cherney, with his wife, Sarah, owns and operates two food businesses in Solvang, California: Peasants Feast, a restaurant; and Peasants Deli & Market.
“We live and work in an agricultural hotspot,” Cherney says. “We source the majority of our products from local, organic farms, mostly run by families. They've always been able to provide a steady supply of fresh fruits and veggies without any disruption in the supply chain.”
And if there is a disruption?
We adapt, Cherney says. “If an ingredient isn't available, we change our menu,” he says.
3. Remain in a State of Constant Optimization
Optimization is constantly on the mind of executives at Tropical Smoothie Cafe, which currently has 1,235 locations in 44 states, with plans for over 1,500 more in the near future. That’s what any business wants – growth – but as a food business grows, its supply chain has to expand with it.
“A large tenet of our strategic supply chain focus this year is simply ensuring and confirming available capacity at our suppliers and reviewing and approving new suppliers that can support our future growth,” says Kristi Kingery, senior vice president of supply chain at Tropical Smoothie Cafe.
Optimization done well means having a mindset somewhere between a realist and a pessimist. “We have to eliminate any instances where we could have one single point of failure,” Kingery says.
Kingery says that the company really learned that lesson a few years ago.
"Supplies were not easy to secure throughout the pandemic and, in addition to that, our volume is constantly growing – a double whammy for us," she says.
But beyond the mindset, relationships also matter, Kingery says. "At Tropical Smoothie Cafe, one of our core values is that 'relationships rule' – and we live this every day with the relationships we have with our suppliers," she says.
4. Be Careful About Focusing on One Specific Food
Let’s say that you have a restaurant that specializes in kale. Your kale-centric restaurant sells kale sandwiches, kale pasta and kale pie, among other things. But by going all out on kale, you’re taking a risk – what if there are problems with kale crops around the world, and the price skyrockets?
“The entire industry has been battling hard against food cost inflation for the past two years," Kingery says.
But she points out that the saving grace for Tropical Smoothie Cafe is that it doesn’t rely heavily on one particular food. For instance, its menu has products with chicken, like wraps and sandwiches, but it doesn't specialize in chicken sandwiches.
“While everyone has been subject to these increases, our commodity mix put us in a favorable position when compared to many restaurant brands. The cost of chicken and chicken wings had a moment last year where it pushed certain brands’ food costs over 40%,” Kingery says, adding that the industry averages closer to 30%.
She also says that “the current outlook on cattle and beef pricing has burger and steak chains planning for a profitability hit as well. Our commodity mix is a well-rounded blend of food and smoothie ingredients which provides us with a built-in hedge against volatility for any one certain commodity or commodity group.”
A burger restaurant, for example, might want to consider adding chicken, fish, or vegan options to its menu. Every time a business adds a new, different item, it makes itself less reliant on the whims of commodity prices.
On the other hand, having a varied menu can also make your supply chain more complicated and increase the odds that you’ll also have some food you’re running low on.
“Reduced crop yields and extreme weather events are making it harder for farmers to produce enough food to feed the current population, let alone the projected population in the next 20 or 30 years,” Reyes says.
5. Consider Investing in Technology
Any investments you can make to your supply chain will presumably pay off in some way, but one area many food-related businesses are paying attention to is artificial intelligence.
“AI holds the potential to play a significant role in demand forecasting, inventory management, connection with suppliers, and quantifying how much food to produce,” Reyes says “It could even predict disruptions and mitigate price volatility. In the long run, the strategic use of AI could help us not only streamline the food supply chain, but also avoid its waste.”
And there are other areas you may also want to invest in.
"My belief is that cybersecurity is an ever-evolving and increasing risk for food industry supply chains," Kingery says. "It’s an unfortunate incident when a cybersecurity breach leads to leaked data, but it would be a catastrophic incident if were to shut down the operating systems responsible for providing food supplies across the country – or the world."
In trying to anticipate the worst, Kingery says, "Last year we initiated a cybersecurity review process for our key supply delivery systems and partners. This is an iterative process for us as the risk continues to evolve, and we learn more about the potential threats to our systems and processes as each new event unfolds."
Fixing and improving supply chains is likely going to be one of the great challenges facing businesses now and in the future.
"The future for supply chains is how we can get more reliable, resilient and responsive," Kingery says. "And in the food industry, that’s very difficult to deliver when you’re working with products, like fresh produce, that have a very limited shelf life. Prior to the pandemic, supply chains were often looked to for cost cutting initiatives – think about all the buzz around lean manufacturing and just-in-time inventory over the past several decades. Much of that in the rear view mirror. We’ve now realized that a supply chain can not only make or break your operations – it can also be a competitive advantage."
