How to Fight Supply Chain Issues in Foodservice
When asked what issues plague operators the most, among the answers are supply chain disruptions, which affect suppliers and distributors, too, said Brian Warrener, an associate professor at Johnson and Wales University, at the National Restaurant Association in May. Warrener teaches food & beverage hospitality and management.
In his presentation, Warrener said that food costs are up 13%, industry wages are up 11% and industry prices are up 8%.
When it comes to food costs, beef is up 23%, eggs 31%, chicken 27%, and cooking oil 44%. Many factors go into those price increases, from inflation to supply chain issues and customer demand.
He said 96% of operators report delays in the supply chains.
"Everyone is pivoting and being flexible," Warrener said.
What's causing the supply chain bottleneck? Warrener cites COVID, lack of available workers at the distribution level, and low unemployment rates.
Operational solutions include:
1. Increasing prices. "Demand for restaurants remains strong despite inflation," Warrener said.
Consider the price elasticity of demand. The middle class is feeling squeezed, with 57% considering cutting back on dining out. Warrener said he talked to operators who have increased their prices, but the quality of food and service had to be maintained to be successful.
2. Focus on the most profitable methods of distribution. Warrener said that 54% of all adults and 72% of Millennials say that delivery is essential to their ordering, but some customers don't mind curbside and pickup. Domino's offers a $3 "tip" coupon for customers who pick up their own orders to reduce delivery drivers on the road.
3. Consider smaller menus and simpler preparations to streamline operations. Warrener said menus have 13% fewer items, with the focus on most popular items. A smaller menu will streamline staffing and training challenges.
4. Strengthen your supply chain if possible. Warrener cited Wingstop as exploring the idea of operating their own chicken farms to supply chicken, a costly ingredient. If that's not feasible, build a good relationship with the vendors in your supply chain.
5. Manage inventory more actively. Getting ingredients in the same day as usage might not be practical anymore, but if you run out of something during a busy weekend, you've shot yourself in the foot. Stock up when prices are low or on sale. Consider cash, space, and spoilage, including paper goods. "Buy more stuff if you can afford it," Warrener said, "if you can store it and you can turn it over."
6. Invest in technology. "Good help is hard to find and if you can find ordering technology, payment technology, you can eliminate about 25% of what your employees are actually doing." Menus need to be flexible by changing them frequently to meet needs. Change price and availability constantly.
Warrener believes we're going into a recession but it's not like 2007, he said.
"People's finances are in ok shape," Warrener said. "For the most part, they're not overextended like 2007."
He cited a Fortune economist who predicts a one- to two-quarter recession "to take the heat off the economy and reduce the foot traffic without crushing people" and get back to some form of normalcy.
"The industry clearly has changed," Warrener said. "Where we land is going to be different. I think delivery, curbside, and technology are going to be big parts of what we do forever."
Source: Mandy Wolf Detwiler, Fast Casual