SugarCreek: Brandworthy Food Solutions

5 Ways Poor Supply Chain Management Can Ruin a Fast Food Business

Posted by Craig Fissel

May 9, 2016 2:30:00 PM

Frustrated fast food supply chain manager

For many consumers on the go, mealtimes no longer offer a regular break in the daily schedule — they’re necessities that need to be wedged into compressed time spaces between other activities. The astounding growth we’ve seen in the fast-and-fresh sector and in ready-to-eat food sales at groceries proves that.

A significant portion of modern consumers lack either the time or the desire (or both) to fit food prep into their days. And that means that they’re placing the onus on the food industry to meet their needs and taste preferences. Much of that demand is now met by QSR concerns.

But where there is great opportunity, there is also risk. Today’s consumers don’t want to wait and they don’t want to be told “we’re out.” So, the keys to profitability and success in a fast food operation inevitably come down to this: how agile is your supply chain?

You have to stay ahead of the investment curve to maintain viable supply lines.

The market is hot, and it is cutthroat. With all the competition QSR companies now face from fast-and-fresh chains and grab-and-go food products, franchises that lag behind in technology or sustainability investments are doomed.

QSR chains must invest in order to create supply chains that are agile enough to fulfill both logistically demanding long-term trends and shorter lived food fads. Investments cannot be conducted like fast food purchases, either — they must be ongoing and sustainable in and of themselves.

But it’s not as simple as making a new capital investment every few years to catch up. Fast food companies can never allow their attention to wander away from their supply chains; they must cultivate their supply chains.

What do we mean by that?

Effecting solid supply chain management is like tending a crop.

A recent survey conducted by HAVI Global Solutions and Technomic, Inc. — reported on by Food Logistics — found that, of the top business risks faced by fast food companies, the first 3 (commodity cost pressure, commodity price volatility and customer price sensitivity) could not be immediately influenced, let alone controlled, by a company’s direct action. They’re macro-level costs, mostly determined by the ebb and flow of the market.

The next-most pressing worry — costs associated with logistics and distribution — can be somewhat mitigated on the micro scale. But even then, macro-level factors like oil prices still come into play.

Distribution managers and supply chain managers must recognize that they need to make continuing horizontal and vertical investments to reduce their companies’ vulnerability to market-derived costs.

That’s what we mean by “cultivating” your supply chain. A farmer cannot simply throw seed into the field and skip ahead to harvest, right? He must plant seeds in the right places and at the ideal depth, fertilize and water, weed and control pests, monitor soil quality and so on.

That metaphor holds true for restaurant supply chain managers. You must invest in commodity production capacity, consumer research, energy efficiencies and other needs to grow and maintain an agile supply chain — one that can predict and meet long-term and short-term shifts in consumer preferences.

With that in mind, let’s take a look at:

5 ways poor supply chain management could ruin your business.

1. Food Waste

An inefficient supply line in the fast food industry means profit sunk by avoidable food costs. QSR companies operate in tight food safety windows — especially now that consumers are rejecting highly-preserved food products and demanding fresh, organic, non-GMO ingredients. The more time it takes ingredients to get from the farm into customers’ to-go bags, the less money you’re making.

2. Shortages

In a highly competitive market, you cannot afford to be out of the food your customers want, when they want it. There are too many options available to them. You need to have a supply chain that never fails to keep your outlets stocked.

3. Costly Logistics

The movement to source locally isn’t just a consumer reaction against standardized, homogenized food offerings. It’s a reaction to a volatile energy market. Although lower oil prices over the past year or so have taken some of the edge off delivery costs, the trend in fuel prices is always up over the long-term. Localize your sourcing and simplify your life.

4. Inflexibility

Never allow your business to be reliant upon a single source for an ingredient. What happens if   that supplier has production problems, a significant safety concern or supply problems of its           own? Diversify your sourcing as much as possible.

5. Complicated Menus

Work with your test kitchen and product developers to ensure that menus aren’t over-complicated. The more ingredients your fast food company needs, the more likely supply chain headaches will occur. Maximize taste with the minimum number of ingredients.

How Quick-Service Restaurants Can Find Balance

Written by: Craig Fissel

Topics: Food Service, Supply Chain, QSR