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Your Relationship with Co-packers and Distributors Must Change in 2016

Posted by SugarCreek

Dec 11, 2015 11:00:00 AM

Relationship With Co-Packers

In the competitive world of quick service restaurants (QSRs), variety and freshness are paramount for keeping customers satisfied and profits strong. QSRs need to pay special attention to their supply chains and inventory management in order to deliver a quality quick meal at an affordable price. Everything from fuel costs and product quality concerns to the public’s changing taste preferences for fresh, healthy foods are squeezing supply chain profitability.

The recent Chipotle E.coli outbreak, which has sickened more than 40 people who ate at the popular burrito chain in six states, is an important reminder that a single breakdown in the supply chain can have a profound impact on an entire QSR business. With the CDC still struggling to identify the source of the outbreak more than six weeks after the initial cases were reported (and with new cases still being reported), there’s simply no room for lackadaisical supply chain management. Food brands must be prepared to utilize new technologies, including better inventory tracking, to improve relationships with their co-packing companies and distributors in 2016.

Wendy’s Leads the Way: How One Fast Food Company is Revolutionizing Supply Chain Management

Recently at the International Foodservice Distributors Association (IFDA) Distribution Solutions Conference held in Phoenix, Arizona, Ed Medlock, senior vice president of distribution, logistics and supply chain for Wendy’s International, spoke directly with foodservice distributors about the importance of staying up to date with the latest distribution technology. The session, entitled “A Co-op Perspective, What They Need in A Distributor Partner,” explored what a national supply chain co-op looks for when selecting a distribution partner.

“Distributors need to be up-to-date on technology and have systems in place to ensure good communication with the company’s franchisees,” says Medlock.

The Wendy’s International supply chain cooperative oversees the distribution for 95 percent of the company’s franchisees (288 in total), managing 18,000 weekly deliveries to 61,000 restaurants. As such, Medlock emphasized the need for distributors to be fully engaged with the latest technology changes, including employing the GS1 standard.

As of 2016, Medlock says all products in Wendy’s International supply chain will have the GS1 bar code, which enables a distributor to efficiently capture and track information including vendor lot numbers and vendor dates.

“Metrics are key,” Medlock said. “We measure everything, every week.”

Improved supply chain management through better metrics tracking will also make managing supply flow for limited time offers (LTOs) easier, reports Medlock.

System Distribution vs. Broadline System: What’s the Difference?

At the IDFA Conference, Medlock also discussed the importance of understanding the difference between a system distribution and a broadline system.

Broadline system distributors first emerged in the 1970s, offering a “one-stop-shop” for QSR supply chain distribution. As of 2010, the Hale Group reports that broadline foodservice distributors account for nearly 60 percent of all distributor sales operators, offering a “streamlined and tailored set of services” that are highly valued by foodservice operators. Broadline distributors require minimal purchase sizes per delivery, which guarantees bulk orders and allows distributors to offer lower cost products. Though convenient, and possibly the best system currently in place, it may not be the best solution. The proliferation of food safety scares and recalls in the last five years underscores how “one-stop-shopping” for QSR needs can also lead to supply chain contamination that is difficult to source and eliminate.

Looking Forward to 2016: How to Improve Supply Chain Efficiencies

Nearly 3 out of every 4 chains recently surveyed by HAVI Global Solutions (HGS) and Chicago-based Technomic Inc. report that increasing costs and logistics/transportation pressures have been a major challenge for the last three years, according to Food Logistics. With distributors, co-packing companies and QSRs all facing rising commodity costs, higher transportation expenses, and increasing labor costs, sophisticated management tools—like the GS1 bar code that Wendy’s International uses—are a must for 2016. An investment like this would improve the supply chain relationship between co-packing companies and QSRs will lead to mutually beneficial outcomes.

The future of QSR depends on agile supply chains that can deliver quality goods at an affordable cost, while also ensuring food safety.

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SugarCreek

Written by: SugarCreek

Sugar Creek prides itself on its authentic culinary expertise. With nearly 50 years in the food manufacturing business, we know what Americans want to eat.