Restaurant News from CrunchTime!

Restaurant Supply Chain Management

The Top 10 Requirements for an Integrated Solution
Managing a restaurant supply chain using spreadsheets, paper invoices, and/or multiple electronic systems
can cause staggering monetary losses that may remain almost invisible. How? Supply chain management
is a complex process, individual losses are small and can occur at many different points, and without an
integrated system the timely tracking of these inefficiencies is almost impossible. It’s like a miles-long oil
pipeline which can only be serviced on foot, that’s leaking
from many tiny holes. Non-integrated systems also make it It Pays to Integrate
hard to be responsive to food quality and safety issues, both In a company that does $50 million in
critical to ongoing success. An integrated approach that ties annual sales, a supply chain
the back office system to the supply chain solution has wide automated with the proper software
ranging benefits, and enforces order and accountability across can mean savings of $500k - $2 million
or more… every year.
the enterprise.

The Problem
To illustrate the complexity of managing a supply chain without an integrated solution, let’s see how that
approach affects a simple hot dog stand. The stand owner has a supply chain process to deal with, and must
answer important questions every day:

Process and questions

Plan for purchases Buy goods and services Take Delivery Troubleshoot problems

What should I offer my
customers?
How much am I likely
to sell?
What will I need to
buy?
Who will I get it from?
Which vendors offer Is this what I ordered? Why am I running
what I need? short of these items?
Is the quality
What is the pricing for acceptable? Why am I wasting so
each of the vendors? much of this item?
Is this what I agreed
Which vendors are to pay? Why is this order late
most reliable? or missing?
Is the service
acceptable?

The process is complicated, but the hot dog stand owner has three critical advantages:
1. A simple menu.
2. One person makes all the business decisions.
3. One person has visibility into all aspects of the operation.

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But take this approach and apply it to a restaurant chain managing hundreds of products across dozens of
markets, and it becomes substantially more difficult to execute efficiently, due to 2 main factors:

1. Multiple people are involved in the process, but none have visibility to every part of the system, making
truly informed decisions a challenge.
2. Tracking inventory from the negotiation stage to procurement, delivery, and on through use, in real
time, is almost impossible. Proper cost control is daunting.

The Specific Problems

Following are typical problems in a restaurant supply chain managed without an integrated software solution:

1. Accurate sales forecasts based on historical data and current trends are difficult and time-consuming
to generate, which leads to under-ordering (and unhappy customers) or over-ordering (and increased
waste).
2. Prices paid for goods may be too high, due to:
Problems “normalizing” prices during vendor price comparison (i.e. one vendor sells by the
pound, the next by the case). Spreadsheets offer a poor vehicle for comparing the cost of
various items from multiple vendors, creating a time-sink of data entry and manual formatting.
A lack of centralized control of order guides and approved vendors, allowing restaurants to
engage in unauthorized spending at non-negotiated pricing.
Ordering outside of business rules (e.g. below minimum quantities) may trigger premium
pricing.
Orders may include unapproved vendor substitutions at higher costs.
3. Menus may be unprofitable due to inaccurate or non-existent cost-modeling, whether for LTOs or
everyday items. Any item with poor margins that’s sold 500 times a day will crush a bottom line; poor
margins should never come as a surprise.
4. Manual ordering and receiving generates reams of paper and mistakes.
It makes comparing orders and invoices to their underlying negotiated contracts so difficult that
many companies skip the process altogether. Contract non-compliance is a major source of
lost cash.
It wastes an enormous amount of managers’ time, virtually every day.
Data should never be entered twice, as it dramatically increases errors; for example, orders
shouldn’t be placed via a vendor phone, FAX or website, and also entered into a back office
system.
5. Without an easy, centralized way to give feedback on the quality of food delivered, and the service
during the delivery, there’s no way to correct poor
vendor performance. The restaurant supply chain is
6. Manual maintenance of allergen and nutritional inefficient by design
information is tedious at best.
In processing over $3 billion in
invoices in 2011, we found that 12%
Historically the problems above were so pervasive, and so
of PO lines had recoverable
expensive, that ultimately they led to the creation of the compliance errors.
integrated supply chain software industry! In our work with some

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of the world’s great brands, the implementation of integrated supply chain solutions has resulted in savings
of 1% to 5% of sales. In a company that does $50 million in annual sales, a supply chain automated with the
proper software can mean savings of $500k - $2 million or more… every year.

10 Requirements of an Integrated Restaurant Supply Chain Solution

The following features and functions can generate substantial savings and solve the problems outlined above;
they are requirements on a truly integrated supply chain solution:

1. Menu engineering functions for recipe modeling, where the effects of ingredient cost changes,
substitutions, and usage amounts can be predicted. A recipe’s profitability must be determined before
rollout, eliminating costly trial and error.
2. Powerful forecasting tools should enable the delivery of just enough inventory, just in time, and
should make it easy to incorporate adjustments for LTOs, weather, holidays and events. Forecasting
should also link to labor scheduling, and the best tools will allow forecasts to be specified by sales
dollars, guest counts, dine-in vs. takeout, and more; flexibility means accuracy, and accuracy means
profits.
Cash Back
3. Vendor bid analysis that enables easy comparison of
“normalized” prices (all prices are converted to a single unit, An automated supply chain
e.g. per pound, or per case) for a given item, across multiple system contains all contracted
vendors in multiple markets, ensuring a competitive price in prices, orders, and invoices,
every location. For maximum savings, comparisons must be making it possible to quickly
generated easily for every item- virtually impossible for manual identify and recover
systems. overcharges due to non-
4. Ordering should be fully optimized. The system should compliance to negotiated pricing,
generate accurate suggested-orders based on sophisticated delivery overs and shorts, and
forecasts, to save time and reduce costs. It should also product substitutes.
generate automated alerts when an order quantity outside
normal limits is entered, avoiding potentially expensive mistakes. A best practice is to enter the order
in only one system, and not in both the back office system and a vendor’s web site; the system must
provide for data entry at a single point.
5. Receiving must be possible “by exception” (where only inaccurate quantities must be noted), saving
managers substantial amounts of time on every delivery. The ability to do three-way-match between
the order, an electronic invoice, and the physical receipt of goods has benefits across the
enterprise.
6. Built-in and updatable nutrition and allergen databases are needed to safeguard customers and
help meet regulatory requirements, a process that is unwieldy at best in a manual system.
7. Centralized order guides for vendors must be controllable at the corporate level, and limit what (and
from whom) restaurants can order, preventing rogue spending at non-negotiated pricing.
8. Manufacturer Lots should be tracked in the system from purchase through use, enabling rapid
response to recalls and other food safety issues, and protecting both the customer and the company.
9. Vendor score-carding should be possible through a centralized database for recording and sharing
information quickly among restaurants and the corporate office. Fill ratios, damaged goods reports,

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and the service quality of delivery people should be visible to all, helping to eliminate problem vendors,
increasing accountability across the enterprise, and reducing wasted time and money.
10. The system should generate automated credit alerts when invoice price exceeds contracted price,
so loss recovery is automatic. Not only are costs recovered that would otherwise be lost, but inventory
costs at the restaurants will be far more accurate, making better food cost control possible.

Conclusion
The nature of a multi-unit restaurant supply chain, with its many vendors, purchasing agents, broad
assortment of goods, multiple restaurant locations, and processes that must be repeated thousands of times
annually by associates of varying expertise, creates many moments where profits can disappear. Integrated
supply chain tools reduce the number of “moving parts” or opportunities for inaccuracy (like ordering, or
vendor bid comparisons), they make it easier to enforce business rules and accountability, provide
outstanding visibility into the supply chain process in real time, and ultimately save time and substantial
amounts of money for their operators. The CrunchTime! back office solution addresses these issues by
allowing restaurant operators to build exacting business rules centrally, which the system will tirelessly
enforce throughout the enterprise.

About CrunchTime!
CrunchTime! Information Systems is a leading provider of enterprise solutions for the hospitality industries.
Since 1995, CrunchTime! has helped customers dramatically reduce food & beverage costs, drive labor
efficiencies, and better manage the quality and consistency of their food service operations. Customers
include multi-unit restaurants, cruise lines, hotels, and food service management companies around the
world.

For More Information

For more information on CrunchTime!’s integrated supply chain tools:

Phone: 617-567-5228 x237

E-mail: info@crunchtime.com

Web: www.crunchtime.com

CrunchTime! Information Systems - 8 New Street, Boston, MA 02128 - info@crunchtime.com – www.crunchtime.com