Case 2 Opmt

For the exclusive use of P. Rao, 2023.
CB0065
REV: September 20, 2020
XIANDE ZHAO
LIYANG RUAN
LIANG WANG
Baman Technology:
Building Supply Chains for “Boundaryless Dining”

In November 2019, Zhang Tianyi, CEO of rice noodle chain Beijing Baman Technology Co., Ltd.
(“Baman”), announced expansion plans. Founded in 2014, Baman ran more than 60 restaurants in
China’s northern Beijing-Tianjin region, with an average daily turnover of more than ¥10,000
(US$1,446) ① each. The company’s retail business was also growing steadily.
Baman ② started out building brand reputation and popularity using online community marketing.
In its first year, the company opened five restaurants and then rolled out its hallmark “boundaryless
dining” model over two years. By adding takeaway and retail products to its range, Baman went
beyond the confines of traditional restaurants to form a diversified and complementary revenue
matrix.
However, by 2017, Baman was weighed down by excessive inventory, forcing Zhang to examine
the importance of supply chain management. The company began integrating supply chain
management with business strategy the following year. The measures included clarifying supply
chain positioning, segmenting its management for restaurant and retail needs, and ensuring
collaborative innovation with partners to lower costs and generate greater efficiency.
Baman’s enhanced supply-chain management capabilities set it apart from many other restaurant
brands that had become popular online. They made it more sustainable in an industry where names
generally only lasted two or three years. The next challenge for Baman was to manage more complex
supply chains as its businesses and markets expanded.
Background
After earning a master’s degree from Peking University in 2014, Zhang turned down conventional
job offers and founded Baman with ¥150,000 raised between him and some friends to sell Hunan beef
①
¥ = CNY = Chinese yuan renminbi; ¥1 = approximately US$0.144672 on August 25, 2020.
②
Originally known as “Funiutang”, later renamed to “Baman” in April 2018, a name from the Hunan dialect which literally
means never give up.
Professor Xiande Zhao, Case Writer Liyang Ruan and Research Fellow Liang Wang of China Europe International Business School prepared this
case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by
China Europe International Business School and not by the company. CEIBS cases are developed solely as the basis for class discussion. Cases are
not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
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This document is authorized for use only by Parina Rao in Case 2- Summer 2023 taught by Mazyar Zahedi-Seresht, University Canada West from Aug 2023 to Sep 2023.
Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065
rice noodles. As a native of Changde, Hunan province, Zhang was a connoisseur of beef rice noodles.
He felt that while standardized preparation of many Chinese dishes was not possible, beef rice
noodles were an exception. Although the beef needed hours of preparation and stewing to produce
broth, beef rice noodles could be made to order within 30 seconds through a standard process of
boiling rice noodles and adding broth and toppings. Zhang simplified the process to a set of steps and
pre-prepared ingredients to produce high-quality beef rice noodles in record time.
Baman quantified traditional beef broth recipes that depended greatly on a chef’s experience into a
carefully proportioned spice mix of 24 ingredients. The company also defined rigorous cooking
standards. The beef, including tendon and bone, required at least five hours of stewing to make the
broth. Additionally, only a certain kind of long-grain non-glutinous rice containing at least 25%
amylose was suitable for the rice noodles. The company also dictated that the broth had to reach a
Scoville Heat Unit (SHU) ① of at least 399. This structured approach meant that Baman could serve up
beef rice noodles fast and easily with a consistent taste and quality.
Baman could not afford to open outlets in prime locations with high footfall initially and so instead
leveraged online traffic to build a following. By marketing products via China’s Twitter-like
microblogging platform Weibo and instant messaging super-app WeChat, Baman gained followers
among Hunan communities studying and working in Beijing. The initiative snowballed into a
2,000-member-strong online fan club. Word of mouth from this group boosted the brand’s visibility,
earning the company millions of fans and even media coverage from state broadcaster CCTV and the
BBC. Baman invested significant time into fan base interactions online and offline. It invited the most
loyal customers to try newly developed or redesigned dishes to collect valuable feedback and
suggestions. Baman’s efforts bore fruit, and the firm soon began to turn a profit allowing the opening
of four more outlets in the first year of operations.
“Boundaryless Dining”
Zhang was aware that Baman’s fledgling strategy to strike up a customer base for its physical
restaurants through online marketing was incapable of underpinning long-term growth. Other
players that adopted a similar strategy had struggled to scale-up their businesses. To avoid the same
predicament, Zhang removed limitations on the restaurant experience. The firm aimed to cut
dependency on actual footfall, which was prone to fluctuations while offering customers the freedom
to enjoy beef rice noodles anytime and anywhere. To this end, Baman launched what it called
“boundaryless dining” in 2015, breaking with the constraints of traditional restaurants in terms of
limited opening times and seating.
The strategy began with the addition of a take-out service, offering customers the opportunity to
eat noodles at their office or home, so long as their location was within a certain radius of a Baman
eatery. Rice noodles lose their taste when soaked in broth for too long, so the company redesigned
takeaway packaging to separate broth and noodles during transit and preserve the taste for about one
hour after dispatch. The takeaway dishes were essentially an extension of its fresh food business.
Therefore, to push the boundaries of time and space even further, Zhang set his sights on retail. He
wanted to package his ingredients so that they had a long shelf-life, thereby making his dishes
available anytime and anywhere. Baman had laid a foundation for standardized production and, in
2016, developed pre-packaged food that would stay fresh for up to 120 days. Dried rice noodles,
①
The Scoville Heat Unit is a measurement of the pungency (spiciness) of peppers and other hot foods. The scale is based on
the concentration of capsaicin, an active component of chili peppers that produces a burning sensation when it touches your
tongue or skin. A beef rice noodle with SHU lower than 399 will make Hunan people feel the dish is “unauthentic”.
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sealed broth, cubed beef and side dishes were processed in-factory, packaged in cardboard boxes and
distributed to retailers across China. This product provided the convenience of storage and cooking. It
took consumers only eight to ten minutes to make a bowl of beef rice noodles at home with nearly the
same taste as a dine-in order. Baman sold the pre-packaged noodle dishes for about ¥20 per box,
slightly cheaper than the price of a bowl in-store.
Members of its online fan community were the first consumers and promoters of the pre-packaged
foods. By guiding community traffic to its flagship store on Alibaba’s premium e-commerce platform
Tmall, Baman increased monthly sales from zero to ¥1 million in about two months ①. The move
expanded Baman’s presence beyond Beijing and Tianjin to the whole country. The enterprise also
diversified sales channels to cover not only online marketplaces like Tmall and JD.com but also more
than 3,000 offline supermarkets, including upmarket Ole, Alibaba’s Freshippo, JD’s 7Fresh, Metro and
Carrefour.
This portfolio of dine-in, takeaway and pre-packaged products brought Baman diverse revenue
streams. By 2017, Baman had opened 13 restaurants, contributing nearly one-third of total income.
Takeaway and retail accounted for another 30% and 40%, respectively. At the same time, Baman
began cross-marketing campaigns. For example, a typical store would reserve a display space for
pre-packaged products available for purchase. Restaurant staff would also recommend internet
channels for pre-packaged goods, driving the conversion of offline traffic to online sales. Baman also
offered diners a WeChat mini-program for in-seat ordering (with a 90% uptake), which collected user
and transaction data for marketing uses. Zhang believed that cross-selling would boost online and
offline growth for both restaurants and retail.
Excess Inventory
Baman accelerated the expansion of retail products in the second half of 2017. Zhang maintained
that customers who loved Hunan beef rice noodles would also want to buy other typical snacks from
the province. Baman arrived at this conclusion after successful trials offering local favorites like stinky
tofu and sweet dumplings as side dishes. He also noted that a large retail market already existed for
products like stinky tofu, which racked up more than ¥300 million in annual sales on Taobao alone.
Zhang also observed that the Hunan snack market was highly decentralized without a clear leading
brand. Baman had already built a solid reputation. The company name comes from Hunan dialect,
which adds to the brand’s authenticity and credibility. Zhang and his team identified several
categories of snacks that had posted yearly sales in excess of ¥100 million on Taobao, and that were not
distributed by any major retailer. Baman engaged several manufacturers to make products under its
brand and added nearly 40 SKUs (stock-keeping units) to its retail product line in just a few months.
Zhang expected each SKU to generate ¥10 million in annual sales, bringing in around ¥400 million in
total, up from ¥150 million in 2017.
However, Baman was soon saddled with huge excessive inventory for the first time since its
inception. Zhang was at a loss; he previously operated between 30 and 40 SKUs for the restaurant
business without encountering any serious overstocking issues. Baman had assumed that the retail
business, with its bigger market, would pose no problem. In contrast, the same SKU expansion led to
surplus stocks with inventory turnover on some items exceeding 60 days. Slow-moving stock soaked
up vast amounts of capital, compounding Zhang’s problems. “From late 2017, the first thing I would
do as soon as I got up every morning was check our cash flow and stock level,” he said. “They had
①
As of Aug 2020, Baman’s monthly sales on Tmall (including flagship store, Tmall supermarkets and third-party distributors)
have reached ¥15 million.
3
never been a concern before, but the retail business turned out to be a completely different ball game.”
Unsold inventories mushroomed to nearly ¥20 million at the end of that year.
Supply Chain Reflections

Zhang never envisaged that supply chain issues could hinder Baman as there was an abundance
of dedicated suppliers available in the food industry. His experience provided invaluable insights
into such management: “The importance of supply chains was not obvious when the business was
small,” he said. “However, as the company grew in magnitude, so did the importance of good supply
chain efficiency for survival… effective supply chain management turned out to be far more complex
than just outsourcing.”
In late 2017, Zhang reexamined supply chain management at Baman from a strategic perspective.
In his view, the company’s comparative advantages in the catering and food industry lay at each end
of a “smiling curve,” i.e., product R&D, branding and customer relationship management. Therefore,
Zhang aimed to strategically position Baman as a brand owner and virtual manufacturer in the
supply chain. “Our role in the catering and food supply chain is similar to that of Apple in the
smartphone supply chain, i.e., to provide customers with quality products and services, and to attract
more orders for upstream and downstream partners, while leaving the procurement, production,
distribution and logistics jobs to more specialized suppliers,” he said.
Zhang also found that what applied to the restaurant supply chain did not necessarily apply to
that of retail. The two required different management approaches. In the long term, Baman needed to
strengthen supply chain relationship management and reinforce mutually beneficial cooperation
with upstream and downstream partners, instead of treating them only as providers. “Improvement
of supply chain efficiency and reduction of relevant costs will bring mutual benefits and win-win
results, so they require concerted efforts from both upstream and downstream partners,” he said.
Supply Chain Segmentation

Retail Supply Chain: Reducing SKUs to Boost Efficiency
In 2018, Baman reduced the number of its retail SKUs from nearly 40 to less than ten to eliminate
excess inventory and free up working capital. The company also cut some SKUs that generated sales
but at the cost of high capital occupation, as they required high minimum order levels (e.g., a
minimum order of 30,000 units was required for the stinky tofu SKU). Only the most in-demand
SKUs were retained. Larger bulk orders led to economies of scale through discounts and allowed
Baman to forge better links with suppliers (e.g., shorter lead time). At the same time, the best-selling
SKUs effectively ended up with faster sales cycles, improved inventory turnover and less
overstocking. The firm also avoided frequent retail SKU updates because, unlike dine-in offerings,
changing retail SKUs could mean the replacement of raw materials and production barcodes, which
would be complex and lead to material waste (eventually become operating costs).
In Zhang’s view, the supply chain strategy of minimizing complexity and increasing efficiency
was a perfect match for Baman’s retail business at this stage. For a small-sized brand owner with
lesser bargaining power over food suppliers, cost efficiency on the supply side came before
profitability. It would be better to use supply chain metrics than market indicators to decide whether
an SKU was profitable, to avoid high book profits but low working capital. He hoped that Baman
could create more sustainable ‘Super SKUs’ like “Kangshifu Braised Beef Flavor Instant Noodles” or
4
“Unif Beef with Sauerkraut Flavor Instant Noodles,” that drove repeat purchases, and used a highly
efficient and stable supply.
Restaurant Supply Chains: Increasing SKUs to Hedge Risk

Zhang adopted a completely different supply chain strategy for the restaurant business in which
the company had more experience. Baman restaurants generally offered up to 30 products, 30% of
which were subject to annual adjustments. The firm replaced poor-performers with new ones or
innovated slightly on flagship products, such as creating new selling points with ingredients popular
online. He believed that today’s restaurant industry could not replicate the success of centuries-old
best-sellers like Peking duck. Restaurants needed to update their offerings from time to time,
drawing inspiration from fast fashion to retain customer attention.
More importantly, Baman’s restaurant business suppliers considered the company a key account,
providing the company with greater bargaining power (in comparison, the firm held less clout in the
larger retail chain and was afforded less flexibility). Greater supply chain flexibility for the eateries
allowed Baman to place lower-volume orders from time to time and get faster responses from
suppliers. To reduce the cost of maintaining relationships with multiple suppliers, Baman forged
closer ties with a few key players. The firm offered them more orders (at a lower procurement cost),
engaged them in more supply chain processes and built up positive links that allowed more flexible
coordination.
With a clear distinction between retail and restaurant supply chains, Baman defined respective
objectives and key performance indicators for the two business lines. This approach provided a
roadmap for supply chain deployment, as well as collaboration with upstream and downstream
resources. In this way, Baman resolved supply chain problems that stemmed from treating the
restaurant and retail businesses in the same way, and gradually refined the management of its
dual-segment supply chains.
Upstream Collaboration and Innovation

Supplier Selection
Baman’s upstream suppliers were mainly involved in the procurement and production processes.
Food safety was of utmost importance in the food industry, and any failure could severely impact
brand reputation. Baman prioritized three factors when selecting and evaluating suppliers for its
restaurant and retail businesses, namely, quality, flexibility and price. For example, if the average
industry defect rate was six items per 10,000, and while supplier A and supplier B had rates of five
and one per 10,000, respectively, Baman would select Supplier B, even if Suppler A expressed greater
interest in cooperation and offered better pricing. Zhang would go the extra mile to make
relationships with demanding suppliers work if he knew their reliability could add value to the
brand.
To hedge specific risks in the restaurant supply chain, Baman classified suppliers A, B and C. ① By
working with a reasonable number of A, B and C-class suppliers, Baman hoped to boost flexibility
and efficiency along the supply chain. He attached the greatest importance to quality when selecting
B and C-class suppliers. The firm adjusted the distribution of orders among the three types of
suppliers periodically according to performance. For example, Baman conducted weekly evaluations
①
A-class= primary supplier, B-class= secondary supplier，C-class = backup supplier
5
on restaurant food suppliers based on product quality (60%), service quality (25%), process
improvements (5%), compliance and anti-corruption safeguards (5%) and R&D innovations (5%).
Baman split the all-important product quality indicator into several sub-categories (see Exhibit 1),
two-thirds of which related to customer feedback. The company shared these indicators with
suppliers to show that customers, not Baman, had the final say on supplier performance.
Collaborative Innovation with Key Suppliers

Baman generally gave the majority of orders to key suppliers as long as they delivered on
performance. This approach reinforced Baman as an essential partner and strengthened relationships
with these suppliers. A-class catering industry suppliers usually provided an array of value-added
services, including procurement, warehousing and deliveries, in addition to central kitchen
production. Baman used all these additional services even though it was not the most cost-effective
approach. Zhang explained it was better to outsource these functions to one key player than to
multiple suppliers to guarantee better service quality, fewer coordination costs, and sustain good
cooperation by ensuring their healthy profit margins.
One of Baman’s topping manufacturers serves as an example of this principle: the company in
question had a solid industry reputation. It supplied to several well-known chains in the
Beijing-Tianjin region. The manufacturer provided a variety of toppings for Baman stores and also
served other supply chain processes. It procured ingredients on behalf of Baman, stored and
distributed them. It also centrally warehoused and delivered other Baman inputs like rice noodles,
snacks and drinks (see Exhibit 2).
Baman would also seek out constructive input from key suppliers for product R&D. For example,
the firm once planned a fish topping in response to customer demand. However, key suppliers said
that the fragile nature of fish flesh posed a technical challenge during processing and led to higher
wastage and costs, as well as unguaranteed quality. Baman ultimately abandoned this plan. Another
example related to beef offal topping. The supplier had more experience than Baman in mixing offal
ingredients to produce toppings at a reasonable cost. In exchange for the advice, Zhang was willing
to reduce the company’s own margin and give more to the supplier.
Zhang personally met the heads of each key supplier and visited their facilities as he was a firm
believer that treating key suppliers as “in-house players” would help nurture solid relationships. As a
top graduate from Peking University, Zhang was able to rapidly learn about the industry through his
supplier interactions before applying this knowledge to develop ties with small and medium-sized
suppliers.
Growing Together with Smaller Players

Baman also worked with small and medium-sized suppliers, most of which it partnered during its
fledgling stage. Although these suppliers provided quality goods, they failed to boost production
capacity to keep pace with Baman’s expansion. The company decided to help those small and
medium-sized suppliers that were keen to work with the firm and willing to adjust capabilities that
benefited their relationship.
For example, Baman assisted a wide rice noodle producer that was using outdated production
approaches. Zhang shared with the company lessons that he had learned or had picked up from
other key suppliers and recommended a consulting firm to help them improve production. The
recommendations covered new equipment purchases, production process reengineering and
visualization, operational process optimization and personnel training. Baman also covered part of
6
the equipment upgrade costs by refunding part of the order amount. In return, the supplier offered
not only a dedicated modern production line for Baman, but it also linked its production scheduling
to the company’s store management information system, which collected daily orders from more
than 60 eateries, cutting communication costs. The supplier also provided Baman with favorable
prices 1.5-2 times cheaper than those offered to other firms. Zhang said it was not a zero-sum game in
which the supplier made concessions to Baman, but a win-win game for the growth of both parties.
“It wasn’t profitable and even lost money at the beginning,” he said. “However, as production
capacity expanded, it grew into a leading wide rice noodles manufacturer in the Beijing-Tianjin
region, with larger business volume and higher selling prices.”
Supply Chain Synergies

Baman tactically sought out synergies between its newly segmented restaurant and retail supply
chains and engaged capable manufacturers to supply both in-store and pre-packaged foods. Zhang
believed that the processing approaches for foods in restaurants and retail were reasonably similar.
Beef toppings, for example, were first stewed in a central kitchen. Baman could freeze the beef and
deliver to restaurants via cold chain, or sterilize it at a high temperature before pre-packaging for
retail. The processes were more or less the same, except for the final step. In theory, beef stewing
could serve as a decoupling point in the supply chain: part of the beef could be sterilized at a high
temperature based on actual demand, with the rest frozen and delivered to outlets. It was also
theoretically feasible for one rice noodle supplier to fulfill restaurant and retail orders as production
for each channel only differed in the final step (dehydration for retail).
Few suppliers of premium topping ingredients, except for one beef offal supplier, were willing to
try this synergized method. Restaurant supply chains were particularly reluctant to serve retail, even
if it meant more business from Baman. Zhang attributed their reluctance to path dependence: “the
suppliers believe their strengths lie in the catering market, and to serve retail would mean entering a
completely new food processing field. In fact, all they need to do is add one more step to their
production line, more specifically, purchase and deploy high-temperature sterilization equipment,”
he said. Suppliers willing to try something new also failed to deliver the desired results. “One
supplier tried to produce retail products at a slower speed than I expected.”
Nevertheless, Zhang was determined to pursue this strategy. By involving more suppliers capable
of serving restaurant and retail supply chains at the same time, Baman could further reduce costs,
increase efficiency and improve supply chain flexibility to hedge risks as business expanded.
Downstream Delivery Optimization

Optimizing the downstream delivery network posed a new challenge to Baman. There were no
downstream partners to manage the restaurant supply chain since the company was the
end-consumer in the chain. However, after entering retail, Baman became a supplier of pre-packaged
products for e-commerce platforms like Taobao and JD.com, as well as traditional offline players like
Hualian Group and Carrefour. As a newcomer, Baman ran into some problems due to a lack of
experience in the sector. In e-commerce, Baman opened flagship stores on Tmall and JD.com, both of
which punish sellers for failing to dispatch items within 48 hours of receiving orders. It generally
took four to five days for Baman’s pre-packaged products to arrive at the e-commerce warehouse due
to a poor location choice. Online sales were often tricky to forecast. Baman had no choice but to hoard
as many goods as possible in the e-commerce warehouse to avoid platform punishments. This
situation contributed to the company’s excessive inventory level in late 2017.
7
Delivery Network Optimization

Baman optimized a packaging and delivery network for its retail product line to resolve issues.
Zhang found that there were two critical nodes in the retail chain. One was the packaging facility that
combined toppings, rice noodles and packaging from different producers to make the finished
products. The other was the e-commerce warehouse, which ensured the deliveries nationwide (see
Exhibit 3). Connectivity between these two nodes was of utmost importance and determined the cost
and timeliness of the entire downstream network. Baman respectively relocated the packaging
facility and e-commerce warehouse to Huaihua and Changsha, both in Hunan province. The
Huaihua plant allowed Baman access to premium topping suppliers at a lower cost while the
Changsha warehouse brought convenient transportation. The close vicinity of the two made
overnight deliveries possible. If the warehouse was out of stock, then Baman could
“package-to-order” as long as the finished goods could arrive at the e-commerce warehouse the next
day. As a result, Baman was able to eliminate most safety stock.
Baman adopted the same supply chain strategy, positioning and tactics used in upstream
operations for the downstream stages. The company remained focused on branding and customer
relationship management in which it excelled while outsourcing other functions to partners. Quality,
flexibility and price remained the key criteria for selecting downstream partners. Baman also pushed
for consolidation by having the same e-commerce warehousing partner undertake as many logistic
jobs as possible.
E-commerce Collaboration
Baman marketed products directly to consumers via flagship stores on Tmall and JD.com. As it
gained in popularity, the firm entered the 2B (to-business) market, serving self-operated storefronts
on the Tmall Supermarket section and JD.com by directly shipping to their warehouses. Baman
positioned itself as a humble “learner” when collaborating with leading online selling sites. “These
big platforms are role models for us to learn, we respond supportively to their purchasing and
replenishment needs,” Zhang said. “They offer information system interface, specialized software
and even application programming interface (API) to suppliers like us to facilitate our collaborations.
Communication between us is smooth…We can benefit a lot from the market and demand
information they share with us.”
Zhang felt that e-commerce majors were strongly motivated to integrate with suppliers, which
perfectly suited Baman’s supply chain strategy. As collaboration deepened, synergies emerged.
“These big platforms sometimes use our products in production for pre-sales, and sometimes guide
us to conduct cross-docking with them (i.e., ship our products from our assembly plant directly to
their front warehouses, skipping our own e-commerce warehouse stage)… These help both of us to
improve supply chain efficiency.” However, collaboration was limited to information sharing for the
most part.
Looking Forward
Further Synergies between Supply Chains
Zhang reflected that Baman had made great strides in supply chain management over the last two
years but conceded the firm “still had a long way to go. As our restaurant and retail businesses
continue to grow, more supply chain challenges are ahead.” One pressing question was how to
convince more suppliers to serve both restaurant and retail supply chains, which would boost
8
Baman’s flexibility. The company could not resolve this by simply adding equipment, Zhang said,
adding that the issue required a change in mindset. He had to find a better way to boost supplier
collaboration. Should he hold thorough discussions with suppliers, expounding the benefits on offer?
What kind of cooperation mechanism should Baman pursue? Technical improvements were also
necessary, and Zhang considered adopting an integrated ERP system for catering and retail suppliers
to help count their input and benefits when serving both businesses simultaneously.
Market Expansion
Another lingering question was how to open more outlets and conquer more regional markets.
Baman had emerged from running more than 60 outlets with a standardized and replicable operating
model for restaurants covering aspects such as staffing, division of labor, standard operating
procedures (SOPs), and supervision. The company broke down the actions of each store visitor into
375 sequences to standardize management of each engagement point. Baman set up an enterprise
university and training programs to build a talent pipeline to aid expansion. Newly recruited college
graduates could generally become restaurant managers after six months of training. Baman’s outlet
design drew inspiration from “Chu culture” ① by incorporating typical elements such as Chu Ci (The
Verses of Chu), the phoenix and the hanging chair, making the restaurants popular selfie spots.
However, Baman stores were only present in the Beijing-Tianjin region. Zhang had communicated
with investors when raising early funding that Baman would not expand beyond Beijing unless it
opened at least 50 outlets there and achieved economies of scale. Blindly opening stores in Beijing,
Shanghai, Guangzhou, Shenzhen and other major cities at home and abroad could only result in low
supply chain efficiency. Now that Baman had reached 60 outlets in its stronghold, was it time to foray
into other regional markets?
Zhang put plans to expand to Shanghai on ice in 2018, partially due to supply chain concerns. The
service scope of its restaurant food suppliers was confined to the regional market. Therefore, Baman
would need to engage new suppliers to establish a presence in Shanghai, which would probably
bring new management problems. He decided to rethink his approach and start by formulating an
executable plan based on Baman’s established strategy, addressing issues such as customer
acquisition and supply chain support.
For the moment, Zhang planned to open 100 outlets in the Beijing-Tianjin region (including one
store per two square-kilometers within the capital’s fourth ring road). This way, Baman could become
part of ‘Beijing’s infrastructure.’ Single-outlet traffic would remain unchanged as outlet density grew
while there would be cost reductions and supply chain efficiency improvements. Running 100 outlets
would help Baman fully tap into its restaurant supply chain capacity. However, product development
and update issues would arise. How should Baman attract new customers to its new outlets with
better offerings, without encroaching on the traffic of pre-existing outlets? While eager to open more
outlets, a franchise system was not on Baman’s agenda because its outlets had played a key role in
driving retail sales, and the management of franchised outlets could pose new challenges or even
“endanger our brand’s reputation.”
Self-operated Supply Nodes

When considering expansion, Zhang also pondered over whether Baman should build
self-operated key nodes in the supply chain to better support its future nationwide supply and
①
Chu was a major country in ancient China during the Spring, Autumn and Warring States Period (770 B.C.-221 B.C.). Chu
culture is regarded as a symbol of Hunan in China today.
9
delivery. Guided by its “owning two ends, and coordinating middle processes with partners” supply
strategy, Baman had reimagined the entire cycle of supply chain operations from supply to delivery
by driving collaborative innovations with suppliers and adjusting the network layout. However,
Baman’s restaurant supply chain remained regional while the retail one was yet to reach maturity.
Would such an “asset-light” supply chain be resilient enough to deal with a future spike in outlets and
retail SKUs? Zhang had gained considerable knowledge of food factory construction and operations
by working with key suppliers on collaborative innovations and with small and medium-sized
suppliers on mutual growth. Various local governments were also willing to provide factory sites, so
should Zhang leverage these internal and external resources to “add some weight” to Baman’s supply
chains? The potential existed to build a self-operated food factory, packaging facility or a central
warehouse, like those of Alibaba’s Freshippo.
By building its own factory or warehouse, Baman would be able to increase control over supply
chains, minimize supply disruption and improve its efficiency as well. The facility would bring
greater cost advantages and returns on investment once at full capacity. At the same time, however,
Baman would have to be more involved in some intermediate supply chain processes, which would
bring new challenges such as new business processes and personnel management as well as
increased fixed asset investment.
Facing these questions concerning Baman’s short-term and long-term development, what should
Zhang do to ensure the company’s supply chains grow in line with its scale-up plans?
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Exhibit 1: Examples of Baman’s Supplier Performance Evaluation Indicators
a) Overall
Supplier Rating Goods Service Process Compliance Innovation Total Change from Quarterly Score
Quality Level Improvement (5) in R&D (5) Score Previous Week (Cumulative)
(60) (25) (5)
A King 60 25 4 5 0 94 – 269
B Gold 59 25 0 5 2 91 3 257
C Sliver 56 25 0 5 0 86 3 237
D Bronze 48 25 0 5 0 78 -3 247
b) Sub-indicators in Goods Quality
Goods Quality (60)

No. of Converted No. of complaints Converted No. of Converted Major Converted
Supplier
complaints (on score (on foreign score complaints score accident score
deterioration) matter) (others)
A 0 15 0 15 0 10 0 20
B 0 15 0 15 1 9 0 20
C 0 15 0 15 4 6 0 20
D 2 5 0 15 2 8 0 20
A total of 15 points; 5 points A total of 15 points; 5 points A total of 10 points; 1 point 20 points for no major
deducted for each complaint deducted for each complaint deducted for each complaint accidents; and zero for
regarding the deterioration of regarding foreign matter regarding food ingredients any major accidents
food ingredients found in in food ingredients
Note: The data are subject to concealment treatment, and only part of the suppliers are selected.
Source: Baman’s internal statistics
11
Exhibit 2: A Demonstration of Baman’s Restaurant Supply Chain
Source: Summarized by the case author
12
Exhibit 3: A Demonstration of Baman’s Retail Supply Chain
Source: Summarized by the case author
13

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Building Supply Chains for “Boundaryless Dining”

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Supply Chain Reflections

Supply Chain Segmentation

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Restaurant Supply Chains: Increasing SKUs to Hedge Risk

Upstream Collaboration and Innovation

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Collaborative Innovation with Key Suppliers

Growing Together with Smaller Players

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Supply Chain Synergies

Downstream Delivery Optimization

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Delivery Network Optimization

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Self-operated Supply Nodes

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Exhibit 1: Examples of Baman’s Supplier Performance Evaluation Indicators

b) Sub-indicators in Goods Quality

Goods Quality (60)

Source: Baman’s internal statistics

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Exhibit 2: A Demonstration of Baman’s Restaurant Supply Chain

Source: Summarized by the case author

Baman Technology: Building Supply Chains for “Boundaryless Dining” CB0065

Exhibit 3: A Demonstration of Baman’s Retail Supply Chain

Source: Summarized by the case author

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