A Detailed Guide To Restaurant Supply Chain Management

By Jay Altizer|Jan 30, 2024|1:00 pm GMT

In the fast-paced, ever-evolving restaurant industry, understanding the intricacies of supply chain management is paramount. Restaurant supply chain management is about more than just how you get your ingredients and raw materials.

It’s about sourcing, ordering, tracking, and managing all the components that go into running a successful restaurant. It’s about developing relationships with suppliers and creating contingency plans in case something goes wrong. And ultimately, supply chain management is about your bottom line.

In this guide, we’ll take a deep dive into what supply chain management entails, as well as supply chain management tips and best practices for managing your supply chain.

Understanding your restaurant supply chain

In order to effectively manage your supply chain, you first need a thorough understanding of what supply chain management actually is and how the supply chain works.

Restaurant supply chain management specifically focuses on the processes involved in the procurement of food and other supplies from suppliers to restaurants. It involves managing relationships with suppliers, ensuring timely deliveries, monitoring inventory levels, controlling costs, and ultimately delivering finished products to customers.

Restaurant supply chain components

There are a number of components involved in the restaurant supply chain. First, you have the suppliers. They provide raw ingredients, beverages, as well as equipment. Then there are the distributors, who function as intermediaries between suppliers and restaurants. Distributors transport in bulk to the restaurants. And finally, there are the restaurants themselves, who are the end consumers of these items.

In between these three parties, you have logistics and transportation. This includes trucking companies moving supplies from food suppliers and distributors to restaurants, as well as freight companies who handle the logistics of moving large quantities of supplies and equipment.

The impact of the supply chain on restaurant operations

Each component of the supply chain plays a critical role in ensuring that restaurants have the necessary supplies to operate and serve their customers. A breakdown at any point in this chain can result in disruptions and delays, negatively impacting your restaurant’s operations and customer satisfaction.

It’s important for restaurant owners and operators to understand how their supply chain works, as there are often multiple steps involved and opportunities to identify potential inefficiencies. By optimising their supply chain, businesses can reduce costs associated with transportation and logistics, allowing them to focus on what matters most – providing great food and service to customers.

Why is restaurant supply chain management so important?

There are a number of specific reasons why restaurant supply chain management is so important for restaurant operators.

• Cost Control: Efficient supply chain management helps control costs by optimising inventory levels, reducing waste, eliminating bottlenecks, and minimising the risk of overstocking or stockouts. Negotiating favourable terms with suppliers and distributors can lead to cost savings, contributing to overall profitability.
• Quality and Consistency: Having a consistent flow of high-quality ingredients is essential if you want to supply outstanding dishes to your customers. A well-managed supply chain enables you to deliver a superior customer experience, which in turn enhances your brand.
• Operational Efficiency: Streamlining supply chain processes improves operational efficiency. This includes the timely delivery of goods, accurate order fulfilment, and effective communication between suppliers, distributors, and the restaurant. Operational efficiency contributes to a smooth-running kitchen with minimal disruptions.
• Menu Planning and Innovation: Understanding supply chain dynamics allows you to plan your menu more effectively, taking advantage of seasonal availability, market trends, and cost considerations.
• Customer Satisfaction: Disruptions in the supply chain lead to inventory issues, which in turn make it difficult for you to consistently provide your guests with the dishes they want. The customer experience is key to the success of any restaurant, and supply chain management plays a vital role in ensuring customer satisfaction by providing timely delivery of quality ingredients.
• Sustainability: With growing concerns about sustainability, consumers are increasingly interested in how their food is sourced and produced. A well-managed supply chain can demonstrate responsible sourcing practices, enhancing the reputation of your restaurant and attracting environmentally-conscious customers.
• Financial Performance: A well-managed supply chain improves the financial performance of your restaurant. It allows for cost savings, improved efficiency, and better resource utilisation, all of which contribute to overall profitability.

10 restaurant supply chain management best practices

Now let’s look at restaurant supply chain management best practices. Implement these in your restaurant to more effectively manage your supply chain and set yourself up for success.

Build strong relationships with reliable suppliers and distributors

Your supply chain is only as strong as your suppliers and distributors. Make sure to build strong relationships with them and communicate regularly to ensure a steady flow of high-quality ingredients.

To build strong relationships with your vendors and suppliers, focus on these things:

• Communication: Establish open and transparent communication channels with suppliers and distributors. Regularly discuss expectations, changes in demand, and any issues that may arise.
• Reliability: Place accurate orders in a timely manner so that your suppliers and distributors can plan accordingly. Also, honour agreed-upon payment terms. If you encounter any financial issues, communicate potential payment delays in advance.
• Mutual Understanding: Understand the capabilities, limitations, and needs of your suppliers and distributors. Work together to find efficient and mutually beneficial solutions.
• Build Trust: Communicate clearly, honestly, and transparently with your suppliers and distributors. Work to foster trust.
• Negotiate Fairly: Negotiate fair and reasonable terms with suppliers and distributors. Understand market prices, terms, and conditions to ensure that negotiations are based on realistic expectations.
• Visit Suppliers: Face-to-face interactions can go a long way in helping you develop strong relationships with your suppliers and distributors. Visit supplier and distributor facilities to better understand their operations, quality control measures, and capabilities.

Regularly reevaluate your vendors

It’s important to regularly evaluate your vendors to determine whether they are meeting your needs. You need a clear understanding of the value each of your vendors provides. If a particular vendor begins to fall short, it may be time to seek out a new vendor or renegotiate terms.

This is why it’s crucial to have open communication channels and build trust with your vendors – it allows for honest discussions and the ability to address any issues as they arise.

When it comes to vendors, remember that price shouldn’t necessarily always be the deciding factor. You need to look at your vendors holistically, taking into account factors such as quality, reliability, and communication. A vendor may offer a lower price but if their products or services are subpar, it can ultimately end up costing you more in the long run.

Additionally, regularly evaluating your vendors can also help you identify any potential risks or weaknesses in your supply chain. This allows you to proactively address these issues before they become major problems that could impact your business.

Utilise restaurant inventory management software

The supply chain and restaurant inventory management are closely connected. The better you manage your supply chain, the more effective your inventory management will be. On the flip side, a poorly managed supply chain will almost always lead to inventory problems.

Utilise restaurant inventory management software to streamline the entire process, from ordering to receiving and tracking inventory levels. This software can help you accurately forecast demand, automate orders, and track inventory in real time.

Specific benefits of restaurant inventory management software include:

• Easily engage with suppliers through a single platform
• Consolidate supplier catalogs for real-time pricing
• Utilise predictive ordering to reduce waste and manage inventory levels
• Develop workflows that keep managers on task with their purchasing tasks
• Streamline the purchasing process
• Engineer your menu for maximum profitability per dish
• Use demand forecasting to manage dish preparation and track waste
• Perform recipe costing in real-time
• Track inventory from order and delivery through production and accounts payable

Inventory Management, by Fourth, enables you to easily identify areas of waste or inefficiency and make data-driven decisions to reduce prime costs and better manage your supply chain.

Use AI demand forecasting tools

At the heart of effective restaurant supply chain management is demand forecasting. If you can accurately forecast customer demand at your restaurant, you can order ingredients and supplies in a timely manner and ensure that you always have what you need to deliver an outstanding customer experience.

AI demand forecasting tools, such as those offered by Fourth, can help restaurant business owners and operators accurately predict future demand based on historical data and market trends. Created from the largest repository of data– collected from serving more than 100,000 locations globally and 14 of the top 20 restaurant chains– Fourth’s AI Forecast delivers unmatched accuracy.

Armed with this data, you can manage your supply chain with precision.

Reduce your food waste and excess inventory

Reducing restaurant food waste and minimising excess inventory helps you run a tighter, leaner restaurant supply chain. How can you reduce food waste and excess inventory in your restaurant? Several ways:

• Food Waste Audit: Performing a food waste audit allows you to identify key areas where waste is occurring. This can be done manually or with the help of technology which provides insights into food consumption and waste patterns.
• Just-In-Time Ordering: With the help of robust restaurant inventory management software and demand forecasting, you can establish a just-in-time ordering system. This ensures that you only order what you need when you need it. As a result, you don’t have excess inventory taking up space that could be used for other, more productive, reasons.
• Closely Track Inventory Levels: Regularly monitoring and tracking inventory levels allows you to identify areas of excess and adjust accordingly. Additionally, this helps prevent stockouts and unexpected shortages.
• Work Closely With Suppliers: Work closely with suppliers to optimise ordering quantities and schedules. Collaborate with suppliers to explore options for smaller and more frequent deliveries.
• Implement Portion Control: Train your staff to practice precise portion control. This ensures that every dish is prepared with exactly the right amount of ingredients and that there is not an excess of uneaten food on plates.
• Utilise Specials: Strategically implement specials and promotions to utilise ingredients that are close to expiration. Not only does this minimise waste, it also attracts customers who are interested in specials and deals.

Utilise menu engineering

Menu engineering is the process of analysing your menu to determine both the profitability and popularity of your dishes. This analysis helps you identify which items are selling well and which ones may need to be changed or eliminated.

What is the connection between menu engineering and supply chain management? The more effectively you engineer your menu, the better your inventory management will be. The better your inventory management, the more effective your supply chain.

For example, say that through menu engineering you determine that a particular hamburger on your menu does not sell well and is not profitable. You decide to remove it from your menu. This means that you need less ground beef in your inventory. As a result, you can adjust your ordering schedule with your supplier to reduce the amount of ground beef you receive on a regular basis. This leads to less waste and better management of your supply chain.

Menu engineering also allows you to identify dishes that are popular and profitable. These dishes may require more frequent or larger orders of specific ingredients, allowing you to optimise your supply chain and ensure a steady supply of these ingredients.

Implement quality control standards and checks

Implementing quality standards and control checks in a restaurant can significantly enhance the management of the supply chain. Specifically, they can help with:

• Supplier Accountability: When you have standards and checks in place, it communicates your expectations to suppliers and distributors. This, in turn, encourages them to consistently provide high-quality products and to meet agreed-upon standards. It also creates a sense of accountability across the supply chain.
• Consistent Quality: Standards and control checks ensure that you consistently receive products that meet a pre-determined quality. This consistency is essential if you want to provide your customers with great experiences. Control checks at various stages, from receiving shipments to food preparation, help identify deviations from quality standards early on.
• Compliance With Regulations: By implementing control checks, the restaurant can ensure compliance with food safety standards at the local, regional, and national levels. Meeting regulatory requirements helps mitigate the risks of fines, closures, and damage to the restaurant’s reputation.
• Enhanced Supplier Relationships: Clearly communicated quality standards and regular control checks help build strong relationships with suppliers. Suppliers who consistently meet or exceed these standards become valuable partners in the supply chain.
• Data-Driven Decision-Making: Collecting and analysing data from quality control checks provide valuable insights into the performance of suppliers, the consistency of product quality, and areas for improvement. Data-driven decision-making allows restaurant owners to optimise their supply chain by making informed choices based on actual performance metrics.

Develop contingency plans

There is always the potential for supply chain disruptions. A report from the National Restaurant Association stated that 95% of restaurants in the United States have recently experienced supply chain issues. They say:

Simply stated, moving goods from point A to point B is not as efficient and dependable as it once was. Shipping delays, a truck driver shortage, congestion at the nation’s ports, increased international tariffs, and overly burdensome shipping regulations are grinding the supply chain to a halt.

Whether it’s due to natural disasters, supplier issues, or unexpected events, preparing for contingencies is crucial in ensuring business continuity. This should include creating a backup plan for key suppliers and having alternative sourcing options in case of emergencies.

In addition, investing in technology such as restaurant inventory management software can help streamline processes and identify potential issues before they become major problems.

Prioritise sustainability

Consumers are increasingly conscious of the environmental impact of their purchases. Implementing sustainable practices in restaurant supply chain management is not only responsible but also beneficial for brand reputation and customer loyalty.

This can include:

• Sourcing Local Or Organic Ingredients: Work with local and organic suppliers to source high-quality ingredients that are produced sustainably. This not only reduces the carbon footprint of transportation but also supports the local economy.
• Reducing Food Waste: As we’ve noted, food waste is a major issue in the restaurant industry, and it’s important to address this in supply chain management. Establishing protocols for proper food storage and handling can help reduce spoilage and extend shelf life. This, in turn, reduces the amount of ordering you must do.
• Use Biodegradable Packaging: Minimise the use of single-use plastics and opt for biodegradable packaging materials instead.
• Implementing Energy-Efficient Practices: Look for ways to reduce energy consumption in your supply chain, from transportation to storage facilities. This can not only lower costs but also contribute to a greener operation.

By prioritising sustainability in the supply chain, restaurants can also appeal to a growing market of environmentally conscious consumers.

Train your staff

Supply chain management is not just the responsibility of one person or department. It involves every member of the restaurant staff, from front-of-house to back-of-house.
It’s important to educate and train all staff on their role in supply chain management, including:

• Proper Inventory Management: Proper inventory management includes accurate tracking of ingredients and supplies, as well as following proper storage and rotation protocols. This can help reduce food waste and ensure the freshest ingredients are used.
• Supplier Communication: Ensure that all staff members understand the importance of clear communication with suppliers, including timely ordering and proper handling of deliveries. This can help prevent delays or issues in the supply chain.
• Waste Reduction Practices: Train staff on how to reduce waste in their daily tasks, such as portion control and proper food handling techniques. This can not only save money but also contribute to a more sustainable operation.

By involving all staff members in supply chain management, restaurants can create a cohesive team dedicated to minimising waste and maximising efficiency.

Effective supply chain management leads to success

Effective supply chain management is crucial for the success of any restaurant. By implementing these strategies, restaurants can reduce costs, minimise waste, and improve overall sustainability in their operations.

With proper training and communication, every member of the restaurant staff can play a role in maintaining an efficient and sustainable supply chain.

It’s important for restaurants to constantly evaluate and improve their supply chain management practices to stay ahead in a competitive industry. By continuously striving for improvement, restaurants can ensure the freshest ingredients, minimise waste, and ultimately provide a better experience for their customers.