Hospitality has evolved over many years – more brands, more restaurants and bars, much wider cuisine choice – all driven by increases in eating out, and demand for convenience while hopefully ensuring improved efficiency.
More recently, technology advances around digital, changing customer needs and an increase in “disruptor” start-ups or companies simply adapting or “disrupting” their own menu offer, has brought opportunities to grow. Order and Deliver, Order and Collect, Order Ahead and Eat-In, all now increasingly available from our favorite brands or independents.
What is surprising, is that these extra channels for revenues have so far been served by businesses without any further investments in their supply chains. Orders have been accepted through an assortment of new innovative ways, which has increased demand and revenues and often changed the mix of eat-in/eat-at-home. The explanation for the limited changes in supply chain is simple. Outside of preparation, much of the logistics has been outsourced to industry aggregators, or businesses have treated all demand equally from whatever source the order derives.
Aggregators or in-house solutions?
As revenues grow and the mix changes, new opportunities are created to meet customer expectations and demand. Aggregators are likely here to stay, offer a quick solution, help drive further demand and often fulfil the final mile delivery requirement. However, there is a price to pay in using them, which is in reduced margin. Ignoring who owns the customer for a moment, there is a lack of certainty on the real additional revenue and net margin gained until the sales mix becomes clearer over a longer period.
The market will continue to evolve, some of the early outsourcing of on-line orders will be brought back in-house or to a healthier margin balance. Hospitality businesses require capabilities that enable further efficiencies around supply chain planning and control. Proven solutions that work to the economics of the industry – for example Master Data and Menu/Recipe control, costing and procurement of ingredients and finished product, production planning and management for those that need it (including dark kitchens), and inventory and demand planning to ensure availability.
What are the key elements of building Food-To-Go revenues?
- Technology enabling the customer to easily order and pay – usually a firm’s own app, web-based or third-party aggregator solution.
- Receiving the order against a cut-off or delivery time and preparing the food for collection or ‘to go.’
- Accurate demand planning for order fluctuation. This is becoming critical and more challenging than a 100% eat-in restaurant that generally prepares dishes and packages for delivery from inventory.
- Food service businesses serving the business and consumer lunch, coffee, sushi, quick service markets often rely on that day’s product delivery from their suppliers as well as existing inventory. Committing to supply by taking orders up to, say, midnight the day before and then receiving the goods needs swift early processing to identify shortages or damaged goods. Goodwill and loyalty can be badly affected particularly if the customer order was for a special occasion or important business lunch and the stock did not arrive.
- For both restaurants and Food Service retailers, demand planning, ordering accuracy and allocation for Food-To-Go is more important than ever. The days where all orders on the restaurant or outlet could be treated as fluctuating demand, in the same way as if additional diners arrived, are not sustainable as the mix of Food-To-Go or for growing collection increases.
The benefits of having the right supply chain solution
As the revenue mix changes, the need for improved planning to ensure availability and customer satisfaction increases. More efficient processing of deliveries and inventory matching to that day’s commitments, dealing with damages or shortages, right place, right time, right value inventory investment and demand planning information are needed to support supply chain planning.
Recent technology investment priorities have rightly been with employee and customer-facing engagement and demand initiatives, but it’s now time to ensure the business’s supply chain capabilities can meet the demands of the evolving market. Highly efficient supply-chain control with Master Data Management, consumption-based demand planning, mobile order checking and control of costs are necessary to maximize the opportunity. With pressure on the industry driven by rising costs and product inflation, now is the time to supplement customer-facing initiatives with an increase in efficiency around menu choice, product information and availability.
Is your supply chain system up to the job? Read the second blog in this series.
Discover how AI is enabling a more accurate demand forecast.