Competition puts pressure on food service industry to improve supply chain

The food service industry has looked to improve its supply chain network and use digital tools to give it an edge over competition, such as providers of home delivered meals and grocers that offer prepared foods consumers can take home to eat.

In a recent webinar, Juan Guerrero, senior vice president and chief global supply chain officer for Bloomin’ Brands, explained how the Tampa, Fla.-based company has worked to improve efficiency, reduce costs and improve visibility across its supply chain network. The company operates over 1,500 restaurants, including Outback Steakhouse, Bonefish Grill and Carrabba’s Italian Grill, in 48 states, Puerto Rico, Guam and 19 other countries.

Guerrero explained how the gap is widening between consumers who eat at restaurants and at home. Between 2001 and 2017, the number of restaurants has risen 33% to 630,299, or twice as fast as the rate of population growth in the United States, according to the Bureau of Labor Statistics. Meanwhile, 40% of U.S. consumers are buying prepared foods to eat at home as they see this as more convenient and inexpensive. The desire to eat prepared foods at home has led to the rise in home delivered meals, and by 2022, the home food delivery market is expected to increase 79% to become a $76 billion industry.

Social media also has impacted the industry as restaurants are the most shared category on the sites, he said, and accurate and complete data are important to compete. Customer reviews are important, and 79% of people trust reviews. If a restaurant were to receive a one-star boost in its Yelp rating, it could lead to a rise in revenue of between 5% and 9%.

How restaurants serve customers depends on location because customers on the West Coast prefer different foods compared to those on the East Coast. In China, Outback doesn’t have the Bloomin’ Onion on the menu.

“Trends in what customers are looking for from a menu offering change rapidly, and we need the ability to quickly capture those changes and pivot,” Guerrero said. “We also need to be able to quickly react to unforeseen forces, which can impact menu items and customer satisfaction, such as weather events.”

The restaurant company looks to bring visibility to a complex supply chain that includes 270 suppliers, 70 distributors and 1,500 restaurants in food, packaging and small wares, Guerrero said. The company’s solution to improve its supply chain network was to use the Real Time Value Network, a product of One Network Enterprises. The restaurant company selected the network because of the ease to adopt it, its affordability, how it offers demand forecasting, inventory management, order forecasting and supply chain visibility, he said. The network captures point of sale data hourly, uses machine learning and places automated orders at the restaurant level.

Forecast accuracy rates have risen from the low 60s to high 80s, he said. The network has reduced supplier costs, cut inventory levels by 50% and eliminated transfers at the restaurant level.

The restaurant company also is in the midst of a blockchain pilot, with the goal to improve transparency throughout the supply chain. Blockchain is a distributed ledger on a digital platform that requires everyone within the blockchain group to sign off in order to make changes to the ledger. Along with improving transparency, the company also wants to improve chain of custody and the food recall process.

One Network Enterprises offers a blockchain network called One Blockchain that allows for the results that Bloomin’ Brands seeks. Bernard Goor, vice president of sales and marketing, retail and food service, consumer goods and pharma and healthcare for One Network, explained the benefits of One Blockchain, and it increased forecast accuracy by 20%-30%, reduced transportation costs by 15%-25%, decreased inventory by 20%-30%, and reduced number of employees needed for scheduling by 60%-80%.

The blockchain system allows everyone on the network to share a “single version of the truth,” Goor said. It also offers flexibility and adaptability to the task at hand and can continue to adapt as needed. The company has provided network operations for over 15 years, and configured blockchain for the supply chain, offering the appropriate level of confidentiality, scalability and optimization.

“We need to augment the blockchain standards to meet the needs of the supply chain domain, which is what we have done,” Goor said.

One of the key elements to make sure such as system is effective is all suppliers have to be on board with it, said Guerrero, adding that “it really is an ecosystem.” The food industry has sought a secure food supply chain, but recent high-level recalls have hurt some companies. However, Guerrero is hopeful that blockchain will allow the industry to reach the goal to secure the food supply chain.