A procurement expert suggests that profitability in the food service sector can be enhanced more effectively with better cost reduction strategies than with efforts to expand market share.
Procurement consultant, Gavin Bowen-Ashwin, acknowledges that professionals occupying procurement and supply chain jobs in the restaurant sector have kept pace with rapid industry evolution. More consumers today choose to stay at home, ordering food from their favourite restaurants and having it delivered to their doorsteps.
Practitioners in supply chain jobs especially, from permanent professionals to supply chain interims, are increasing the agility of the supply chain to meet these new demands, ensuring that current requirements for ethical sourcing are met while encountering perpetually rising costs.
Bowen-Ashwin suggests that practitioners in procurement jobs in this sector should focus on five areas:
Too many organisations don’t sufficiently track the performance of their menus; which products are working and which are faltering? Menu analytics and optimisation can solve this by computing margin across a multiplicity of ranges, enabling data-based decision-making to de-list underperforming items and re-engineer menus.
Cost of Goods Sold (COGS) management
The emphasis here should be on determining and, where possible, paring down costs on the packaging, portion/package size, specification, and distribution. Keeping an eye on these can drive growth and cut costs.
Reduction of indirect costs
Often neglected, goods not for resale (GNFR) can amount to more than 20% of a food business’s cost base. Procurement pros need to review and aim to reduce the operational costs in areas such as store outfit, property, IT, logistics, and head office costs. Savings of between 8% and 15% are achievable here.
Supply chain management
If the existing distributor has such a limited range that products are often unavailable, change needs to be instigated. Distributors that can innovate to improve service, drive down costs, and improve operational efficiency are indispensable.
Reducing restaurant costs
If preparation can be done in the supply chain, it will reduce restaurant labour costs.