Supply Chain Super Bowl

Supply Chain Super Bowl

America’s appetite for build-a-bowl restaurants is growing, but the concept serves up new supply chain challenges.

During the eight years Ting Yen managed sushi operations in grocery stores, he fielded numerous customer requests for customized dishes. “We told customers we couldn’t accommodate them,” Yen says. “We had to follow the menu.”


Technology Fuels the Food Chain

Fortunately for both Yen and his sushi-loving customers, those requests sparked the idea for Sushi Fuku, a “build-a-bowl” restaurant concept focused on—not surprisingly—sushi. As a co-founder, Yen launched the first location in Pittsburgh in 2012, and has added a second. A third is in the works.

Build-a-bowl restaurants—where consumers choose the ingredients that make up their pizzas, burritos, gyros, and sushi, and watch as it’s prepared—are enjoying solid, steady growth. Many industry analysts place build-a-bowl restaurants within the fast-casual segment of the restaurant industry, which will grow more than 10 percent between 2016 and 2020, predicts market research firm Technavio.

Even as build-a-bowl restaurants thrive, they face numerous supply chain challenges. To tackle them, supply chain professionals turn to technology and employee training, and forge close relationships with their colleagues in marketing, among other steps.

A Mix of Challenges

Demand planning and replenishment schedules for build-a-bowl operations can be hard to get right, as each order is custom-created. The challenge is heightened when many ingredients are fresh because restaurants frequently must discard items that aren’t used often.

“Build-a-bowl restaurants don’t have a standard recipe,” says Pan Chen, senior director, business analytics, with HAVI, a supply chain management solutions provider. “There’s more volatility in demand for individual ingredients.”

Moreover, it’s unlikely each employee will scoop the same amount of ingredients for each order. Some may want customers to feel they’re getting their money’s worth, and offer a smidgeon more food than the guidelines allow. Focusing on the customer is the right approach, Chen notes, but consumes ingredients.

In contrast, restaurants with a set group of standard menu items, many of which are pre-portioned, often can reduce waste levels to less than one percent, Chen says.

One way restaurants can compensate for demand uncertainty is by carrying higher levels of inventory, notes Jonathan Byrnes, senior lecturer with MIT. The downside? Higher inventory levels increase the risk that more will have to be thrown away, especially since the food’s visual appeal is critical to most build-a-bowl restaurants.

Another option is to order from a vendor that offers expedited—even hourly—delivery. This boosts flexibility, without the need to carry additional inventory. While expensive, a restaurant likely would do this for a tiny percentage of its products.

Build-a-bowl restaurants can take a page from the playbook of many fast-fashion retailers, and use the limited amount of ingredients to help shape demand. That is, they can let customers know the restaurant is offering special ingredients, but only for a limited time. “Make the lack of availability a desirable marketing trait,” Byrnes suggests.

Larger chains can cluster restaurants close enough together that they can move products between them. The approach is similar to one used within many hospitals. “If one floor runs short on bandages, they’ll take them from another floor,” Byrnes says.

The goal of these tactics? “You either give more flexibility on the supply side, or shape demand so you can serve customers with inventory that won’t go bad,” Byrnes says. “It’s getting supply and demand right with a big dollop of imagination.”

Supply chain professionals with build-a-bowl operations also can meet with their colleagues in marketing to discuss the value proposition and what to promote. The goal is to be alert for marketing campaigns that focus on the freshness of ingredients that are difficult to keep looking fresh.

Another decision that calls for input from both marketing and supply chain is the size of the containers that hold the ingredients. While a shift to larger containers reduces the frequency with which they need to be refilled, the quality of many ingredients declines over time. “There’s a trade off,” Chen notes.

Marketing and supply chain can jointly identify the sweet spot between efficiency and the presentation of the ingredients.

Serving Fresh, Local Ingredients

Supplier quality and the food’s aesthetic appeal are paramount in build-a-bowl operations, given that consumers see the ingredients as they place their orders. “Presentation is critical,” says John Piatek, principal at management consulting firm A.T. Kearney.

Many build-a-bowl restaurants feature natural or organic—and often locally grown—ingredients. “The whole story of the food is more important,” Piatek says. That can mean working with numerous smaller suppliers, often within a certain number of miles from the restaurant’s location.

At first glance, local supply chains would seem to offer compelling benefits. After all, shorter transportation times should translate to lower costs and fresher ingredients.

However, smaller, local firms tend to have less sophisticated quality controls, notes Dale Rogers, professor with Arizona State University. Local suppliers also may struggle to provide the depth of safety stock carried by larger outfits, or to expedite orders. And, managing multiple smaller firms typically is less efficient than dealing with a handful of larger providers.

Build-a-bowl operators should check that their suppliers incorporate safety steps, such as testing for listeria, recommends Katy Jones, chief marketing officer with FoodLogiQ, a provider of farm-to-fork traceability solutions. Both suppliers and the restaurant also need to jointly verify that the products supplied align with the restaurant’s brand promise. If a restaurant markets itself as a provider of non-GMO foods, its suppliers should confirm that’s what they offer.

Another way to boost food safety is to centralize processing, says Patrick Penfield, professor of supply chain management at Syracuse University. By having a commissary prepare the food and dispense it to a group of restaurants, fewer people come in contact with the products, lowering the risk of mishandling. A commissary also may be able to invest in safety solutions that would be unaffordable at a single restaurant.

Employee training is a critical step as well. The goal is to establish processes that prompt employees to consistently do the right things, Rogers says. One example is requiring employees to switch food bins every 20 minutes to ensure the contents remain fresh.

Chronic Tacos Plays It Safe

Chronic Tacos offers “authentic Mexican recipes with a bit of California flair,” says Michael Mohammed, chief executive officer with the Aliso Viejo, California-based restaurant.

The company sources local produce for several dozen locations across the southern and western United States, as well as a handful in Canada. “We showcase all the produce,” Mohammed says, “so the visual quality has to be there.”

Mohammed and his team train employees to visualize the restaurant through customers’ eyes. “You don’t want to get robotic,” he says, and potentially miss items customers might find unappealing.

Mohammed’s priority when working with suppliers? “The number one thing we look at are suppliers’ safety protocols and the traceability of food,” he says. Mohammed and his team also leverage Chronic Tacos’ national volume when negotiating prices. “Our franchisees shouldn’t be able to find a better price,” he adds.

Before Chronic Tacos introduces new flavors, it ensures its distributor can offer the quality needed at all locations. The management team also weighs whether a new product will slow the line, and if it should be an addition, or replace another ingredient. “We put a lot of thought behind the decision,” Mohammed notes.

Keep the Line Moving

Greater variety typically means longer lines. Customers face more decisions and employees must learn more ingredients.

Indeed, one challenge facing build-a-bowl restaurants is moving customers quickly through the line. “You can’t pre-make their dishes, so you need a lot of efficiency,” says Adam Narang, co-founder and president of Toast Inc., a provider of restaurant point-of-sale solutions.

Moreover, unlike customers at sit-down restaurants, build-a-bowl customers typically can’t quash their hunger with bread or rolls while their dinners are prepared.

Build-a-bowl restaurants can attack this challenge in several ways, Penfield notes. One is to replace some of the seating area with another line, especially if most customers take their meals with them. Another is to offer fewer ingredients.

Training also is key. At Chronic Tacos, employees help customers choose. They’ll group products together, and then ask customers which of the group—say, mild, regular, or spicy salsa—they prefer. “You want to be guiding customers,” Mohammed says.

Marketing materials play a role as well. By explaining how different menu items are prepared, the materials can preempt questions that would slow the line.

“It’s all about communication,” Mohammed says. In addition to communicating with store employees and customers, he and his team talk regularly with both franchisees and distributors. “We’re dedicated to open lines of communication to meet the challenges.”

Technology Fuels the Food Chain

Several technologies are likely to influence future build-a-bowl supply chains, according to John Piatek, principal at A.T. Kearney.

1. With blockchain, or the technology that underpins digital currencies, each product receives its own receipt or token. Each interaction from farm to restaurant can be permanently tracked.

2. Robotic process automation will replace some manual handling of fresh food. Because it’s more fragile, fresh food currently tends to require more manual handling than, for instance, hearty frozen foods.

3. Internet-enabled sensors let restaurant operators know the time each ingredient spent in transit, and its temperature along the way. Such sensors are available, but often not compatible–the truck sensor doesn’t easily communicate with the warehouse sensor. “In time, restaurants will use internet-enabled sensors to identify bad products before they get to a restaurant,” Piatek says.

4. Analytical muscle encompasses both skill and a business culture restaurant chains should build now, to take advantage of technology later. “It’s a shift from instinct-based decisions to analytic decisions,” Piatek says.

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