White Paper

Sweating Supply Chain

Overview

Today’s restaurant chains are confronted by countless strategic and structural challenges,
but few more critical than the impact of sourcing and managing ingredients and supplies.
With 25-35% of revenue spent on food, beverages, packaging, and supplies, operators are
increasingly focused on finding more effective ways of managing their variable cost inputs.
This trend is a predictable and necessary outgrowth of oversupply (too many restaurants),
consumer demand for value, and the margin pressure brought on by intense competition
over patronage frequency and loyalty.

Unfortunately for most operators, 99% of the “experts” are on the
distributor’s side of a negotiation.

A poorly understood and often sub-optimized element of the supply chain is the “lastmile”
stage, better known as “distribution.” Roughly three to six cents of a restaurant sales
dollar supports that restaurant’s foodservice distributor’s cost of acquiring, warehousing,
invoicing, and delivering ingredients to their “end user” destination; the operator’s storeroom,
cooler, or freezer. To clarify, that’s $.03 to $.06 of every $1.00 that comes into the
restaurant, is spent on food and supplies. Some part of that is the distributor’s net profit.
So when one considers only five cents of a sales dollar make it to a typical restaurant’s
bottom line, fractions of pennies begin to look really important.

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