I interviewed Wade Winters who discussed the Supply Chain for Restaurant Industry.
Today we're speaking with Wade Winters, and we're going to discuss supply chain for the restaurant industry. Wade, can you first provide a brief background of yourself?
Sure, Dustin. Originally, I worked for Hilton Hotels for about 15 years, ran supply chain both at the hotel level, regional supply chain offices, and then eventually at the corporate office where I was responsible for establishing supply chain for all food and beverage for all of the Hilton brands. Then I was with Au Bon Pain. I was the VP of supply chain for Au Bon Pain for about nine and a half years and ran the full supply chain everywhere from working the manufacturers, distributors, franchisees, and obviously, the restaurant level.
So for the past three years I've been with Consolidated Concepts, and we are supply chain specialists and consultants for restaurant chains. So basically, our goal is to help them reduce costs, continue to support their growth, and overall, just add value to them from a supply chain perspective.
Can you talk about the how the supply chain in the restaurant industry is different or how you look at things differently?
Absolutely. The restaurant industry is, I think, different other industries in the fact that you're dealing with a lot of perishable items. You're dealing with a lot of inconsistencies in terms of demand. There's a lot of things that are related to sales and forecasts, unknown parameters that you have to plan ahead for and have contingency plans for.
A lot of things that we also evaluate from a supply chain perspective is products that are being used, or alternatives that might have a better fit for the application. One thing we always like to make sure, when we work with our clients, is understanding what they buy, why they buy those items, how those products are used, how are they processed and utilized and then eventually presented to the customer. Until we know all those steps of the entire supply chain, we can't really help them and understand where there might be opportunities to reduce our costs, either through a lower cost for the product itself, or there are other ways to save money and reduce costs, whether it be improved yield, reduced labor... And we even go as far as looking a food safety risks, because there are opportunities to help a restaurant company by taking some of the labor out of the kitchen and outsourcing that. And there's a lot of advantages related to that.
How do you evaluate the supply chain beyond just cost and cost savings?
Similar to what I was mentioning earlier, we always want to make sure we don't just focus on the cost per case of a product because there are so many variables that go into that. There's yield, there's quality, there's labor. So eventually, what we want to do is dissect the entire process. I'll give you a perfect example — buying a case of commodity French fries. French fries are typical on all menus for most restaurants in the United States. So instead of buying just the lowest-quality French fry, we want to show our clients that they have to use more product per serving when they use a lower-quality product sometimes. And it has to do with yield and filling up either the plate or the container that the French fries are going in. So if they paid a few more bucks for a case for a higher-quality, extra-fancy potato that reduces that amount of product they have to use per serving, their cost per serving goes down, and the quality goes up.
There are perfect examples of that and many other scenarios. I'll give you another great example. Right now avocados are crazy expensive. It has a lot to do with the demand and supply, and they're almost $100 a case right now. So the first thing we want to evaluate is, an avocado, really, between a grade one and a grade number two avocado is really the exterior of the avocado — only blemishes and scaring on the skin. The reality is nobody shows the customer the outside of the avocado. It's only the fruit inside.
So the first thing we suggest to a client is switch from a grade one avocado to a grade two avocado, and save yourself about three to five dollars a case.
Then the other variable is the yield per case of avocados. Most avocados are 48 count, which means there's 48 in a certain particular size case. If they switch to a 60 count, they actually get a lower cost per usable pound of fruit from the avocado than if they went to a 48 count. Now granted, you're going to have to open up more avocados, so there's a little more labor involved. But it's offset easily by the lower cost per pound on the avocado.
So these are things that sometimes restaurants don't really pay attention to. They're focused on what is the best price I can get for the product that I've been using for 100 years instead of realizing there's other ways to save money by just altering a product that might be a better fit for the application without impacting the customer's experience.
What do you see for the future of supply chain for the restaurant industry?
That's a very interesting question because I'm actually at a conference right now that talks about what's happening in the industry, the type of competition that's taking place, the Amazons of the world, technology, how that's affecting the future of restaurants, the fact that Millennials now are outnumbering every other age group and what their needs and demands are. There's a lot of moving parts right now.
What's really important is that a restaurant concept is able to make adjustments, and if they can't make adjustments, they won't survive. But it's really also defined by what is their niche. From a supply chain perspective, that goes hand in hand. So if you're not able to support the concept and the direction that the restaurant is going from a supply chain perspective, they won't survive. And part of the thing I want to talk about there is expansion of a restaurant chain.
Usually when they're in one market, and they have volume, and they have good following of customers, the supply chain is rather easy. They probably have one distributor, and they can leverage their buying power. But when they start extending into new markets, it's a whole different ballgame. So to really understand and plan ahead, make sure that the growth is consistent and can be supported from a supply chain perspective is very important. So again, those are the other things we work with our clients on, is making sure they're strategic about their growth, that they do it intelligently and economically. Because, again, supply chain is cost to the bottom line. Every dollar you save is to the bottom line, and that reduces the amount of sales you have to have on the front end to offset that.
So that's how important supply chain is, for any company in any industry. I thank that's why more companies nowadays are realizing that and investing in proper talent, resources, technology, to make sure that costs are being managed appropriately on that backend.
Thank you for sharing today, Wade.
About Wade Winters
Vice President Supply Chain at Consolidated Concepts