Supplies and Demands: Operators scrutinize data to drive supply-chain efficiency

By Lisa Terry • Contributing Editor | June 01, 2006

Standardizing and sharing data has not been the hallmark of the hotel and restaurant supply chains; those companies have tended to focus investments elsewhere. But the tide is beginning to turn, with operators recognizing the opportunity to trim costs through better data management and distributors doing more to aid this effort. Operators are deploying data management tools at both the front and back ends of their supply chains to gain visibility and control on what they're buying, how it's used and ensuring the proper price is paid.

The front end

Loews Hotels chose to tackle the front end first. "We wanted to decrease the time and energy spent creating reports," and more time analyzing and applying data to purchasing decisions, says Zack Miller-Murphy, vice president and controller for 18-unit Loews. "We thought there would be a return on investment (ROI) from less labor time producing reports and better costs and sales numbers because of better controls." The luxury hotel chain attained both by deploying Adaco's Eclipse (adacoservices.com) to its food and beverage operations, attaining a 1-1/2 percent cost reduction at its first property, and hoping to get a least a 1/2 point reduction once deployed across the company. With about a dozen hotels installed, the reduction is running at about one percent, he says. "That's a couple of million dollars a year----it's significant," says Miller-Murphy. The tool helped the company determine how much it's buying, and from whom, then track it through inventory to plated serving, including how much Loews charged for the end product. "We're looking at things like inventory turnover percentage and ratios. It's a lot easier and quicker to calculate," says Miller-Murphy. "It's all a matter of how quickly you can get the info and react." While rollout continues, Loews is already experimenting with using Adaco for china, silver, glassware and linen. Automating back-end spending analysis, now done by spreadsheet, is also on Loews' to-do list.
In February of 2004 Intercontinental Hotels Group (IHG) took a similar approach to supply chain and enlisted the help of SCM Supply Chain Management (scmllc.biz) to manage the supply chain functions for IHG, the Americas. SCM manages the supply chain function for both IHG's corporate and owned/managed hotel portfolio, including sourcing, negotiating, contracting and interfacing with suppliers to maintain cost and quality control. According to Tom Murray, chief operating officer, the Americas at IHG, SCM was able to allow the company to meet its commitment to continue driving down costs, enhancing relations with suppliers and standardizing products. SCM acts as an extension to IHG, to meet cost savings goals in a reduced time.

Back-end analysis

Other operators choose to start with the back end, installing tools to gather and analyze purchasing data to rationalize suppliers, uncover rebate opportunities and ensure contract compliance. Without a tool for the purpose, All Seasons Services, Canton, Massachusetts, faced great challenges in trying to get a handle on data for its thousands of dining, vending and refreshment locations, which are widely spread. "We were looking for one source to consolidate purchase history reporting to calculate rebates, maximize menu potential and consolidate SKUs," says Ken Rogers, purchasing operations manager. The company chose Instill (instill.com) procurement, transaction data and analysis and contract management solutions, in some cases garnering up to $30,000 in mis-billing savings from various suppliers, says Rogers. The company plans to extend this functionality to its multiple carbonated bottlers by the end of 2006. All Seasons is also implementing Instill's automated ordering, helping managers see past orders and spot price increases. Lack of timely, accurate purchase info was also an issue for New World Rest-aurant Group, whose 639 bagel bakeries are served by four distributors from nine different centers. First on its road map for supply chain improvement was deployment of Basix Restaurant Services' Traction (basixrs.com), used to monitor distributor sales to stores and inbound purchases from vendors to distributors. The company is also implementing Basix's Catalog product to store SKU and vendor data, and is helping in development of a price verification tool.
"We have visibility to current stock status, to avoid shortages, and it's helped us in purchasing to consolidate data effectively and efficiently," says Ken Bianchi, purchasing manager, food and beverage. To further streamline, New World is pursuing redistribution via a third-party logistics provider, to consolidate less-than-truckload shipments into full truckloads from multiple vendors. A companion in-bound freight program will incorporate full truckload orders into the arrangement.

One umbrella

Driving efficiency in the supply chain is even more challenging when your business crosses formats as diverse as steamboats, sporting concessions and resorts, as it does for Delaware North Companies. "Our role in corporate supply-chain management is to drive commonalities and try to bring them all under the Delaware North umbrella," says Michael Reinert, director of supply-management services. They might not all use the same grade of fryer oil, for example, but they could source it from the same vendor. "When savings are generated in the supply chain they drop right to the bottom line." The company replaced its previous supply-management tool with TiberSoft (tibersoft.com) in 2005. While the prior tool helped consolidate and analyze data, the newer one "afforded more robust productivity and turnaround on data," says Reinert. "It's sliced and diced more efficiently, helping us do more timely queries so we're able to react more quickly to compliance issues," and get information back into the field.
"We've made significant progress in our core purchasing," such as frozen, refrigerated and grocery products, Reinert says. "Now we're addressing secondary areas----paper, plastic, disposables," with produce planned later this year. Delaware North is also implementing price alerts and real-time exception reporting to quickly head off non-compliant purchasing.

A fresh approach

Baja Fresh, a restaurant known for its quality and convenience in fresh, flavorful Mexican food, began using eRestaurant Services' (erestaurantservices.com) suite of browser-based inventory management and supply chain management software to manage inventory and labor costs in more than 121 company restaurants located across the U.S. in August of 2004. "Our business demands a tight control system for managing inventory and labor costs and it was imperative that we implement the best possible centralized system that would be easy to deploy and manage," says Natascha Kogler, CIO at Baja Fresh. "Baja Fresh has found that eRestaurant Services has multiple ways in which it immediately pays back the initial investment in terms of managing inventory and labor cost, and producing reliable and timely reporting. eRestaurant has the functionality and flexibility to meet our needs as we continue to expand." With eRestaurant, the Mexican chain is able to control daily and weekly inventory costs in addition to managing all cash management and labor reporting at a restaurant and enterprise level. Both restaurant managers and regional operators are provided with the tools that they need to effectively manage costs. The solution is centralized and updates are real-time to all restaurants. Regional operators can login to the web-based enterprise system to have full access to all of their restaurant's inventory, labor and cash management costs and reports.

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