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Food Service Supply Chain. ISQA 458/558 Mellie Pullman. Food Service Supply Chain Issues. Days worth of inventory in Supply Chain? Costs involved with this? Average profit for Distributer? Average profit for the restaurant or food service?. Demand.

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food service supply chain

Food Service Supply Chain

ISQA 458/558

Mellie Pullman

food service supply chain issues
Food Service Supply Chain Issues
  • Days worth of inventory in Supply Chain?
  • Costs involved with this?
  • Average profit for Distributer?
  • Average profit for the restaurant or food service?
  • 45% of food consumed in US is food-prepared-away-from-home
    • Consumers purchase $360 Billion in sales
    • Operators purchase $131 Billion in product
  • Potential gains from Food Service Supply Chain efficiency improvements?
layout of supply chain
Layout of Supply Chain







  • Broadline
    • Multiple products from multiple manufacturers.(180,000 SKU)
    • Biggest players: Sysco, Alliant Foodservice, US. Foodservice, and FSA.
    • Many have own brands (lower priced)
  • Specialty
distributors role
Distributors Role
  • Store
  • Break-loads
  • Deliver
  • Finance
  • Value-added service
  • Transform raw materials into products for sale
  • Forward-buying or purchase outside of region to ensure prices and availability
  • Costs of forward-buying
    • Long-term storage
    • Processing
    • Transportation
  • Distributors knowledge key
pricing promotion
Pricing & Promotion
  • Off-invoice income:Distributors benefiting from manufacturing incentive programs (not passed on to customers > customer sees original cost on their invoice)
    • Growth programs
    • Rebate
    • Bonus-on-Bonus
    • Pickup allowance
    • Prompt payment discounts
    • Volume
    • Income from food-shows
    • Advertising in distributor magazines
restaurant vs distributor relationships
Positive or Negative?

What does the food service want from a distributor?




Distributor's pricing structure to a restaurant based on:

Average order size

Distance and ease of service between warehouse and operator

Restaurant vs. Distributor Relationships
what influences the service to the restaurant
What influences the service to the restaurant?
  • Size and number of delivery windows
  • Site delivery requirements
    • Unloading into specific areas of storage, stairs, or elevators
    • Order size
    • Order entry mechanism (electronic, phone, fax)
    • Rebate recovery programs
  • Product condition
distributor sales rep dsr marketing associates ma
Distributor Sales Rep (DSR)/Marketing Associates (MA)
  • Paid on commission
  • “Street” account = a relationship between a restaurant and a DSR/MA
  • “Program” or primary vendor account
    • 70-80% products from a single distributor
  • Sysco’s MA’s can hand-price based on the relationship
    • Tiered pricing depending on the restaurant
    • Street: cost plus 35%
    • Program: cost plus 8-14%
value added services
Value-added Services
  • Menu Design
  • Recipe Development
  • Kitchen and service training
  • Safety and sanitation education
  • Software for improving operational efficiencies
distributors procurement merchandisers
Distributors Procurement“merchandisers”
  • software support
    • Inventory management, forecasting, and recommended purchase quantity
      • Order size based on?
  • FCFS in warehouse = proper rotation
  • Age reports
  • Perishables:
    • Meat frozen near end of shelf life and sold at reduced price or sold to processors
    • Milk: exchanged for fresh
    • Food bank and Prisons
    • Dumpster > write-off loss
produce pricing
Produce Pricing
  • Highest variability
    • Weather
    • Growing conditions
    • Esp. in California
  • Need multiple and diverse suppliers for consistent high quality products
  • Big D’s have their own quality assurance people in the fields
restaurant obstacles
Restaurant Obstacles
  • Lack of Technology
    • 80% processed manually
  • Multiple distributors
    • Different ordering systems “proprietary”
  • For a large distributor
    • Less than 4% orders come from internet
    • Those are QSRs…
  • Lack of integration between POS and Back-office
restaurant pos
Restaurant POS
  • What could a restaurant POS tell management?
    • What ?
    • How much? And what’s left?
    • When?
    • Who?
    • To whom?
  • What could you do with that information?
if there is waste in the food service supply chain what does it take to make it more efficient
If there is waste in the food service supply chain, what does it take to make it more efficient?
efficient foodservice response
Efficient Foodservice Response
  • Industry wide mission
  • 5 Strategies to address Problems
    • Electronic commerce using EDI to improve revenue and reduce cost
    • Supply Chain demand forecasting with product ID and bar-coding for scanning
    • Logistics optimization: reduce inventories at manufacturer and distributor levels
    • Foodservice category Management: Seeks to measure consumer demand vs. menus and ingredient assortment
    • Equitable Alliances: seek to forge relationships between operators and suppliers to better match costs to revenues.