Building Relationships

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Building Relationships

By Vicki Powers Contributing Editor - 09/01/2005
Managing the wide-range of relationships, suppliers and food-cost variables has always been one part science, two-parts art for hospitality operators. While a loft, ambition, bringing logic and efficiency to the supply chain has proven difficult. After a brief flirtation with the fantastical promises of a few dot-com companies, hotel and restaurant companies are finally giving renewed attention to supply chain. Using supplier-relationship management and materials-management tools, as well as a more sophisticated approach to procurement and managing the supply chain, making the supply chain work.

With four locations around Chicago, Weber Grill Restaurant added the Compeat ( Restaurant Accounting System in 2003 after its previous software product focused only on the inventory side. Compeat's system seamlessly merges accounting and inventory needs for the hospitality industry. It also includes purchasing/receiving, menu item sales, theoretical versus actual analysis, and prep portioning. Weber Nation Bradley Ritz, corporate purchasing manager at LSG Food Services, says as a growing company Weber Grill Restaurant needs systems that allow the business to do a number of jobs of the business at the same time. According to Ritz the Compeat system allows Weber Grill to have inventory and accounting control all at once.
Restaurants often create a high-volume, high-stress environment where managers are required to juggle 15 to 20 balls at any one time. Ritz says anything his restaurants can do to obtain efficiency and consistency makes managers' jobs easier with less chance for error.

At Weber Grill, Ritz's job is streamlining the supply chain so people touching the food and serving drinks can focus on their jobs rather than putting fires out all day, which can become a costly exercise. "With an efficient supply chain, managers can focus ultimately on what they were hired to doÃ.‚¬"provide customers with an extremely good experience," Ritz says.

The biggest advantage to Weber Grill's supply chain/materials management solution, according to Ritz, is it allows him to extract historical buying data and then use that data to negotiate the best possible contracts and deals with vendors. Ritz can pull data over a period of time (such as how many pounds of beef were purchased or the dollar amount spent on ribs) and use that information to forecast buying habits going forward.

"One thing that opens eyes is to sit with a vendor and tell him we spent thousands of dollars to the penny on a specific product and what we'll be buying in the future," Ritz says.

The software also enables Ritz to compare food costs from one restaurant to another and achieve a greater degree of consistency and continuity in terms of food and beverage for the guest. A slightly different price in butter can cause a fairly significant difference in what a plate costs from one restaurant to another.

"Without a centralized system in place, it would be impossible to get that type of control," Ritz says.

Managing materials

Three years ago Pechanga Resort & Casino opened in Southern California with its materials management system from Agilysys ( already in place. This huge property, boasting 522 resort-style rooms, casino, health club, spa, theater and convention facility insisted on having a complete inventory and procurement system to manage its entire online procurement process ready at start-up.

"The beauty of the system is it's all-encompassing with inventory, retail, barcoding, accounts payable, purchasing and recipe analysis," states Jim Guenthner, Pechanga's purchasing manager. "A large property that buys the volume we buy and has to manage goods once they hit the dockÃ.‚¬"whether it's sheets, towels, toilet paper or vehiclesÃ.‚¬"benefits from this system that has the best encompassing technology to wrap it up all together."

Guenthner says the materials management system (MMS) helps Pechanga ensure the best possible bid price. The MMS system also offers real-time inventory control and captures the procurement history for each item, which plays a big factor at budgeting time when employees need to know how much they spent. A database of vendor history ensures the resort/casino gets the price actually quoted. If a product is one penny more than quoted, the system blocks the invoice and it must route for approval.

To get the best possible vendor bids, a number of companies offer bids, then system generates a bid list that ties into its ordering system. When it's time to place orders in produce, for example, the system selects according to price, which ensures that Pechanga gets the best price available for the right product.

"There are numerous benefits of running a large property with a multi-million inventory and knowing everything coming and going is accounted for," Guenthner says. "That's ultimately the goal."

Guenthner says the materials management system saves a tremendous amount of labor as most buyers do the majority of work on a computer rather than making phone calls. It also creates a paperless office, which provides a big savings to the company.

Gaining insight

A merger in 2001 created a need to rethink purchasing when Nathan's Famous purchased Miami Subs and acquired its purchasing organization. Nancy Murphy, vice president of purchasing, says it became important to consolidate data so the organization could use the information to know where in the country it needed different products and how many products it needed to bid more effectively.

"We build our brand and conduct our business all through the supply chain," Murphy states. "That's what the restaurant runs on, especially with franchise organizationsÃ.‚¬"getting the proper product at the right price at the right time with the correct quality."

Nathan's added Instill's ( Purchasing Insight to gather accurate supply chain purchasing data to find hidden cost savings in the supply chain. The organization might use one brand of mayonnaise in New York, another in Florida, and another in Texas.

Murphy says it's important to have the technology to capture that information and get bids to take over the business in all distribution centers. The organization also uses a Contract Management system that matches contract prices with actual purchases. This provides a cost savings by ensuring distributors are charging the right price.Overall, Murphy says the system has saved the organization money and provided better information.

Fresh supply chain

While saving money was also important to Baja Fresh, even more important was tight control of inventory. That desire led Baja Fresh to select inventory management and supply-chain management tools from eRestaurant Services ( to manage inventory and labor costs in more than 121 company restaurants located across the United States.

"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," explains Baja Fresh Restaurant CIO Natascha Kogler.

Baja Fresh will use eRestaurant Services to control daily and weekly inventory costs in addition to managing all cash management and labor reporting at both the restaurant and enterprise level. eRestaurant Services' enterprise back-office solution provides both restaurant managers and regional operators with the tools that they need to effectively manage their food and labor costs.

According to Kogler, Baja Fresh appreciated that it could achieve a return on its investment in multiple ways, including inventory control, labor cost control and better reporting. "Most importantly," Kogler continues, "eRestaurant Services has the functionality and flexibility to meet our needs as we continue to expand into more locations."

For Baja, like many hospitality companies the truest ROI for supply chain management is in bringing rationality to growing operations.