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06/14/2021

Why It's Time to Digitize the Procurement Process

Bringing the restaurant supply chain into the future is a key step in helping the foodservice industry rebound.

The explosive increase in tech adoption across the restaurant industry shouldn’t come as a surprise. COVID has forced all businesses in every sector to speed up their adoption of technology, and think about an online presence to grow. Foodservice operators, who at best, thought of new tech as a “nice to have” and at worst, “annoying” have embraced the tools they need to maintain and grow their livelihoods.

However, while the majority of businesses have gone through some sort of digital transformation, the sad truth is that 99% of operators in the restaurant supply chain remain completely offline.

This is surprising. After all, there’s no shortage of software adoption in the front of the house for restaurants, with global restaurant management software market projected to reach $6.94 billion by 2025. However, most restaurants are prioritizing softwares for POS, accounting, loyalty, online ordering, third party delivery apps, training, scheduling and payroll.

Given that technology has touched most, if not all other areas of a restaurant, why is the supply chain still operating in the dark ages? Considering up to 40% of a restaurant’s revenue is spent on ingredients and up to 12% of that food is wasted before it’s even sold to the customer, one would think food procurement would be the first thing to digitize. 

The broken and chaotic food procurement process still relies on antiquated methods like pen and paper. While there’s something to be said for “if it ain’t broke, don’t fix it,” many operators don’t realize the reality is that their own supply chain is broken -- or at least, could be much more efficient. In fact, for many, it can mean the difference between just surviving and thriving.

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a truck that is driving down the road

The first defense against waste

While increased use of technology by the foodservice sector is good news overall, if a healthy number of the 120,000 restaurants across North America that closed during the pandemic are going to return, the typical restaurant stack needs to change dramatically, and quickly. Order management, in this context, changes from a ‘nice to have’ to crucial. It’s the first line of defense to cutting costs, waste, and inefficiencies for a business looking to bounce back stronger than ever.

Making sense of chaos

For example, a single restaurant wastes about 500 hours a year (at least) ordering food supplies due to lack of digitization of the ordering process from its distributors. That’s a lot of payroll wasted that could otherwise be shifted into revenue-generating activities that make them more competitive like menu reinvention, a renewed focus on customer service, marketing, social media or special offers that delight customers and keep them coming back.

Juggling offline

Furthermore, most restaurants are ordering from seven different suppliers. That means logging into many different distributor platforms and using an endless number of spreadsheets -- or even notebooks in many cases -- to track this notoriously “messy” process. Restaurants are managing a mix of broadliners and smaller, local distributors to procure specialty local meats or unique, organic produce and hard to find spices. That’s a lot of juggling trying to make sense of the chaos. Additionally, the pen and paper system leaves much room for error which equals loss.

Transparency is long overdue

Additionally, restaurants often do not know how much they are paying for wholesale food items until after they are invoiced. Imagine going to an office supply store to buy 20 cases of paper, and not knowing how much it will cost until it’s been delivered to your desk? This is unacceptable in this day and age when the consumer marketplace has experienced price transparency for countless decades. The truth is technology has the power to do the same for the restaurant industry but until recently, it has been largely unavailable.

Restaurants  deserve the same price transparency experienced in the B2C marketplace. There needs to be more healthy competition among restaurant distributors and this starts by enabling restaurants to cost-compare products from distributors through an online marketplace. There’s some in the industry that do not want to see this, but I have seen firsthand how it benefits the entire industry - restaurants and distributors alike.

Streamline the buying process

Distributors have also been hit by the pandemic. In addition to lost revenue due to a struggling restaurant industry, when food orders are received, owners and employees are getting up at 4 a.m. to manage them with paper and pen as well. This is inefficient, causing hundreds of botched orders a year that equates to thousands of dollars in losses, along with time that can never be recouped. They need to digitize their order desks but many continue to rely on texts and voicemails.

Supply chain management doesn’t have to be an opaque, confusing, and time consuming aspect of business for both sides. Order management doesn't have to be a business’s  biggest time-suck. Technology solutions have helped ratchet up the speed in other industries, like accounting integrations, chat, delivery notifications, even the ability to quickly repeat an order without having to write it out or repeat the same items, every week. It’s just a matter of recognizing the impact adopting these practices can have on a business.

Technology can come to the rescue to fix the broken restaurant supply procurement process -- not to mention help alleviate much unnecessary stress on both sides of the supply chain. So go ahead, invest in POS and accounting systems but don’t forget that notable savings start by digitizing the procurement process.

About the Author

Jordan Huck is CEO of Notch. Notch is a platform that brings the wholesale restaurant supply chain online for restaurants and distributors to reduce food waste and eliminate inefficiencies to save time and money. It allows restaurants to shop nearly 100,000 skus online transparently and competitively while completely digitizing restaurant food distributor order desks to connect both sides of the chain within one, easy to use software.