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Trending in foodservice supply chain: technology

AI pricing, algorithms, blockchain, e-sourcing, PIM/DIM

What does the future in foodservice supply chain look like? When it comes to conversations surrounding foodservice supply chain trends, advances in blockchain, AI and digital ordering are developments that come to mind. Technology will certainly help suppliers and distributors. At the same time, cost pressures are mounting and the economic landscape for foodservice operators has been in flux. The restaurant industry today is not what it was just a few years ago. Large restaurant chains are reporting that delivery could be a double-digit piece of the business pie, outpacing growth of on-premises dining by multiples. And robots and self-ordering kiosks will quickly become a routine sight at most-chains.

Still, the restaurant business, which is an $800B behemoth, according to the National Restaurant Association, has shown growth in the past few quarters. According to intelligence firm and sales-tracker TDN2K, its Blackbox reporting shows signs of a potential recovery, with rolling-average sales growing 1.06 percent as of November. Foodservice operators, which are largely made up of restaurant chains, independent restaurant groups, caterers and contract operators, make up a hefty portion of the foodservice supply chain business for broadline foodservice distributors. Read: Distributors’ successes will hinge largely on
the livelihood of these clients.

A major theme in the foodservice supply chain world, currently, is transparency in pricing and in sourcing, as well as a concern to reduce food waste and conserve resources. Amazon has become a leading online source
for foodservice purchases, according to an e-sourcing report from Chicago-based foodservice consultancy, Technomic, Inc. But it would be difficult for the company to take on other advantages that distributors have, including convenience, an advisory relationship with restaurants and referral programs.

Distributors like US Foods are recognizing that food delivery is an important part of the restaurant business. Photo by US Foods.

Yet, restaurants are willing to tap into a variety of sources for their purchases, including Amazon, club warehouses, restaurant warehouses and GPOs (Group Purchasing Organizations). GPOs were named a hot trend in foodservice sourcing by Pentallect last year.

AI pricing, rise of the GPO

Dining Alliance is one such GPO. With regard to pricing transparency, Christina Donahue, its president, suggests innovative pricing models will work, including pricing through algorithms and “cost plus” pricing. GPOs that deploy cost plus pricing give operators the peace of mind of knowing that any price changes are the result of real commodity fluctuations, not because of the whims of a distributor,” shesays. “The relationship between the distributor and the operator has been purified, in a sense, by having the GPO present.” She insists operators appreciate the presence of a GPO to establish trust and transparency, and to avoid competitors luring customers away.

Pricing via AI instead of DSRs (Distributor Sales Representatives) is another developing trend, according to Donahue. “There are massive algorithms in place that can decide, much more accurately than a human, what the optimal pricing is at one particular time for, say, hamburgers sold to a certain type of operator.”

Online ordering tools, waste reduction

Online order tools are another tech trend that is becoming more pervasive. Systems that track inventory and manage menus across multiple outlets are additional tech tools that are helping multi-unit operators, says Anurag Awasthi, director of Engineering at Riversand, a company that supplies such data management tools to large foodservice operators. Real-time management of data, which could include stock levels and allergen information in menus, can create advantages for the foodservice operators that use them.

FoodBAM, a sister company of Dining Alliance, provides an online ordering platform for operators. “It’s a single online portal that allows operators to compare prices for items across multiple distributors, and allows them to order and keep track of inventory in one place,” says Dining Alliance’s Donahue. “Working with a third party provider ensures transparency for the operator and lets distributors compete on a level playing field.”

Foodservice distributors are also developing their own proprietary systems. As consumers look to manufacturers, suppliers and restaurants to reduce food waste, supply chain stakeholders are listening.

According to the 2018 Sustainability Report from the National Restaurant Association, more than half of consumers say that food waste reduction is important when choosing a restaurant and 22 percent of restaurants are donating leftover food. Food waste as a restaurant industry topic and challenge is coming to the forefront. “Data collected in any MDM/PIM system can help distributors estimate the amount of food to be supplied to an operator, maintain their stock levels and reduce the shelf life of food to be sold,” says Awasthi. “It also helps them to stock the right amount of food thereby reducing food wastage.”

Blockchain, inventory

Blockchain technology is one of the hottest trends in foodservice supply chain, allowing distributed tracking systems to help ensure food safety, integrity and bring additional confidence in sourcing and validate provenance. When healthy-eating fast-casual Sweetgreen tapped $200M in funding in November, it said those additional resources would be used to make advances in using blockchain technology. As an example, blockchain can help track coffee beans from the time they are harvested to the time they enter the final stage of food distribution.

Awasthi notes that the advantages of blockchain extend into food safety, allowing hyper-focused tracking of ingredients across the supply chain, and allowing for faster recall if there is any contamination. This helps supply chain members identify raw ingredients in the face of widespread bacterial or viral crop infections, greatly aiding in the pinpointing of products during a recall,” he adds. Large restaurant chains have direct access to suppliers and can build a cost plus pricing structure that fits their needs, while sourcing food product for integration into their distribution system. Smaller chains, however, mainly rely on sourcing product from the existing supply chain of a distributor.

E-sourcing, data sharing

E-sourcing has become a top trend for independent foodservice operators and smaller chains, and has propelled Amazon to be a contender in the sourcing of foodservice supplies and food product. One reason that operators have embraced e-sourcing is the ability to gain additional visibility on pricing from food & supplies and make comparisons for themselves. Still, others see it as a way to better negotiate with their distributors.

Unfortunately, data sharing by distributors is only a developing philosophy in the foodservice supply chain world. GPOs typically can improve on this dynamic: The distributor relationship, pricing transparency, data sharing and visibility on manufacturer rebate incentives that many restaurant operators seek can be enhanced.

Donahue says that distributors have access to large amounts of data and should be sharing that information with operators. When a GPO, such as Dining Alliance, is involved, data sharing is a given. “We encourage our distributor partners to work with our data and theirs to gain more insight on pricing and trends, and to share that information with operators to help them become more competitive,” she says. The restaurant industry is changing rapidly as customers continue to demand more ethical sourcing, less food waste and additional conveniences, including restaurant delivery.

The top tech trends in the foodservice supply chain can help operators navigate these consumer-led changes and today’s economic challenges. AI, algorithms, blockchain, online ordering platforms, PIM and MDM systems are notable trends that may help foodservice distributors and operators work together with greater success.

Photo credit: Zhang Dayong (featured), US Foods (inline)

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