November 17, 2021

Fast Food, Slow Supply Chains: The Food Service Industry Needs New Tools to Avoid Jeopardizing Its Profitability

For companies in the food service industry, communication and coordination are the lifeblood of their business. With far-reaching supply chains spread along dozens of suppliers, distributors, and buyers, staying in sync is a constant fixation. After all, when communication and coordination along the supply chain fails, it results in lost product and profit loss. And the larger the company, the greater the struggle to bring their business and supply chain partners under the same common operating picture. 

The food service industry is a prime example of an industry highly affected by small changes. With limited space for time-sensitive product that spoils easily and does not last indefinitely, the food service industry requires just-in-time delivery. 

So, is the food services industry doing a good job at collaborating to react to shifts in demand? It’s complicated. 

Consumer preference is volatile, depending on dozens of exogenous factors. In terms of long-term success, the food service industry has done well in scaling up production and catering to consumer interest.  

As a result of understanding this long-term shift in behavior, major corporations like Tyson, as well as smaller players such as the recipe website Epicurious and the restaurant Eleven Madison Park, have shifted to focus on more plant-based offerings.  

As concerns for the climate and the harmful impact of meat skyrocketed, so did interest in plant-based alternatives. Tyson’s early action in producing plant-based meat alternatives secured their future business and enabled it to shape demand by encouraging meat-eaters already comfortable with Tyson’s poultry products to try the plant-based product as it rolled out.  

Despite relative success in this long-term transition, the food service industry struggles immensely when it comes to short-term alignment.  

COVID revealed just how unsynchronized the food service industry is.  As typical predictive models and standard demand forecasts were rendered instantly obsolete due to rapidly shifting consumer behavior, financial numbers suffered as the food service industry stumbled in adjusting to the shifts in demand. 

As the whole world witnessed the economic turbulence during and following COVID-19’s stay-at-home orders, smart businesses found and used new intelligence that enabled them to more quickly adapt to the extreme changes in consumer behavior. And, while no company could be expected to be ready for a catastrophe like COVID-19, the sluggishness displayed by the food service industry is indicative of a deeper issue of connectivity and coordination along the industry’s supply and distribution chain.  

COVID-19’s impact on the food service industry was felt by all of its participants. In a business where just-in-time response is the rule, a sudden change without precedent left the entire industry in a lurch. As restaurants closed, a crisis emerged, as well as a call to action for the supply chain: change your ability to understand demand in time to adjust your supply chain or be left behind.  

The world witnessed the food service industry’s slow response to the COVID-19 crisis. Although the initial shock of the pandemic has settled, the industry’s supply chain and distribution issues remain exposed. Demand is returning unevenly across the country. Companies are unable to source product and allocate it effectively. Some can’t even find enough drivers to deliver product that may or may not be consumed. Others can’t hire enough staff to carry their restaurant through the weekend rush.  

How can the food services industry tackle these residual supply chain issues? Getting the right consumer demand intelligence is the first step. The food services industry can begin to solve their issues with unique demand intelligence that:  

  • Uses data from their business, their partners, and external sources, 
  • Gives actionable business insights by product, customer, and local market, and  
  • Is shared within their business and among their supply chain partners 

With the right demand intelligence platform, the food services industry can resolve their supply chain issues by continuously sharing and collaborating with their supply chain partners, enabling synchronized responses to disruption. From there, businesses need to monitor their partners’ actions, ensuring that all of their ecosystem partners are collaborating towards a more efficient and profitable response to ever-changing consumer behavior. 

Of course, it all starts with getting demand right. 

The COVID-19 crisis is an omen for the future of the food service industry. To efficiently serve dynamic local marketplaces, companies must be agile and coordinated in their efforts to continually adapt to changing consumer behavior. While innovation sprung up throughout the industry, with industrial orders for food products changing to consumer- sized packaging and ghost kitchens servicing demand that was formerly filled by brick-and-mortar dine-in restaurants, the time lapse between the dramatic increases in stay-at-home orders and supply chain adjustments caused food services business to experience financial losses due to spoiled goods and inefficient responses.  

In a just-in-time industry, even the most minor shifts in demand or problems with supply have far-reaching implications. To keep small changes in demand from snowballing and affecting long-term profits, businesses in the food service industry must implement a platform solution that: 

  • Taps data sources outside their enterprise to deliver up-to-the-moment intelligence about changes in consumer demand by product, market, and customer, 
  • Enables a common understanding of demand both within the business and among its supply chain partners, 
  • Monitors how well each partner performs relative to the market opportunity, and 
  • Delivers intelligence on how you can affect demand to move more units and increase the return on merchandising and marketing. 

If long-standing industry leaders had had systems like The Intelligence Exchange platform, that provided intelligence about changes in demand and enabled quick alterations of the operations of their business ecosystems, they would have been more agile at the onset of COVID and mitigated losses. However, the disjointed communication and slow-moving internal infrastructures that rely on outdated data sabotaged the companies who relied on old- school methods for garnering, distributing, and using information about demand.  

The problems highlighted by the COVID-19 crisis will persist and worsen unless the food services industry acts now. The root of the turmoil does not lie in the pandemic itself; while it is easy to blame business problems on external disruption and changing consumer tastes, the industry suffered because companies lacked the demand intelligence and ecosystem alignment necessary to understand, anticipate, and respond to the changes in demand and be prepared as local demand rebounds.  

For businesses in the food service industry to stay competitive in the modern marketplace, it is crucial that they incite change to make their decision-making processes intelligence-driven and grounded in the connectivity of their business to its ecosystem partners. The Intelligence Exchange platform is essential for food services companies hoping to thrive amongst ever-present supply chain volatility.   

For a deeper dive into the food service industry’s failures during COVID and how your company can learn and profit from them, download our white paper on demand intelligence in the food service industry here

For more information about how you can join an Intelligence Exchange,
call us at (855)-760-6003 or have a member of our team reach out to you!

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