Knowledge is power if you want to protect your share of the foodservice cake
With food service inflation running at 8.8% in June, consumer confidence at an all-time low and Brexit around the corner, we might be forgiven for thinking that the future isn’t bright. Helen McMillan, director of online commerce at Zonal, looks at how operators can protect their margins by looking closer at the detail in their data.
With the price of fish increasing by 13.4%, coffee up by 11% and bread and cereals 2%, this unprecedented food service inflation looks set to continue. This is underpinned by the Office for National Statistics data which reports 3.0% menu price inflation, suggesting volumes are down circa 2.5% year-on-year. Separately, a continuing difficult trading environment makes for a bleak outlook with the Coffer Peach Business Tracker for July showing like-for-like sales growth of 0.6% (prior year 0.3%).
But it doesn’t have to be all bad news.
Prudency and strong management are key if operators are to survive the rocky road ahead. And, the key to protecting any foodservice operation in the twenty first century is the ability to tightly control costs and margins.
In my role as Director of Online Commerce for Zonal, it would be fair to say that I’m obsessed with detail because it’s detail that makes the difference between success and failure. In fact, with the continuing pressure on costs, the old adage that ‘every penny counts’ is more relevant than ever before.
Operators need to approach the price increase jigsaw from the perspective of the aggregation of marginal gains. It’s all about small incremental improvements in the purchasing process, culminating in a significant improvement when they are all combined.
The concept was made famous by the performance director of British Cycling, Sir Dave Brailsford, who set about breaking down the objective of winning races into its component parts. He believed that it was possible to make a 1% improvement in a whole host of areas, the cumulative gains of which would end up being hugely significant. He saw each weakness not as a threat, but as an opportunity to make adaptations, and create marginal gains. Rapidly, they began to accumulate.
And, it is access to real time data on purchase volumes, stock levels, pricing and margins, together with full visibility of supplier activity and the ability to control the purchasing of every outlet that will give operators the ability to make the incisive decisions needed to achieve these cumulative gains. When consistently implemented, I have seen improvements on margins ranging from anything between 3 to 8%. Who, in this climate, can afford not to search out every marginal gain?
Achieving these levels of visibility and control, almost by default, further protects against the often insidious aggregation of marginal decay. Small errors and omissions – orders not added to stock on the day of delivery, using the wrong supplier and paying sub optimal prices for a high volume product, inaccurate reports going to the wrong recipients – quickly add up. When the going gets tough, this stuff really matters – burying our heads simply isn’t an option.
Implementing a comprehensive supply chain system can unlock the real potential of your business and protect against external cost pressures, helping to combat the kind of unprecedented inflation we are facing. But it doesn’t need to be difficult or costly – every improvement, no matter how marginal, contributes. It’s about using the tools you already have at your disposal to implement the processes and controls you need to quickly give you the right information to make informed choices.
In this climate, moving to a data driven culture is the key to survival. ‘Knowledge is power’ and without this knowledge, the reality is that operators are powerless to make the right decisions to future proof their business. Improving efficiency is more urgent and important than ever.
It is no secret that true competitive edge is gained by those operators with flair, creativity and vision. The talent that is so crucial to the success of our industry is attracted by virtue of this very fact. But this flair is a rare and beautiful thing, which must be nurtured to flourish.
However, the real winners know that the ‘boring stuff’ – comprehensive systems, underpinned by solid process, delivering accurate and timely information, which is constantly reviewed and regarded – has to be the foundation upon which the ‘sexy stuff’ is built. Getting the basics right may be dull, but relatively easy – and there are plenty of people who can help.
More than ever operators owe it to themselves to get these fundamentals right so their talent can be applied to the far more difficult task of driving the top line.
We need to open our eyes and have a detailed picture of all our operations in order to manage costs effectively from utilities to ingredients to people. Never has it been easier to paint this picture through integrated technology, so that data can be aggregated quickly to create real-time data analysis and comprehensive reporting in an easy to understand format.
In our brave new world, it’s all about having the right level of detail to watch the pennies and make sure that all of those small changes add up to make sure your slice of the cake keeps on growing.