We enjoy going out to eat as a way to relax, celebrate, or just because we don’t feel like cooking. Thanks to restauranteurs, we have a wide variety to choose from, whether we’re in the mood for fine dining or something more casual. Most of us are not aware of the behind-the-scenes work that goes into running a restaurant, in particular, the supply chain.
While consumers may not be aware of restaurant supply chain issues, these problems can have a big impact on businesses. From food shortages to price hikes, restaurant owners must be prepared to deal with the challenges that can arise. Now that we’re still in the middle of a pandemic, restaurateurs are being hit hard with new issues to contend with. What are some of the most common restaurant supply chain issues and how did this impact the industry?
Lack of Resources and Equipment
Restaurant supply chain issues can often be traced back to a lack of resources and equipment. This can include everything from an insufficient number of suppliers to a shortage of key ingredients. Raw materials are a necessary part of any restaurant business, so a shortage can quickly lead to problems.
Due to the COVID-19 pandemic, the raw materials restaurant owners need have become even harder to obtain. For instance, there has been a shortage of meat due to the closure of slaughterhouses. This has led to an increase in prices for beef, pork, and chicken. In addition, some restaurant chains have had to reduce their menu offerings or temporarily close their doors due to these shortages.
Moreover, with the issue of equipment, some restaurants had to cut back their operations because they could not find the necessary tools and materials needed to run their business. Due to a lack of capacity to ship these foodservice types of equipment, restauranteurs had to wait even longer to get their hands on these resources. The pandemic has only exacerbated this problem as restaurant owners scramble to find ways to keep their businesses afloat.
Shortages in the Workforce
In addition to a shortage of resources, restaurant supply chain issues can also arise from a lack of workers. This is often due to a combination of factors such as an insufficient number of trained staff, high turnover rates, and the pandemic.
Training staff takes time and money, so a restaurant owner needs to be able to retain employees to recoup their investment. However, the restaurant industry has one of the highest turnover rates, with an average of 73% annually. This is often due to low wages, long hours, and poor working conditions. The pandemic has only made things worse as restaurant workers are now dealing with the added stress of working during a global health crisis.
In addition, many restaurant workers have been laid off or furloughed due to the pandemic. This has put even more strain on restaurant owners who are trying to keep their businesses running.
Backorders Are on the Rise
Supply and demand play a big role in restaurant supply chain issues. When there is more demand than there is supply, this can lead to backorders. A backorder is when a customer orders a product but the restaurant does not have enough in stock to fulfill the order. This can be frustrating for both the customer and the restaurant owner.
The COVID-19 pandemic has led to a surge in backorders as restaurant owners try to keep up with the increased demand. This is because many people are now cooking at home more often and are looking for restaurant-quality food. With the accumulation of imports and exports, restaurant backorders are now at an all-time high.
This problem is only compounded by the fact that many restaurant suppliers are also facing shortages. This means that they are unable to restock their shelves, which leads to even more backorders and as a result, restaurant supply chain issues that are hard to solve.
But, we can see a little bit of daylight at the end of the tunnel. A simple solution that restauranteurs can take is first, to order early. This simple strategy can help restaurant owners avoid backorders and restaurant supply chain issues. It enables the distributor to allocate the restaurant’s order ahead of time and ensures that the restaurant will get its shipment on time. Secondly, is to allow for a wide range of stock options.
This gives restaurant owners the ability to purchase from a variety of suppliers to ensure that they can get the products they need. This strategy also helps to keep costs down as restaurant owners can shop around for the best deals.
Failing To Communicate Effectively
Communication is key in any relationship, especially when it comes to business. This is especially true when it comes to restaurant supply chain issues. When restaurant owners and suppliers are not on the same page, it can lead to big problems. Poor communication can lead to restaurant owners not getting the supplies they need promptly. This issue will get worse if you’re operating globally because of the different time zones and language barriers.
Well, the restaurant industry is an ever-changing landscape. What does this mean for restaurant owners? First and foremost, it means that they need to be adaptable. They need to be able to change their menu on a whim and adapt to the changes in the restaurant industry. Another thing is that restaurant owners need to have good relationships with their suppliers. This way, they can be sure that they are getting the supplies they need on time.
Last but not the least, restaurant owners need to be able to communicate effectively with their suppliers. This way, they can avoid any restaurant supply chain issues that may arise and keep their restaurant running smoothly.
With the help of technology nowadays, restaurant owners can easily communicate with their suppliers through email, phone calls, or even video conferencing. This way, restaurant owners can be sure that they are getting the supplies they need promptly and avoid any issues.
Costs in the Supply Chain Are Rising
Another big issue that restaurant owners are facing if not the biggest issue is the rising costs in restaurant supply chains. This is because many restaurant suppliers are facing shortages.
This means that they are unable to restock their shelves, which leads to even more backorders. Other factors contribute to this problem, let’s take a look at some of them.
Costs of Energy and Fuel
The first factor is the rising cost of energy and fuel. This is because many restaurant suppliers rely on energy and fuel to power their businesses. With the current state of the economy, energy and fuel prices are at an all-time high.
This means that restaurant suppliers are passing on these costs to restaurant owners. It also means that restaurant owners are having to pay more for their supplies.
Freight and Logistics Costs
The second factor is the rising cost of freight and logistics. This is since restaurant suppliers have to ship their products all over the country to reach their restaurant customers.
The cost of shipping has gone up due to the increase in fuel prices and the fact that there are more restaurant suppliers than there are restaurant customers.
This means that restaurant suppliers have to compete for space on trucks and in warehouses. This competition has driven up the cost of freight and logistics.
Manpower
This is one of the reasons that there is a rise in cost in the restaurant supply chain because the restaurant industry is one of the most manpower-intensive industries. As we have mentioned earlier in this article about the shortages in the workforce, restaurant suppliers are finding it difficult to find the right people to work in their businesses.
And, the fact that the benefits and wages have not increased in recent years, restaurant suppliers are having a hard time attracting and retaining employees. This has led to an increase in the cost of doing business for restaurant suppliers.
Adapting Technological Advancements
The restaurant industry is also one of the most technology-driven industries. Restaurants that quickly adapt to new technology tend to be more successful than those that don’t. For example, restaurant POS systems have evolved greatly in the past few years. Restaurant owners who have not adapted to these changes have found themselves at a disadvantage.
Another example is the rise of mobile ordering and delivery. restaurant customers now expect to be able to order their food from their smartphones and have it delivered to them. Restaurant owners who have not adapted to this change have found themselves losing business to their competitors which means a rise in the cost.
To Conclude
The restaurant industry is facing many challenges when it comes to its supply chains. From food safety scares to labor shortages, restaurant owners and investors must be aware of the potential risks and impact these issues can have on their business.
By understanding the root causes of these problems and implementing effective solutions, restaurant businesses can minimize the negative effects of supply chain disruptions and continue to thrive.
If your restaurant is struggling due to the supply chain issues of the restaurant industry and facing possible closure, reach out to us at TAGeX for a consultation on next steps.