Sorted for e-procurement with a whizz
20 February, 2013
It has taken a while, but supply-chain management in the food service sector has finally caught up with technological advances first touted more than a decade ago, says David Read
Way back in the mists of time, before the Millennium, we heard how e-procurement would revolutionise the way we manage supply chains. But somehow the quiet backwater of foodservice seemed to be passed by.
Slowly, however, e-procurement has become a part of everyday operations for the majority of catering operators. As industry-specific technology has developed, smart operators have been steering functionality to deliver real and sustainable benefits. A plethora of well- designed, robust and cost-effective systems is now available, as software, or in the cloud as a software-as-a-service.
Some food and drink suppliers have launched their own platforms, and these have a place. But the desire to retain independence and select the right software to meet business requirements has driven most operators to renting or buying their own system.
Good automation positively impacts all four of the key success criteria in use by supply chain people—cost, quality, availability and innovation. Here is a high-level guide.
The automation of the order and receipting process gives the operator the opportunity to set authority levels (in cash, volume and specific product terms) and bar, report or escalate exceptions. This dramatically reduces wastage.
The operator agrees pricing with a supplier, and this is what gets loaded on to the system. If the supplier erroneously invoices a higher amount, it gets reported as an exception. This also has the benefit that users only order the right product, from the right supplier.
At pretty much every point in the supply chain, labour is reduced. For example, suppliers can invoice electronically, and the three-way match (order/delivery note/ invoice) can be automated at a line item level. An operator’s labour is then only focused on resolving exceptions. Suppliers, too, benefit from these efficiencies, in, eg, reduced telesales labour, lower error rates and simplified picking.
Integration with Epos/stock systems has revolutionised stock management. Each dish is listed at ingredient level, so that when stock is taken, theoretical consumption based upon dish sales can be compared to actual consumption at single SKU level. Yield problems on high-value items can then be identified and managed out quickly.
For supply chain people, data is vital. For me, the single biggest impact of automation, when done well is the massive improvement in the availability, accuracy, depth and currency of data available. This has several critical impacts:
Effort – I have seen armies of accountants, buyers and analysts grapple with inadequate data from inappropriate systems for months. The labour cost alone can be massive.
Time – while all this inadequate data is slowly collated, the clock is ticking. A three-month delay on a project aimed at delivering a £1m benefit costs an additional £250,000.
Quality – the data quality delivered by a well-set-up system should be significantly superior to that from multiple sources, boosting the quality of the commercial terms struck with suppliers.
All of this timely, accurate data delivers total transparency of the supply chain, and enhances the organisation’s ability to make informed decisions about all aspects of the value chain.
Inventory and forecasting
In many other industries, and in a few enlightened catering businesses, focus is also given to forecasting future orders. Suppliers (and their suppliers) have to hold inventory to cover what every customer MIGHT need. Like you, they get the blame and may lose the business if they get their forecasting wrong. Making forecasts transparent throughout the supply chain helps everyone manage their stocks better, and keeps costs down. Just look at the major food retailers to understand the
value of this. There, provisional orders are placed as much as six weeks out, with regular revisions as the actual order date draws closer.
Strategic procurement decisions based on pricing insight, such as that from our recently launched Supply Market Reports, can also be factored into inventory management and forecasting. When coupled with automation, it is critical to driving efficiency in the supply chain.
Key indicators such as product rejects and delivery OTIF (on time, in full) are a feature of some e-procurement systems. Accurate and timely reporting enables procurement managers to agree and monitor improvement goals with suppliers, and raise the bar on the efficiency of the whole supply chain.
Many e-procurement systems can now issue orders in multiple formats (even fax), and they can enable suppliers to create their own invoicing on the system, meaning that the use of even the tiniest of artisan suppliers is feasible, but in a managed and controlled manner.
As systems become more and more integrated, the opportunity becomes available not only to manage one’s own business better, but to collaborate upstream, by using open technology. This will create a new world for supply chain professionals, where access to brand owners, processors and farmers will become the norm, and intermediaries will be properly evaluated for the value that they genuinely add.
David Read is Chief Executive of Prestige Purchasing
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