January 3, 2019

Lessons From Top Restaurant Supply Chain Blunders

Lessons From Top Restaurant Supply Chain Blunders

In restaurants, Murphy’s Law is always in full effect — everything that can go wrong, will go wrong.

When it comes to restaurant supply chain blunders, not even the largest chains are immune — in fact, they’ve had some of the most visible supply chain disasters of the last decade.

There are many lessons in the mistakes made by some of the major players in the food service industry: It’s not about if there will be a problem, it’s about when and how you can be better prepared to tackle it. Having a plan in place to handle supply chain issues quickly and gracefully can be the difference between coming out the other side with your customer base intact or taking a major financial hit.

Let’s take a look at a few of the biggest restaurant supply chain blunders and the biggest companies with that lesson in mind. Remember, things go wrong at every restaurant. If these big chains can survive these disasters, your restaurant can make it through supply chain hiccups, too.

Chipotle's Supply Chain Outbreak Disaster

Chipotle was one of the most popular fast-casual chains in the U.S. when its supply chain struggles began.

The chain’s motto was “Food with Integrity

And it sold its concept on sourcing ingredients from local suppliers that met its standards for sustainability, accountability, and animal welfare. Chipotle has done well in sticking to those principles — for part of 2015, it stopped serving pork in its restaurants because a routine audit of a pork supplier showed it wasn’t meeting the chain’s standards. At the time, sales took a small hit, but Chipotle was also praised for standing behind its practices.

It was those principles that would get Chipotle in trouble.

Sourcing natural and locally grown ingredients requires complex supply chains, and Chipotle didn’t have full visibility of its supply chains. The writing was on the wall.

In a 2014 annual report, Chipotle made this prediction: “We may be at a higher risk for foodborne illness outbreaks than some competitors due to our use of fresh produce and meats rather than frozen, and our reliance on employees cooking with traditional methods rather than automation.”

In late 2015, that prediction came true. Within months, a nine-state E. Coli outbreak was linked to Chipotle restaurants, and the chain faced norovirus outbreaks in California, Virginia and Boston, where more than 100 students were sickened after eating Chipotle.

Amid this absolute storm of supply chain disasters, Chipotle was hit with multiple lawsuits and a federal criminal investigation. To date, Chipotle has been fully cooperative with authorities, as well as openly communicative with the public. In its 2016 annual report, it announced food price increases that would allow for better technology and improvements to supply chain management.

The Lesson: Ensure full visibility into your restaurant value chain

Stay true to the principles that brought you success because the values that made you successful will be the ones that ensure your continued success. The lesson smaller restaurants can learn from Chipotle’s outright disaster is that while it’s admirable to source ingredients locally and sustainably, it’s vital to invest the resources necessary to have full supply chain visibility, even over a more complex chain.

It’s equally important to have a crisis plan in place in case something does go wrong — speedier and more cohesive action may have meant fewer outbreaks for Chipotle.

A&W’s Beyond Burger Craze

In summer 2018, A&W restaurants in Canada tried to do the same thing Chipotle has long been known for: meet customer demands for healthy, sustainable foods and ingredients.

After more than 60 years serving burgers, the company used 100 locations in Canada to test a new product: California-based Beyond Meat vegan burger patties. While A&W knew demand for plant-based proteins was strong and growing, it didn’t anticipate how popular the Beyond Meat burgers would be.

They sold out in many locations in just a day, and within weeks, were sold out nationwide.

The shortage was due to the supplier. Despite opening a new factory in Missouri in June that tripled its production capacity, Beyond wasn’t yet able to keep up with demand for its vegan burger patties when the product was rolled out at A&W stores in Canada. Beyond ended up delaying the release of its products in the UK so it could focus on meeting North American demand first.

A&W had to work to ensure it could reintroduce the burgers once supply was consistent.

It communicated clearly with customers to let them know that while there would be a delay, Beyond Burgers would be back for good once they were back in stock. By October, the burgers were back in Canadian A&W stores.

A&W had the best possible supply chain problem: Demand for a product was so high, it couldn’t initially meet it. While this is nowhere near the disaster level of Chipotle, it can still leave guests disappointed to not be able to get the products they want--especially new items that they really love.

The Lesson: Supply chain management depends on understanding guest demand

Smaller restaurants should learn from A&W’s mistake that it’s important to anticipate demand before rolling out a new product. For example, try sampling reactions to new products in smaller markets where you know you can capably respond to spikes in demand. Once you’ve got an estimate of projected demand from that sample, make sure your suppliers are ready to scale up with you when you release the product more broadly.

Know that surprises happen and be transparent with customers when fixing a supply chain problem. Let them know that you’re committed to getting the items they love back in front of them as soon as possible and take the opportunity to get new potential guests excited about the product as well.

KFC’S Supply Chain Disaster: The Great Chicken Shortage of 2018

In early 2018, KFC franchises in the UK and Ireland partnered with DHL to deliver their ingredients. DHL operated out of a single UK warehouse, which was blocked off by several traffic accidents that coincidentally happened on the same day in a few key intersections near the warehouse.

This kicked off a chain of events that led to a weeklong shortage of chicken at KFC restaurants.

Many locations operated with limited menus or shortened hours.

Four days after the accidents that disrupted the supply chain, only 266 of the 870 KFC restaurants in the UK and Ireland were even open.

Supply chain disruptions aren't uncommon.

KFC’s situation was unique in that several things went wrong at once to create a catastrophic disruption to the supply chain, but there’s nothing to say that can’t happen at other restaurants, too. Richard Wilding, a supply chain management professor at Cranfield School of Management, told Wired  that supply chain disruption is actually pretty common — 10 percent of supply chains will be disrupted each year.

The best food shortage solutions have to do with determining and maintaining a par level, or a minimum amount of supplies you can keep on hand (without them going bad) that allows you to always have a little extra in case supplies can’t be replenished immediately. This way, your stocks are never too low. You’re less likely to be affected by supply chain disruptions because you have extra stock on hand.

The Lesson: Stay on par with a trusted network of suppliers

Maintaining a par level requires ordering more supplies or ingredients before the day you need them, so it takes some organization and forethought. Over time, you and your vendors can work together to figure out your order cadences and forecast your needs, which will make maintaining par levels much simpler.

This will also help you build better relationships with your suppliers, but that doesn’t mean you shouldn’t still have backup suppliers in case of emergencies. Good vendors should even be able to recommend backup suppliers in the event that they’re temporarily unable to meet your restaurant’s needs. Purchasing cooperatives are another great way to ensure you have multiple vendors ready in case your regular supplier is experiencing a disruption.

Supply chain blunders are almost inevitable in the restaurant industry.

But learning from the largest disasters at the biggest chain restaurants can help you prepare for when it happens to your restaurant.

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