Nature of Supply Chain Strategy - Essay Example

A restaurant supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request at restaurant outlets. Small and mid-sized enterprises (Seems) are distinctive In the sense that Seems are relatively small In size and scale, and some Seems are In the fast lane for growth. The size distinction Is often seen as a disadvantage, as Seems may not have a large supply chain work force or a sophisticated IT infrastructure to support the logistics system.

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The goal of SCM is to maximize the supply chain profitability, which is defined as the difference between the revenue and the total cost incurred in the supply chain (Supply chain Management Strategy Planning and operations Peter Medial and Sunnis Copra 2009 edition Clearly, there Is only one source of revenue In a supply chain: the customer. All flows of information and product generate costs within the supply chain. SCM is extremely important to all business owners and managers simply because it has a strong impact on both the revenue and costs for all firms in a supply chain (suppliers, distributors, and retailers).

Some of the problems that a normal Restaurant business is plagued is are : Short shelf-life products such as bakery products and veggies etc . Extreme seasonal demand (For example, the average sales In December Is 14 times he average sales in January ) unpredictable demand due to weather and events Expanding changing product assortment – Normally restaurant change there menu with new products , seasonal products , substituted product . Therefore besides above mentioned problem these problem also exacerbate the working of supplicant.

In the restaurant Industry, a supply chain strategy essentially determines the procurement, transportation, and distribution of products to the customers. The supply chain strategy specifies what the company will attempt to do particularly well grading these functions to support the company’s overall business strategy. Therefore, decisions regarding inventory, transportation, operating facilities, and information flows within the supply chain are all part of the supply chain strategy.

All these aspects of the supply chain can be explained through the Seven S of the supplicant as follows : Service – Service Is one of the Important aspects of any food service organization . In fact this can be treated with utmost importance. Ability to customize product as per customer requirement and serve as per the varying seasonal demand required lot of planning in supply chain management . The food supply chain is characterized by a number of features, such as the associated lead- time, shelf-life, seasonality, variety, and uncertainty.

Therefore some of the parameters we will be looking to Increase our service rate and reduce stock out items that need to be purchased weekly for daily consumption. Broadly, items with high demand or short shelf-life such as bread, produce, fruits seasonal items salads, and chicken etc are appropriate for using this option. We can look into developing mom nearby options for these items so that transportation and storing cost is reduced along with the fast responsiveness in case of sudden increase in demand .

Logistics – Since we plan to expand our restaurant to further locations within the city in initial phase logistics of the same quality material will also be of utmost importance . For some initial days Third Party Logistics providers can be considers with eventually migrating into our own logistic service . Cold Storage Warehouse : As the demand spikes up and we establishes ourselves as a major player in food industry . This can be looked upon a major investment to build cold storage warehouse for all the perishable goods so that there could not be any shortages or wastage of material .

Thus increasing our service level and quality overall. Speedy Response : Speedy response as per the changing market requirement has become a important factor in food industry for a venture to prosper . This changing requirement means our supply chain should be well equipped as per the changing need and demand of the customer. Some of areas that can looked up are: Better information flow among all the suppliers so that any change in requirement can be easily met. In initial phase for streamlining the operation a fixed schedule can be decided and any change in requirement can be accordingly accommodated case to case basis .

Eventual we can look into developing some low cost ERP type system using Excel and Ms Access which can operate as purchasing solution for the us. Suited to customer requirement: Since food industry is one of such industries which need to continuously evolve itself as per the changing customer requirement otherwise it will not be able to survive . Therefore from supply aspects to keep up with changing customer requirement we an look into developing second sources for the items that are currently purchased .

This will not only help in mitigating risk but also having a better customer satisfaction writ to changing market and service requirements . Standard : Developing supplicant standard is one those features which is mostly overlooked by restaurants . Some of the steps that can be done to standalone supply chain and to make it more agile are : Categorizing product – Product can be categorized such as dry , frozen ,baked ,fresh etc and according procured and stored at the inventory area .

This will not only reduce wastage but will also tend to make proper utilization of the inventory. Tagging of food product as per the date it was procured and according to the type . This will help in visual management of the food products specially in case of perishable one in which colored tagging as per the date will allow oldest product consumption first and thus reducing the wastage and standardizing the product.

Supply chain Responsiveness Summarization 7 Vs. challenges that the current business faces create value for that item and restaurant being a place that’s value is not only rated by the product and services it give but also by the overall experience it provides to the customer whenever he or she spends time over there . Velocity – Today marketing condition are changing so fast that one thing that might be trending today may not be available tomorrow and in food industry if you have to survive you have to constantly change your business as per changing business need .

This requires constant evaluation of demand conditions ,market structures and internal supply chain operation should be agile enough to change rapidly. Variety- Ability to customize product and services. Nothing in this world is permanent change is the rule of the nature and if a food Joint has to succeed it has to constantly innovate in term of changing variety in menu along with change in decor or theme of the restaurant . In fact to move from economies of scale to economies of scope or economies of value .

The supplicant has a bigger role to adapt as per the changing requirement of the product in the restaurant. Variability – Variability can be said as the evil that can disrupt the working of any system. There are various variability in the system such as changing requirement , lead time of product , excessive imposition of one particular item , wastage of item due to short shelf life and seasonal variation in demand . These are some of the variability that need to be looked into designing a robust supply chain for the business.

Visibility -Visibility is very important in every part that being procured or stored through the supplicant since the part normally procured for the restaurant business have a very small shelf life therefore transparency in the supply chain will not only help in proper consumption and procurement of material but also transparency in the process with aspect to ordering of material Virtually – An ability to coordinate tangible and intangible assets within the supply chain facilitated by information communication technologies gives customers confidence and ensures dependability.

Some of the technologies that can looked into are bar coding of the material, RIFF tagging if required at some locations so that proper tagging and locating of parts can be done . Economic – Increased disposable income among middle class The middle class currently numbers some 50 million people, but by 2025 will have expanded dramatically to 583 million people-?some 41 percent of the population. These households will see their incomes balloon to 51. 5 trillion rupees ($1. 1 billion)-? 11 times the level of today and 58 percent of total Indian income.

The other major spending force in Indian’s new consumer market will be our last segment-?the global Indians, earning more than 1 million rupees ($21,882, or $118,000, taking into account the cost of living). These are senior corporate executives, large business owners, high-end professionals, politicians and big agricultural-land owners. Today there are just 1. 2 million global Indian households accounting for some 2 trillion rupees in pending power( McKinney. Com, (2014) Next big spenders: Indian’s middle class).

But a new breed of ferociously upwardly mobile Indians is emerging-?young graduates of Indian’s top colleges who can command large salaries from Indian and foreign multinationals. Their tastes are indistinguishable from those of prosperous young Westerners-?many own high-end luxury cars and wear designer clothes, employ maids and full-time cooks, and regularly vacation abroad. By 2025, there will be 9. 5 million Indians in this class and their spending power will hit 14. 1 trillion rupees-?20 recent of total Indian consumption (McKinney. Mom, (2014) Next big spenders: Indian’s middle class) . As the seismic wave of income growth rolls across Indian society, the character of consumption will change dramatically over the next 20 years. A huge shift is underway from spending on necessities such as food and clothing to choice- based spending on categories such as household appliances and restaurants. Households that can afford discretionary consumption will grow from 8 million today to 94 million by 2025. -Overall restaurant market growth from PAYOFF to FYI 2013 is CARR 6. In which organized market growth was CARR 19. 1% The restaurant industry in India, which is mainly driven by the young population aged 15 to 44 years has registered revenues of INNER -? scores in P'”2013. The industry has witnessed a sound growth which has been fueled by the advent of large number of national as well as international chains in the organized market. Many international chains such as the Mac Dona’s, KEF, Domino’s and Pizza Hut largely have dominated the organized restaurant market in the country over the years.

The overall restaurant market has grown at a CARR of 6. % from P'”2008 to F'”2013 and has witnessed an increase in revenues to INNER -? scores in A”2013 from INNER -? scores in P'”2008 (Snatchers. Com, (2014) Snatchers: India Restaurant Market Research Report, Industry Analyst). The changing lifestyles with the increasing nuclear families and a rise in the arbitration in India over the past years have also supported the growth of the restaurant market in India.

Additionally, the customer preference for the cuisine has seen a transition in India from consuming the traditional Indian food to trying out different cuisines such as the Chinese, Italian and Mexican. Due to the growing exposure to the international cultures and lifestyles, the Indian population has started developing their tastes and is reaching out to restaurants more often which offer different cuisines apart from Indian cuisine. This change in the taste players to expand their reach in the Indian restaurant market.

It is estimated that Indian restaurant market revenues will reach INNER -? scores by P'”2018 and is expected to grow at a CARR of 10. 9% during P'”2013 to P'”2018 from revenues of INNER -? scores in P'”2013. The revenues are estimated to be largely driven by the increase in the exposable incomes and changing food habits of the people(Snatchers. Com, (2014) Snatchers: India Restaurant Market Research Report, Industry Analyst). -Health and wellness food market stood at 7,100 cry in 2012 and estimated growth is 5. % during 2010-15 According to Indian Direct Selling Association and Ernst & Young, which prepared the report, the sector registered a growth of 24 per cent to RSI 4,120 core in 2009-2010 from RSI 3,330 core 2008-2009. An increase consumption of consumer goods by the average Indian, coupled with the rising awareness of health and wellness among Indian households is a key growth driver throng drivers of growth will enable the industry to reach RSI 7,100 core by 2012-13,” it said. The survey also noted that metros and tier II and other cities now contribute equally to the overall market.

Health remains the leading category by value with a 47 per cent share of the overall revenues of the sector emanating from it, up from 32 per cent last year, the report said, adding personal care has emerged as a popular category. The survey said that the outlook continued to be positive with a robust growth rate for the future (Economic Times, (2011). Indian direct selling sector to ouch RSI 7,100 cry by IFFY. [online]). Political -Service tax of 12. 36% on 40% of bill at all restaurants As per FYI 2014-15 budget the service tax levied at all restaurants is 12. 6% which initially was only applicable to the air conditioned restaurant. Due to service tax and other taxes levied over the food the bill increases unnecessary for example on average for eating out at NCR one has to pay around 29-30% in taxes which can be factor deterrent to eating out culture at Tier II cities and if restaurant industries to flourish specially new chains it need to reduced so that small player or entry level id size restaurant can flourish (Taught, (2014). Food Industry and Indirect taxes. [online]) . Different VAT rates are being levied on different product as in tea , alcohol ,vegetable etc As per the current VAT structure different tax is levied on the eatable currently used by food industry either as raw material or sold directly due to this uneven variation of tax structure on these items it leads excessive cost variation especially product involving imported food items if restaurant operations need to be streamlined these taxes need to be revived and proper bracket need to defined so hat the cost is reduced and it can attract more number of masses (Taught, (2014).

Food Industry and Indirect taxes. [online]). -Improvement in cold supply chain infrastructure to save perishable goods. But still drastic improvement required When it comes to food production, India can claim an impressive collection of rankings. It is the second largest producer of fruits and vegetables, second highest producer of milk, fifth largest producer of eggs and sixth in fish. Given this record, it becomes a little difficult to explain why it does not have a place in the top-ten list of food exporting countries.

It is here that the real revolution starts, because India has one of the most fragmented produce-supply chains in the industry leads to wastage of about 20 per cent of all foods produced. Due to this wastage cost of perishable good increases drastically and also led to large amount of uncertainty in the supply chain . Though there have been some improvement in this aspect and also owning to the strong pro market government at the center the condition will definitely improve however still improvement is required to move us way forward(misalignment. Mom, (2014) The Cold Supply Chain In India Marketing Essay. [online]) Income tax exemption limit raised from khaki to RSI 2. 5 lack As per the new Budget presented by AND government tax bracket has been raised from 2 lack to 2. 5 lack this move will lead to more take home income among the middle class which will lead to increasing in the spending and ultimately spending more on good quality food and time . Thus this measure will prove helpful to the budding service industry . Withholding tax on royalties is proposed to be increased from 10 20th% As recently announced by the government an increase in the tax on royalty and fee payments made by Indian subsidiaries to foreign parent from 10 to 25 per cent. This move will prove really beneficial for the home grown industries and will help in curbing the rapid pace of foreign fast food giant which is currently dominating the Indian market(Archive. Intrepidness. Com, (2014). Mans to pay more tax on royalty earned from Indian subsidiaries – Indian Express. [online]) Technological -Improvement in logistics operations, supply chain and sourcing options Due to the advancement in Information technology and excessive use of technology such as GAPS, Cogitating it is easier to track supplies and plan operation writ to perishable product such as food items .

Restaurants can plan out there operation with a better view of supplies and products and substantially reducing the cost on inventory and wastage of food items (Vary, M. (2012). How Technology is Changing the Restaurant Industry). – Improvement in infrastructure opening up of shopping malls which has led to designing of food court model of restaurants Technological advancement specially in field of entertainment and large infrastructure development has led to a rapid development of shopping mall food court type resort design .

These technological advancement in fast paced development of infrastructure has generated demand for Hess particular genre of restraint and added to a culture of eating out -Power of social networking site Increased use of social networking platform and rise of social networking rating sites such as COMATE has led to a increase in visibility of restaurant and made eating out much more easier among the youth. These social networking sites indirectly add towards the marketing of the food Joints among the masses ultimately fueling the consumption and higher revenue in the restaurant industry. Increasing youth population which believes more in eating out Compared to their elders, younger consumers are proving to be much more accepting of eating out and foreign brands. An estimated 60 percent of Indians are under the age of 30 and India is slowly becoming a more urban society. Younger consumers and a growing emphasis on convenience are fundamentals that suggest future growth in this sector (Eye. Com, (2014).

Middle class growth in emerging markets – China and India: tomorrow’s middle classes) -Eating out is no more considered unhealthy due to plethora of healthy and hygienic eating options available Previously it was normally questioned whether restaurants would be able to deliver products that were efficiently suited to the Indian palate and wallet to convince consumers to occasionally skip their “home-cooked” Indian food. Consumers also believed their home-cooked meals to be tastier and more hygienic than restaurant food.

But due to the advent of number of foreign and Indian restaurants have made significant changed the outlook among the masses . Developing a range of healthy products and Indian flavors at very competitive prices has led to a increased eating out culture not only among the youth but also among families(The Economic Times, (2011). Indian direct selling sector to touch RSI 7,100 cry by IFFY) Entry of various foreign food chain have helped a lot in changing the eating out culture among youth Foreign restaurant chains when entered Indian market where consumers rarely ate out and few comparable Indian restaurant chains existed.