6 ways to make your restaurant more sustainable without cutting profits

As we look into the future of the industry, we see many indicators of what will help or hinder restaurant business leaders. Supply chain, sourcing and finance are not only expected to hold down costs but will also support agility, speed, innovation, quality and reliability. In discussing the ins and outs of innovation in the restaurant business today, leaders must identify new sourcing ideas, resources and solutions that help to meet these demands.

Improving consumer experience and growing sales correlates to introducing new products and promotions. A survey conducted by Gartner shows that consumer experience is closely tied to promotions, new product and technology innovations and sales incentives and that these will continue to be key drivers of revenue growth over the next one-to-three years. Executing promotions and new product launches reliably and profitably has been a challenge in the industry and building the capabilities is imperative to growing the business.

Ignoring the capabilities needed to execute promotions and new products will be detrimental to restaurants facing intense competition, a volatile economy and value conscious customers. Food and foodservice companies can address this challenge effectively to increase market share and achieve profitability goals by learning to execute promotions and new products faster, more efficiently and reliably. It will distinguish them from the competition and build sales in this competitive environment.

Here are six tips that relate to promotions planning and execution for making your restaurant more sustainable in the current industry climate.

1. Establish visibility

Technology has made it is easier to capture data that is needed for greater visibility from farm to fork. However, solutions that can easily provide relevant and timely information are needed to filter through growing amounts of data and complex relationships. This is extremely useful in the case of promotions where the planning horizon is very short and ending a promotion or deciding to prolong it could make the difference between success and failure.

2. Time your promotions

Promotions introduce additional uncertainty into an already uncertain commodity, supply and demand environment. The best product, introduced at the wrong time, can undo the good work done during product development and early market tests. Better visibility to commodities allows restaurants to time promotions to optimize the restaurant margins. Alternately, suppliers may be best situated to supply the promotional products during certain periods, while other periods may result in interrupted supply and run-outs. Timing the promotions appropriately can make all the difference between a profitable promotion and an unprofitable one.

3. Tap into the power of scenario analysis

Promotions are inherently unpredictable. In an effort to manage the unpredictability, the planning and execution must deliver on both agility and best-cost choices. There are a vast array of choices one must weigh when considering which suppliers can manage additional volume, how much inventory must be built, where to build the additional inventory, how to respond when the actuals are different from the forecast, and how volumes can be bundled between lift and cannibalization in an effort to achieve higher overall predictability. Additionally, there are inherent trade-offs between various supply chain variables, such as quick response late in the promotion, the risk of inventories and forward buying one’s ingredients, and limiting exposure by market purchases. To analyze the impact of promotions and plan for multiple future possibilities, scenario analysis and optimization are essential planning tools for industry leaders. Promotion planning success depends on quickly aligning costs and capacities across the supply chain partners in order to generate demand.

4. Tune up your capabilities

The first step in building the capability to plan and execute promotions is providing the right information in real time to supply chain partners and getting information from them. This is critical in the context of a dynamic environment. The inability to provide visibility into demand across the supply chain and deliver a collaborative response can lead to harmful effects on the brand. Using the information to plan pro-active responses in real-time will build the foundation for a flexible and reliable execution.

5. Manage your promotions

Advanced analytical capabilities and speed of analysis and collaboration are the backbone of effective promotion management. For example, some solutions have planners with a real time multi-tier planning and execution platform with collaboration capabilities to address the complexities in promotions management.

6. Understand the power of your promotions

Promotions present a great revenue and brand building opportunity with an equally strong challenge to manage the uncertain demand created by limited time offers (LTOs) and new menu items. Moreover, promotions introduce further uncertainty due to other factors such as cannibalization, changing competitive offerings in the market, and volatile commodity costs, which may not be appropriately hedged. A well-orchestrated promotions plan must be considered carefully in order to become the difference between increased profit and a potential loss. This discipline requires strong collaboration, speed of response, visibility between supply chain partners and an equally dynamic planning capability to manage promotional targets, those not only tied to an increase in revenue, but also those used to increase traffic and positive feelings about the brand.

The six topics addressed in this article, if carefully considered, can provide an integrated framework of activity-based costing and operations research to analyze forward-looking scenarios.

Read original article