For years, quick service restaurants (QSRs) have relied on their local employees to manage replenishment activities such as inventory replenishment, tracking, and forecasting. After all, local employees have the most visibility into the external factors influencing demand. It’s much easier for a manager of a local pizza chain to know how factors like weather, upcoming local sporting events, and traffic patterns will influence demand for pizza than it is for a demand planner 2,000 miles away.
Challenges Faced by QSRs
The problem with local employees is their primary focus on selling and engaging with customers shifts to managing replenishment activities. Forecasting demand, reordering stock, and tracking inventory remain challenging tasks for QSRs. Any slight mistake can damage the business in terms of lost sales and increased waste production. The challenge lies in the following product categories:
1. Products That Need to be Bought & Sold Fresh
These products have a low shelf life as they get stale quickly and leave little scope for error when they place replenishment orders.
2. Frozen Products
These products have a certain defrost lead time that should be considered, along with short storage space for the freezer.
3. Products That Are Sold in Uncertain Quantity
The necessity of certain products like milk cannot be determined as they are sold in varying quantities. A coffee shop sells different beverages that require different quantities of milk, and sometimes customers also demand indeterminate quantities to be added to their beverage.
The employee should keep track of the inventory and anticipate the demand for each category while using their local knowledge. They should also find time to perform their responsibilities. The employee has to over-perform, resulting in lost sales due to under-ordering, wastage due to over-ordering, and a low customer experience. The ultimate result is value leakage by the employee managing three roles: demand planner, replenisher, and seller.
The Solution: Automated Replenishment Planning Platforms
QSRs can capture the leaking value and liberate their employees to concentrate on enhancing customer experience and selling. Due to advanced data analytics, QSRs can get insight into the external factors affecting demand and utilize them to automate reports of forecasts and orders. Planning can be granular by dividing demand by various ordering channels – in-store pickup, online, delivery, and drive-through. Anticipating the channels in which demand is high can allow businesses to staff their employees adequately.
Best Practices for Replenishment Planning
1. Develop a System to Train Your Staff Who Track Data
To ensure the smooth operation of a restaurant, you should train all the staff so they can track data precisely. You need to train the staff to handle the inventory replenishment system effectively. Even the slightest data errors can harm your business, so you should be careful who you employ.
2. Planning Demand at the Menu or Outlet Level
Every dining establishment or commissary must be able to detect demand at the level of menu items and transfer that data to the level of raw materials. Stockouts will be less likely due to accurate inventory replenishment throughout the supply chain. This level of specificity will also make it simpler to ascertain whether there is a market for new meals. With internal and external demand factors, such as promotions, day-of-the-week effects, holidays, seasonality, and waste, QSRs may estimate daily demand for their perishables.
3. Track and Manage Inventory at Every Node
For QSRs, automating replenishment plans is essential because they must stock a variety of eateries. The focus should be on automating replenishment to maximize income with high availability and reduce waste. The software should make plans while considering existing inventory levels, the number of inventory replenishment cycles, and truckload optimizations, among other things. With real-time inventory and demand changes for shelf life, storage/freezer capacity, UOM batching, and truckload optimizations, demand forecasting software can provide replenishment plans in just two clicks.
4. Utilize a First In, First Out
With this strategy, you use the food item that came in first, the older food item, to ensure that it does not go to waste. This is a golden rule of inventory replenishment for all restaurants, and you should ensure you are economizing on the already stocked inventory. For a FIFO strategy, you need to label all the inventory products on the date you receive them and when it expires. Use food that would expire earlier than the other products and keep a check on what products are about to run out of stock. You may discontinue or introduce changes in the menu, and as these changes occur, you should update the process.
5. Look at Losses from Every Angle
Some food would inevitably rot in the inventory before it is sold, and there is always variation in inventory figures. Comprehending the pain points is essential. Losses are incurred due to human error, and losses occur when more food in the form of raw materials is purchased than sold within a window. Principles like consistent inventory and FIFO alleviate these problems and establish a continuous and transparent process.
Employee theft is another factor that should be examined. Employee thefts in the inventory account for about $3-6 billion in yearly losses. You cannot eliminate all the theft straightaway, but surely curb it and monitor the workings of the employees. Also, you should establish a transparent atmosphere so that people are less inclined to steal.
About the Company
Fountain9’s inventory replenishment software- Kronoscope, with its sophisticated AI engine, helps QSRs by automatically creating dynamic purchase plans & replenishment plans in just 2 clicks. It automatically places replenishment orders when the reorder point is reached and uses a proprietary dynamic norm recommendation engine that uses shelf life, replenishment lead time, and predicted demand to suggest the replenishment quantities and inventory norms (safety stock days, DOH norms) which is optimized for each SKU-location combination.
Additionally, Kronoscope can generate daily purchase plans & replenishment plans in real-time demand and inventory changes adjusted for ingredient shelf life, store storage/freezer capacity, truckload optimizations, and UOM batching.