A multitude of supply chain pressures has increased the demand for integrated data as business leaders turn towards streamlining operations in risk mitigation.
“Often when these supply chain shocks reach the company, it is too late to fully mitigate the impact, leading to margin compression and pressure on working capital,” says Alistair Baxter, head of AR finance at Taulia.
Integrated data will enable businesses to move from reactive to proactive supply chain management, he says.
“Integrated data from multiple parties in the supply chain will increase the field of vision, allowing for a fuller view of the complete value chain. This will bring material benefits to the business, such as reducing inventory and latency, improving working capital, and improving EBITDA.”
Mohamed Chaudry, portfolio CFO at multi-franchise group, Sania Group, said the company made a “significant investment” in a new electronic point of sale (EPOS) system to streamline and integrate data to help improve the quality of decision-making and accuracy of stock purchasing.
“We have to be much more focused when we’re ordering. It’s not just a case of leaving it to the manager in the store […] now it comes down to me overseeing that purchasing.”
“Before, there was never an issue in that if we didn’t order enough, we could plan another next day delivery. You had a time frame where you could get deliveries in and now you can’t.”
Reporting and purchasing has been centralised to help eliminate additional costs and mitigate risks, adds Chaudry.
“At least 50 percent of my time is involved in making sure there is no issue. One wrong purchasing decision and if you’ve got 30 sites, that’s 30 one-week sales that could be impacted. That’s how critical it is. That’s why there is that much emphasis it making sure we don’t get it wrong.”
Supply chain pressures
As a multi-franchisee company, a “big challenge” are the guidelines set by the franchisor including a set list of suppliers and how items are prepared. However, Chaudry explains some of these guidelines have been relaxed to reduce supply chain pressures.
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The recent challenges have bought supply chain conversations and matters to the C-suite, highlighting the importance expertise at board level.
“Organisations have come to realise the importance of supply chain resilience,” says Neil Coole, food and retail supply chain director at BSI. “[As such], needing subject matter experts who are able to support them and their suppliers in adapting to change, including a number of new supply chain laws being introduced, which can have significant impacts on an organization.”
Chaudry explains the two biggest challenges facing the group’s supply chain is sourcing ingredients and staff shortages.
“We are a franchise business, our food costs are pretty standards, labour costs are pretty standard. If one of those areas gets impacted, it impacts the whole P&L.”
“We’re getting to that stage of we can’t pass cost over to the customer. We have to make sure the supply chain issues doesn’t hit the bottom line, so we have to look at cost cuts elsewhere in the business to streamline so that raising prices is a last resort.”
Most of the ingredients the group sources are perishable which can drive up costs if the restaurants are not able to accumulate all the items needed to fulfil an order, says Chaudry, noting that this can partly be mitigated by offering special deals on products that the company has in stock.
Moreover, the group made their Pizza Hut Deliveries available on delivery platforms, incurring new costs, to tap into the platform’s driver supply, says Chaudry.
“We were an end-to-end delivery service. However, we’ve had to change because if we can’t get enough drivers, we can’t deliver [and] there’s no point in having a pizza sitting there […] and losing a customer.”