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Supply chain: How Millennials have changed everything

Caught in a vise, squeezed from one side by cut-throat competition and rising consumer demands — particularly those of the millennial generation, and from the other by increased costs and supply chain complexity, restaurant chains are pressured as never before to manage volatility and maximize profits.

October 21, 2015 by Vishy Visweswaran — Chief Technology Officer, SCA Technologies

Rapid changes in consumer demand and supply environment require better food sourcing capabilities to plan and manage growth. More specifically, the latest generation of food lovers, millennials, have brought a unique perspective to the industry with greater demand for fresh and organic products and sustainability. Their views on social responsibility continue to impact the restaurant industry more than ever before.

Caught in a vise, squeezed from one side by cut-throat competition and rising consumer demands — particularly those of the millennial generation, and from the other by increased costs and supply chain complexity, restaurant chains are pressured as never before to manage volatility and maximize profits. Yet at many chains, functions including supply chain, procurement, finance, menu management, operations and marketing fall short in responding to this crisis. This is largely due to the fact that they are struggling with outdated practices and legacy systems when, in reality, it is more important than ever to establish best practices in farm-to-fork supply chain and procurement orchestration. For restaurant companies to build resiliency and enhance their competitive position in today’s millennial-driven marketplace, this is the only way.

The most successful brands have tapped into the full potential of the millennial consumer. In an effort to speak to this food-centric generation, many have turned to modern solutions and business processes, which allow managers to source fresher products at lower cost; improve promotions and new product fulfillment; and do their part to deliver higher, more predictable and more reliable margins for their company and franchisees. Here are three ways the next-generation is shifting the supply chain approach:

The Internet: Millennials, in particular, are a generation keenly focused on the growing and pervasive use of interconnected devices. This trend is rising alongside those entering the workforce. Because this generation was born and raised during the digital revolution, they’re accustomed to products and processes that are highly interconnected. Supply chain companies should leverage the millennial perspective, better engaging in creative and strategic thinking. Doing so will help to develop strategies for forward-looking supply chain scenarios in response to shifting market features and to respond to near-term supply needs in a dynamic, cost-optimal manner.

Big data: Similar to the use of the Internet and interconnected devices, so too has the use of big data transformed the way millennials approach the supply chain industry. Their digital confidence and understanding of the types of information being collected and analyzed is bound to lead to gains in supply chain operational efficiency as they begin applying their new knowledge of the industry in intelligent ways. Utilizing such next-generation solutions helps QSR chains today optimize sourcing by uncovering true supplier cost structures for sourcing decisions while negotiating leverage.

Marketing and sales: Millennials have been desensitized to overt branding messages. Instead, they respond to more organic marketing and sales approaches. At the root of the problem in many supply chains, is a misunderstanding of the millennial consumer. Knowing that it is more difficult through traditional marketing to convince a U.S. millennial than an older U.S. consumer that a brand is relevant to him or her, the challenge therein lies in the fact that traditional marketing and promotions may not work. Today, millennials rely on a much wider network for support, advice, and general information. In the work force, too, millennials will seek to shift sales and marketing activities online to develop more meaningful, solutions-based relationships with buyers.

Restaurant supply chain, procurement, finance and menu management executives are facing an unprecedented conjunction of complex challenges from farm to fork. Inputs of food and supplies represent, on average, about 30% of all costs for restaurant chains. The executive suite sees these costs as more amenable to management than other high fixed costs such as labor and infrastructure improvement. Supply chain, procurement and finance professionals are expected to play a heroic role in holding down costs, but must also do their part to uphold menu quality and reliability — or the chain risks decline or death. Contributing to the ever-changing landscape of the restaurant industry is the millennial consumer, oftentimes affecting even the largest of companies.

In such an environment, the best practices outlined here are the only options that will allow restaurant chains to maintain profits and enhance their competitive position in the marketplace among the changing industry landscape and shifting millennial ideologies.

About Vishy Visweswaran

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