4 lessons restaurants can learn from Amazon’s supply chain strategy

Today’s consumer is more discerning than ever, relying on technology to surround him or herself with only the people, brands and companies he or she chooses and turning away from the rest. This ultimately points to the growing importance of technology in business. As documented by Pew Research, smartphones dominated the technology scene with 64 percent of Americans owning one in 2015. In response, many of today’s companies have increased their efforts to engage consumers in a much bigger conversation across mobile platforms. The restaurant industry exemplifies how this can change the dynamics of doing business. Most major restaurant chains, including leading corporations such as Wendy’s, Chick-fil-a, Taco Bell, Chipotle, Subway, Dunkin’ Donuts, Starbucks, Domino’s Pizza, McDonald’s, Burger King and Panera, utilize mobile apps to cater to the needs of the American consumer’s evolving demands.

The ability to order and pay ahead of arriving at the restaurant, view the menu, earn rewards through loyalty programs and play games represent just a few of the benefits many of today’s restaurant apps offer. Companies that view such technology as a luxury are at risk of faltering and may not be able to compete with the industry’s most successful restaurants at the level they desire.

Companies that have made an effort to engage with customers in such a way have benefitted from results that rival those from other channels. This comes as no surprise, as consumers that rely on mobile payment frequently spend twice as much as those who rely on traditional ordering. Undoubtedly, this is a statistic, documented by Connect Mobile Innovation Summit, that has inspired nearly 50 percent of restaurants to spend more resources on customer-facing technology in the next year.

Despite the apparent benefits of increased consumer spending as a result of mobile ordering, this can also create demand patterns that challenge restaurants in a unique way. For example, 83 percent of smartphone users surveyed use their phones to make dining decisions while traveling, and 46 percent have tried a new menu item based on a mobile ad.

Diners are also increasingly interested in paying for meals electronically. Of those surveyed by Connect, 40 percent said they would like to look for quick service meals via a mobile or wireless device, and 55 percent say they want mobile payments. Most restaurants report that average check amounts increase via mobile ordering. For example, Taco Bell reported app orders are 20 percent higher on average when compared to in-store orders.

However, the supply chain must be able to grow and adapt to the restaurant’s changing needs as a result of this growth in order to maintain a high level of success. With outdated supply chain technology, the effort to adopt 2121st-century consumer technology can fall flat and disrupt the generation of revenue. Challenges that can occur as a result of an outdated supply chain include shortages and stock outs. These can go unnoticed in the rush to reap all the benefits that consumer-facing technology can bring. It is crucial that today’s restaurants serve the technology-driven consumer while meeting the increased demand by making just as meaningful an investment in supply chain technology.

Companies that have successfully harnessed the power behind the digital consumer are plentiful both within and outside the restaurant industry. As a global leader in e-commerce, Amazon has made it intuitive for consumers to navigate its expansive online store and get what they want in just a few clicks or taps. It is critical to understand, though, that Amazon’s power comes from its strategic supply chain infrastructure.

By earning a spot on Garner’s annual list of the global Top 25 Supply Chains, Amazon has cultivated a following of 200 million loyal online shoppers. Among a number of staggering qualities that have made its supply chain one of the most sophisticated in the world is Amazon’s ability to minimize the need for human intervention in its supply chain processes. This is where it excels, removing the need to manually input sales forecasts into an inventory-management system. This gives Amazon’s supply chain apps the ability to communicate in real time, a rarity for many companies.

Learning from Amazon

Restaurants that want to mirror Amazon’s success must first employ the strategic work it applies to its supply chain technology and infrastructure. This is a critical initial step before investing in consumer-facing technology. Supply chain technology must enable companies to achieve three key capabilities:

1. Establish supply visibility

Mobile platforms generate different purchasing behaviors, particularly as diners increasingly expect more expansive menus. Successfully managing this variability necessitates integrated visibility into store sales, inventory and supplier capacity to avoid stock-outs. With restaurants – where fresh product is vital – there is a significantly greater possibility of more stranded products (wrong product at the wrong place at the wrong time). Getting early notice of these conditions is essential to prevent significant obsolescence costs.

2. Know your alternatives

With greater visibility, restaurants also need to understand their supply options and be prepared to dynamically shift sourcing and supply. As demand fluctuates across regions, there are a few insightful questions to consider. Can you more efficiently source more product from a different supplier? Can suppliers serve a wider variety of markets than they do today? These decisions need to be made in real time to offer an accurate assessment of availability and safeguard margins. Companies must have clear plans in place to nimbly serve consumers in the event that the volatile food industry presents them with a less-than-ideal scenario.

3. Deliver bundled offerings

Most notably, consumer mobile ordering offers a prime opportunity to present consumers with a complete package, priced to accommodate menu items, offer discounts and other similar demand-shaping promotions. For instance, whereas a restaurant may face the challenge of selling burgers in one region, excess supplier inventory for fries may exist in another region. Offering the pair as a bundled deal for a limited time can entice consumers to take advantage of both menu items. Technology is an excellent resource for supply chain practitioners as they attempt to gain visibility into supply alternatives, understand commodity cost trends, assess cost tradeoffs between the various choices and support the right product that maximizes margins and minimizes markdowns.

Customers can attain remarkable results by installing technology that addresses all of these vital supply chain capabilities, helping them to improve profitability and increase market share. A well-rounded technology approach — one that weaves cutting-edge capabilities from the supplier’s supplier all the way to the fingertips of the consumer — is a surefire way for retailers, restaurants and manufacturers to get their product to the point of sale in the most efficient, effective way possible.

The companies who have employed this approach are already established as leaders. Those who want to achieve that same success must assess their supply chain technology capabilities with both care and the objective to be positioned for success now and in the future.