Maximizing customer value and achieving a sustainable competitive advantage are two things a company must strive for. Excellent supply chain management is the key to both.
Being able to handle product development, sourcing, production, logistics, and information systems well is what makes a business’s supply chain successful. 79% of companies that have high-performing supply chains reported greater revenue growth than the average company in their industry. In turn, only 8% of companies with secondary or ordinary supply chains achieve above-average growth. These results clearly show the importance of having a good supply chain. Some of the most successful companies in the world such as Apple, Procter & Gamble, Amazon, and Unilever report having an exceptional supply chain. In the restaurant industry, McDonald’s and Starbucks are the only names in the top 25 list.
Case Study: Church’s Chicken
Church’s Chicken was founded
Most restaurants and their suppliers in the industry don’t have a “single, unified, real-time view of supply and demand when working together in an extended enterprise,” creating a fractured supply chain. This results in having a bloated inventory, excessive waste, supply uncertainty, and poor customer service. This is especially evident in restaurants constant promotions of limited time offers. Without proper visibility, they easily run into problems such as running out of stock or having too much stock, which, in turn, increases food waste and costs rise. These problems and losses echo across the network, which can create conflicts between the restaurant chain and the distributors. This is exactly the kind of issue that Church’s Chicken wanted to avoid.by George W. Church. Having worked in the restaurant
industry for years, he wanted to bring delicious chicken and home-style sides to people in San Antonio, TX. They opened Church’s Fried Chicken-To-Go in 1952 with jalapeno peppers as the first side item. In the 1960’s, Richard and Bill Church, George’s sons, perfected their marinating formula. Today they’re going strong with more than 100 restaurants in seven states. But Church’s Chicken’s success doesn’t just rely on their perfected recipes. A big factor in their growth has been reinventing their supply chain.
Church’s Chicken’s new commitment model was specifically created for promotional products. Instead of corporate ordering for all restaurants based on data forecasts and projections, like they did in the past, they now order based on each location’s requests. This way, the distribution center doesn’t get stuck with storing excess products and the distributor doesn’t have to scramble to find extra products in case there’s a bigger need. Now, the franchises specify the number of orders they need, then Church’s Chickens corporate headquarters places the order and allocates the supplies to the franchises based off their requested need. Extra supplies at the distribution center is sent to the restaurants after the limited offer ends. This commitment model has earned the company praises from their distributors.
Aside from the new model, the restaurant chain is also working on matching their restaurants with distribution centers. They want to both pair them with a better match and make sure they are physically closer together. To implement these changes, Church’s Chicken has created stronger relationships with all distribution center presidents, ensuring both better communication and a working relationship. They’ve also made an effort to have fewer deliveries and decrease transportation costs by doing away with direct delivery and going for full-line delivery with distributors.
Finding creative and innovative ways to be more cost-effective in a business’s supply chain is no easy task. However the cost is much higher for businesses if they are not able to handle demand, integrate their logistics, create effective distribution execution, and supply replenishment. These are three things that Church’s Chicken has addressed proactively as they continue to improve their supply chain. In learning from other big corporations and continuously trying to think outside the typical supply chain box, like how UPS only makes right-hand turns in their routing, companies can decrease costs, become more efficient in their business handlings, maximize customer value, and achieve a sustainable competitive advantage.