The Restaurateur's Guide to Restaurant Supply Chain Management

Mastering restaurant supply chain management may not be the sexiest part of learning how to run a restaurant, but it’s one of the most important. If you don’t have a good handle on sourcing, procuring, and purchasing raw ingredients and supplies for your restaurant, you’ll have a difficult time running a successful business. 

But where do you begin if you’re a first-time restaurateur? There’s no need to panic. Consider this your quick-start guide to restaurant supply chain management. We’ll cover the basics and more, including:

• What restaurant supply chain management is
• The impact of the supply chain on restaurant operations
• The relationship between supply chain and inventory management
• Why supply chain management is so important
• Best practices for managing your supply chain
• How supply chain efficiency can help your restaurant boost sales

What is restaurant supply chain management?

To understand the restaurant supply chain, it’s essential to first understand the concept of a supply chain.

The supply chain involves the steps of getting raw materials from the source, turning them into sellable goods, and distributing them to customers. These steps typically involve working with a number of vendors who specialize in each step of the chain.

Supply chain management in the restaurant industry means actively monitoring and managing the supply chain to maximize efficiency and value. It involves developing and managing relationships with food suppliers to produce meals that meet customer demand. Just like restaurant management ensures personnel are on track, supply chain management in restaurants ensures every “link” in the supply chain is doing what it’s supposed to.

Here’s an in depth, step-by-step look at what’s involved in restaurant supply chains:

• Sourcing raw materials: Identifying restaurant food suppliers, like farmers and wholesale food distributors, and vendors who sell takeout containers and paper goods, and negotiating contracts with them.
• Logistics: Finding partners that will deliver the raw materials to your restaurant.
• Production: Turning raw materials into sellable goods. For restaurants, this involves the magic that takes place in the back of the house, cooking!
• Distribution: Getting your sellable goods to your customers. These restaurant logistics can be as simple as bringing food from the kitchen to the dining room, or as complex as making deliveries to customers’ homes.
• Inventory management: Keeping track of supplies to know when it’s time to reorder them and how much to order.

In a perfect world, once you establish your supply chain by making deals with vendors, everything will go smoothly. Unfortunately, disruptions to restaurant supplies are all too common and have a significant impact on the industry. 

For example, at the height of the COVID-19 pandemic, many people involved in agriculture and food distribution couldn’t work due to unsafe conditions and lockdown measures. This meant that when restaurants were ready to reopen after lockdown restrictions were lifted, there were fewer raw ingredients available, so restaurants weren’t always able to get enough ingredients to meet customers’ demands.  

And because items were in low supply and in high demand, prices went up. According to the U.S. Bureau of Labor Statistics, the price of beef rose 20% between March and June 2020. Restaurants mitigate increased food supply costs by raising their prices.

That’s all to say that restaurant supply chain management is rarely given much thought but has a significant impact on daily business operations. 

The impact of the supply chain on restaurant operations

The restaurant supply chain is the backbone of any dining establishment, influencing nearly every aspect of operations. From the quality of your dishes to the efficiency of your kitchen and the satisfaction of your customers, a well-managed supply chain can make or break your business.

At its core, restaurant supply chain management ensures the seamless flow of ingredients, materials, and supplies. But what happens when that chain breaks? Supply chain disruptions—whether due to seasonal shortages, unexpected demand spikes or global crises—can lead to ingredient shortages, increased costs and even menu adjustments. For example, a surge in the price of beef might force a steakhouse to pivot its offerings or pass on the higher costs to customers.

On the flip side, a highly efficient supply chain enables restaurants to operate smoothly and profitably. That’s why it pays to negotiate strong vendor relationships, optimize logistics, and use data-driven tools to forecast demand. That way, you can reduce waste, control costs and maintain consistent quality.

Restaurants that excel in supply chain management are better positioned to respond to market changes and keep customers satisfied. For instance, having diversified supplier networks ensures you’re not overly reliant on a single source, while implementing inventory tracking systems helps you avoid running out of key ingredients during peak hours.

In today’s competitive and fast-paced industry, mastering the restaurant supply chain isn’t just a necessity—it’s a strategic advantage. When your supply chain is robust, your restaurant can thrive even in challenging times.

The relationship between supply chain and inventory management

Inventory management is an important part of the supply chain. It helps you keep your customers happy and your kitchen running smoothly.

Inventory management involves keeping track of what ingredients and supplies you have in stock so you know when you’ll run out and need to order more. It informs your demand and purchasing decisions.

According to research by Oracle, 87% of companies would be able to reduce their inventory – and thus related costs – by 22% if they had more visibility into their supply chain. The better you manage your supply chain, the less you need to spend on inventory. And when you can make purchasing decisions based on data and accurate forecasts, rather than hunches, it’s easier to order what you need, nothing more and nothing less. 

All to say that when it comes to the supply chain management restaurant industry, you need to prioritize efficiency, visibility, and data-driven decision-making to keep costs low and operations smooth.

Efficient Supply Chain Management with Lightspeed POS

Lightspeed’s restaurant inventory management software works seamlessly with your supply chain workflows, enabling real-time tracking, automated replenishments and data-driven purchasing decisions to reduce waste and control costs.

Why is supply chain management important?

Effective supply chain management in the restaurant industry is crucial for maintaining smooth operations, reducing costs and keeping customers satisfied. Here’s why supply chain management in the restaurant industry plays such a vital role

Ensures consistent food quality 

A well-managed supply chain guarantees the availability of fresh, high-quality ingredients. When you work closely with reliable vendors, your restaurant can maintain consistency in your menu offerings, enhancing customer satisfaction and reinforcing your reputation.

Controls costs and maximizes profitability 

Effective supply chain management in the restaurant industry helps businesses negotiate better vendor contracts. This leads to cost savings and a healthier bottom line, even in the face of fluctuating ingredient prices.

Improves operational efficiency

From timely deliveries to seamless inventory replenishment, an efficient supply chain streamlines back-of-house operations. This allows kitchen staff to focus on what they do best—preparing and serving meals without delays caused by missing ingredients or late deliveries.

Enhances inventory management 

Supply chain management works hand-in-hand with inventory tracking systems to prevent over-ordering or running out of stock. By forecasting demand and managing inventory strategically, restaurants can reduce waste and keep operations running smoothly.

Supports sustainable practices 

Sustainability is a key focus for many restaurants. By optimizing your supply chain to source locally and reduce waste, you can meet consumer demand for eco-friendly practices and boost your brand image.

Restaurant supply chain management best practices

Since you’re a rookie when it comes to supply chain restaurant management and logistics, here are several best practices that will set you up for success. 

• Price shop for the best deals, whether that’s for restaurant supplies, inventory management software or food delivery partners. When restaurant suppliers compete for your business, you benefit by getting a good deal.
• Reevaluate vendors often. You don’t have to work with the same restaurant food suppliers and logistics providers for the rest of time. Evaluate your vendors’ prices at least once a year, if not more, and look for new vendors if you can find better deals and services elsewhere. But first, make sure you aren’t locked into any long term contracts you can’t get out of.
• Join a collective. There’s power in numbers. By joining a group purchasing organization, you can get better deals on supplies than you could on your own. 
• Streamline your restaurant food supply chain by working with restaurant suppliers that can take care of more than just one step on your chain. For example, look for restaurant food suppliers who can provide ingredients and deliver them to you, instead of making you pick them up.
• Consider supply chain software for restaurants; these tools help automate tasks like tracking inventory, forecasting demand and managing vendor relationships. Modern supply chain software also provides real-time analytics, allowing you to make data-driven decisions that improve efficiency and cut costs.
• Weigh the pros and cons of doing things yourself. Evaluate which steps of your supply chain are best kept in-house, and which ones are worth outsourcing. For example, while it may be worthwhile to pay a premium to have food suppliers deliver ingredients to your restaurant instead of going to a market to pick them up, it may make sense for you to fulfill your own food deliveries instead of using a third-party fleet, like Postmates, to do it.
• Make sure you have enough supplies for promotions. What’s worse than launching a new product or promotion and no one being interested in it? Many people are interested in it but not being able to buy it because your restaurant has run out of the ingredients to make the dish. While exclusivity has its perks when created deliberately, when it’s created by accident, it’s just a bad business move. If you’re revealing a new dish or sending out coupons for a particular item, make sure you have enough supplies to fill the increase in demand. Align marketing efforts with supply chain availability. Look at supply forecasts to ensure you’ll have enough chicken for your new sandwich or enough coconut milk for your new lattes.
• Boost restaurant efficiency with software. Restaurant technology, like supply chain management software and inventory management software, is making the tedious, but important, tasks of monitoring inventory, reordering restaurant supplies, communicating with vendors and tracking supply deliveries easier. These tools can cut down the time it takes to do these things. Plus, if your restaurant POS system has inventory management tools built in, or integrations with supply chain management solutions, you can even automate many of these steps.
• Track your supplies to the source. Knowing where your raw ingredients come from is critical for food safety. Remember last year’s E. coli outbreak? It was linked to leafy greens, so key salad ingredients like romaine and spinach were in short supply. Stay attuned to agricultural reports from the regions from which your ingredients come so that you can anticipate disruptions in the supply chain and pivot by switching up your menu or supply order. 

How supply chain efficiency can help boost profitability and sales

Restaurant supply chain management is important because doing it well can lead to business benefits — namely, more sales and higher profitability. But how?

First, when the “links” in your supply chain can share information, they can collaborate better. This collaboration ultimately gives you more control over your business, so you can increase profit margins more easily. Collaboration also reduces risk, which saves you money. 

Let’s say, for example, that your restaurant purchases bread from a local bakery instead of making it in house. If you learn that there’s a shortage of flour, and the bakery will therefore increase prices, you can reduce costs by either removing bread from your menu while flour is in high demand and low supply, or looking for an alternative. 

Second, supply chain efficiency helps you spend less on inventory. As we already mentioned, Oracle’s study found a link between supply chain visibility and inventory cost savings. The more you know about where your restaurant supplies come from, what they cost, and how shortages will impact you, the better informed you’ll be when making purchasing decisions. 

Finally, a streamlined supply chain keeps you in the know and makes it easier for you to inform customers of disruptions in service or supplies. For example, if your ice cream shop is known for its seasonal pumpkin spice flavor, but nutmeg is in short supply, you can keep customers happy by altering your recipe or offering alternatives. By anticipating and working around crises, you can keep customers happy. And when customers are happy, they’ll keep coming back for more. 

Supply chain management makes the restaurant world go ‘round

If you’ve made it this far through this article, then you have the information you need to tackle restaurant supply chain management like an industry veteran. So, go forth and build relationships with food suppliers, keep an eye on agricultural reports, and look for software that can help you streamline your supply chain and restaurant logistics.

Lightspeed’s POS simplifies supply chain management by offering built-in inventory management solutions and integrations. Watch a demo today to learn more.