Edit
Operations

The Future of the Supply Chain

Expect lots of small changes, but there's no magic bullet on the horizon.
Photograph by Clint Blowers

A freight truck pulls up to the back door of a restaurant, packed with supplies. It could be any day in the foodservice business. But is that a typical day in 2020, or a snapshot of the restaurant supply chain circa 2030? The differences, though undoubtedly there, are not expected to be as obvious as some of the changes a time traveler might spot through the restaurant’s front door.  

Experts say the process of supplying restaurants with essential provisions is likely to evolve incrementally rather than jerk from disruption to disruption. They agree that technology will shave off inefficiencies and help in addressing consumers’ demands for fresher, more local fare. But the core process of replenishing restaurants won’t change with the calendar. In their view, it’s a matter of small but important advances.

Consider, for instance, the vehicle that’ll cart the supplies. It may be electric rather than gas-powered, and smaller than the semis and moving van-sized transports that make food drop-offs today, says Mark Allen, CEO of the International Foodservice Distributors Association (IFDA). But contrary to some high-profile experiments, it’s not likely to be a drone or driverless rig, at least not for the next decade or so. “Someone still has to get the products off the trucks and into the restaurants,” Allen says. 

Others say the truck may not sport the signage of the big distributors who specialize in foodservice. The biggest change they foresee in the supply process is a shift to online marketplaces that ship directly to the restaurant, an echo of e-commerce’s challenge to brick-and-mortar consumer retailing. Amazon and its competitors are forging a huge B2B business to complement their hold on consumer shopping.

“It is a big, big deal,” says Joe Pawlak, managing principal of Technomic, sister research company of Restaurant Business. “It’s all distributors want to talk about.”

About 12% of restaurants are currently buying from a third-party online seller, and “we’re sure that number will increase,” says Mike Schwartz, VP of member value for the International Foodservice Manufacturers Association (IFMA). “I would imagine that ordering online will be at the center of our industry.” 

Technomic sees a much higher usage. About 40% of restaurateurs order supplies at least once a month from online sources such as Amazon, according to a recent study by the researcher.

Even if operators don’t buy from an online source, the study noted, they often cite the prices offered in those alternative channels to negotiate lower rates from their broadliners and specialty distributors.

Already, Allen says, “operators are slowly becoming less dependent on DSRs (distribution service or sales representatives) for product discovery and pricing. Just as we as consumers look at online shops, they are looking to do more online.”

Many of the familiar names in foodservice distribution are probing for ways they can ride the transformation. Typically, they’re aiming to position their own portals as e-commerce marketplaces, using their transportation resources for the last mile of the re-up process.

The shift to third-party internet sources comes with its own challenges for operators, Pawlak says. “You don’t know when the package is going to arrive,” he explains. “Will it show up in the middle of lunch so people wonder, ‘Are they really making this food in the kitchen?’” 

Plus, even an overnight delivery may not be fast enough for some restaurants. If a restaurant runs out of some key ingredient, it can call its distributor and ask for help. “Someone can throw a case into a van and run it over to a good customer very quickly,” Pawlak says. “I don’t think you can do that with a UPS or FedEx.”

The product options may also be limited. Foodservice suppliers have been loath to showcase their wares on e-commerce sites that ship directly, bypassing the distributor. They don’t want to antagonize their last-mile partners, because much of the supply channel is still controlled by the big names in distribution.

Some distributors are trying a touch of supply chain jujitsu, looking to outfox online challengers by shortening the time and distance that a product travels from farm to kitchen. Gordon Food Service, for instance, collaborated with Square Roots, an urban farming company started by The Kitchen CEO Kimbal Musk, to open an indoor growing facility at Gordon’s headquarters in Wyoming, Mich. The idea is to supply Gordon customers with locally grown herbs and produce all year long. Using hydroponics and computerized controls, the indoor farm can produce the same amount as a 5-acre outdoor spread, according to Square Roots.

Similarly, vertical farms have taken hold in cold weather areas ranging from Pittsburgh to Brooklyn, N.Y., as urban a spot as any in the country. The issue is volume: Can a facility produce enough lettuce or beans to meet the demand of a single high-volume restaurant, never mind a whole market?

Simultaneously, “a lot of distributors have become very competent in working with local farmers,” says Allen of IFDA.

“A lot of that is driven by the consumer,” says Schwartz of IFMA. “Their demands are changing the expectations of operators, so they’re looking for new sourcing models.”  

Operators will likely benefit from the challenge posed to conventional distributors. Pawlak notes that the big players are stepping up their consultation role, tapping the data they have available to resolve customers’ problems and help operators spot opportunities. An emphasis on service is also fostering adoption of truck tracking systems so restaurants can pinpoint when a delivery is likely to arrive. 

An easier reach for most links in the chain is providing supplies in smaller batches, speeding turnover for the sake of freshness. That means smaller cases and smaller, more frequent drops. With short-haul sourcing and shrinking deliveries, the natural response has been to shift to smaller trucks, and probably ones that don’t run on gasoline, Allen says. “Just about every large distributor has invested in battery-powered trucks,” he says. The lower costs of those vehicles will come back to operators as a counterbalance against price increases, he says. 

Small trucks could also address the major challenge of the supply chain: people. The average commercial truck driver in the United States is 55 years old, with retirement in sight. The mean age for foodservice distributors is 39, according to IFDA, but all segments of the trucking industry are having trouble drawing young people into the business.

Small trucks don’t require the special licenses needed for semi-haulers. They also promise less wear and tear on the driver because they’re easier to navigate and the load is smaller, meaning there’s less to lug off the vehicle and into a restaurant.  

“There are a lot of little things that are being done—there’s no silver bullet,” says Allen.

Although the burden of hiring and retaining drivers falls on partners further up the supply chain, the impact is likely to be felt at every link. “I feel like we’re on a cusp,” says Allen. “The driver shortage has brought operator and distributor together to think about new ways of collaborating.” 

Want breaking news at your fingertips?

Get today’s need-to-know restaurant industry intelligence. Sign up to receive texts from Restaurant Business on news and insights that matter to your brand.

Trending

More from our partners