Supply chain management is the management of the flow of products and services between customer’s customers and supplier’s suppliers. The main objective of supply chain management is to satisfy the end customer. Each operation in the chain should be satisfying its own customers, with the ultimate objective of making sure that the end customer is satisfied. There are a number of food outlet restaurants operating in the different sectors of any economy, these range from small mobile shelter businesses, home based operations to large multi-billion dollar corporate franchises, such as And<, Maxis', etc.
This paper is based on observations we made on two types of restaurants, which are Debonair Pizza, a fast food pizza restaurant ND Pizza e Vine, a la carte pizza restaurant. Debonair Pizza Debonair Pizza is one of the leading pizza restaurants in Africa;it was established in 1991 and is now part of the highly successful Steers Group of Companies, (now known as Famous Brands). Debonair Pizza’s method of sale includes: Over the counter sales (Take outs). Door to door delivery service through phone in order taking.
In restaurant seating facility, though with limited in capacity. Pizza e Vine Pizza e Vine is a restaurant that prides itself on its traditional Italian style food and wine. Destination malls are what the main focus for Pizza e Vine restaurant goes for when looking for a site to open any of their stores, the target market for the business is market middle to upper income earners. Their restaurant business is largely based on customer service which enables them to charge a premium for their products.
Their methods of sale include: Booked tables & Reservations (telephone or online) Sitting arrangements for inside & outside the restaurant with occasional live entertainment Both types of restaurants prepare and sell pizza, but differ in their model of operation and exist in differently configured supply chain networks. Debonair Pizza deals with standardized pizza menus which are determined by the parent Franchise Company (Famous Brands), their branches having no firm control over these menus. Its main thrust is on uniformity and maintenance of Franchise standards across all franchisee shops.
On the other hand Pizza e Vine sells once off specially prepared pizza that is fire cooked. Customers are free to determine the variety in the menu of their choice. Each branch of Pizza e Vine always updates its menu on a regular basis, which is usually every 3 months. The t’. NO restaurants cater for different market segments with the demand side of the supply chain being a major consideration in their pricing structure and location decisions. These demand factors are: Suitability of site – in terms of traffic volume, atmosphere, visibility, etc.
Image of location – Customer and general consumer perception of location Convenience for customers – Parking, space, security Debonair Pizza restaurants are situated in highly populated areas such as busy shopping malls and busy streets. With 90 percent of their customers eying take outs, the design of the restaurant’s sitting in arrangement is meant to cater for customers who are waiting for their orders to be processed or for those who want to have a quick meal in the restaurant. See fig 1. On the other hand, Pizza e Vine is located in market shopping complexes with ample, secure parking space for customers.
The sitting arrangement offers a more relaxed and spacious arrangement that allows customers to relax as they wait for their meals which usually take about 30 to 45 minutes to process. See fig 2. Supply Chain Network Configurations A configuration of a supply chain network is characterized by the shape of the supply network and the role of middlemen in the network. The configuration of the supply chain neurons for Debonair Pizza and that of Pizza e Vine is shown in the diagrams below. Fig 3 Debonair Pizza’s supply chain network configuration as shown in fig 3 is characterized by the elimination of direct suppliers to the restaurant.
Famous Brands acts as the sole buyer and supplier to the Debonair Pizza restaurants, by so doing there is disintermediation, which is the cutting out of he middle men between the primary suppliers and the restaurants. The immediate supply chain network consists of Famous Brands the franchisee restaurant and the customers. Famous Brands is able to make bulk purchases and therefore capitalism on economies of scale. Suppliers The configuration of Pizza e Vine’s supply chain network is characterized by a number of direct suppliers to the restaurant.
The fresh farm produce and the meat that is used in the making of the pizza are directly sourced from small scale organic farmers/producers. And their meat and poultry is sourced from pacific producers who practice what is known as ‘ethical chicken farming. Ethically raised chicken are naturally fed and produced without being force fed and chemically enhanced, in this way the meat is of a higher quality. Pizza e Vine is focused on quality and not quantity; with no bulk purchases from its suppliers, there are less economies of scale in their procurement processes.
This is a significant factor contributing to the relatively higher pizza price than Debonair Pizza. Transformation process Fig 5 – Debonair Fridge for pizza made to stock at Debonair Fig 6 – Pizza e Vine MAKE TO STOCK AND MAKE TO ORDER The two restaurants can further classified in terms of how they respond to customer demand. Debonair pizza can be classified as being more of a make to stock operation, and Pizza e Vine can be classified as more of a make to order type of operation. In reality, the existence of an absolute make to stock or make to order operation is very minimal.
Operations usually have a mix of both, but with one being more dominant than the other. In a make to stock concept, operations produce products prior to being demanded by specific customers. And in a make to order concept, operations produce products only when demanded by specific customers. For those products that are made to stock, appropriate inventory strategies must be determined, and for those products that are made to order, approaches for customer lead time quotation must be developed 1 .
Furthermore, if different products utilize common production resources, as the in the preparation of pizza, see fig 5, operating strategies for those resources will impact on the system performance. Traditionally, most companies utilized a “push” or Make-To-Stock (MATS) system, holding inventory at the end of the supply chain. However, in a MATS yester, firms need to be able to estimate demand, so as to determine how much to produce and stock, these systems rely heavily on forecasts. Debonair Pizza uses the Make to stock strategy; the Debonair branch manager does the demand forecasts and schedules production accordingly.
Thus, depending on the nature of their operations many companies have shifted to the “pull” or Make-To-Order (MOTTO) systems, holding no inventory at all, and producing to order. In these systems, production is based on actual customer demand instead of forecasts. This is the case with Pizza e Vine; the ligament of an order triggers the preparation and production of a pizza as required by the customer. Inventories are eliminated, but customers must now wait for delivery, perhaps leading to loss of competitiveness in terms of speed of delivery on the part of the business.
Generally the decision to use either a push strategy or a pull strategy for a particular product therefore depends heavily on the characteristics of the system. Indeed, in a supply chain, using a push strategy for some products or components, and a pull strategy for others, might be much more effective than using either system exclusively. Because of this, firms are beginning to employ a hybrid approach, a “push-pull” strategy, or combined MOTTO-MATS system, holding inventory of some products, and producing others to orders.
The concept of make to order Make to Order (MOTTO) is a business production strategy that typically allows consumers to purchase products that are customized to their specifications. The make to order (MOTTO) strategy only manufactures the end product once the customer places the order. This creates additional wait time for the consumer to receive the product after having placed an order, but allows for ore flexible customization as compared to purchasing off the shelves. Since Pizza e vine uses this strategy it is able to offer customized pizza, which is specifically made to customer requirements.
The lead time between placement of an order and delivery of the pizza is about 30 to 45 minutes and is relatively longer than that of Debonair Pizza. The make to order (MOTTO) strategy relieves the problems of excessive inventory such as deterioration, theft, storage space, etc which is common with the traditional make to stock (MATS) strategy. In a make to order strategy, the ingredients and materials of ACH product are kept in stock (the average storage times for perishables being 3 days for Pizza e vine) Once the facility receives a customer order, the pizza is prepared with all ingredients being added just in time for the delivery.
The main disadvantage of the make to order production is the lead time, so the customer’s order is delayed while the pizza is being prepared. If many orders for the same product come in at once, or the kitchen is already engaged in another order, this wait can be significant. In some cases, quality and customization advantages are enough to offset this inconvenience to the customer. The concept of make to stock It is a traditional production strategy that is used by businesses to match production with consumer demand forecast.
The make-to-stock (MATS) method a forecast of demand to determine how much stock should be produced. If demand for the product can be accurately forecasted, the MATS strategy can be an efficient choice. MATS (Make to Stock) literally means to produce products for stock based on demand forecasts, which can be regarded as push-type productions. The main drawback to the make-to-stock (MATS) method is that it relies heavily on the accuracy of demand forecasts.
Inaccurate forecasts will lead to losses stemming from excessive inventory or stock outs. The advantage of producing for stock is that you are in most cases able to spread the production evenly over a given time period, avoiding most of the hectic scenes that often characterize make-to-order production in peak demand. There is much room for achieving a highly efficient and effective manner of production; this is a characteristic of Debonair Pizza. In anticipation of a peak in demand, stocking levels can be increased.
An Enterprise Resource Planning (ERP) system geared to make-to-stock reduction can in one aspect make life for the purchasing department easier: The Debonair branch manager issues purchase orders well in advance On the basis of minimum stock levels for each of the ingredients that is required to make the pizza. If MOTTO (Make To Order) is like an elevator because MOTTO starts by receiving an order as an elevator starts by pressing a button, MATS (Make to Stock) is like a train schedule (supply schedule) for which the number of passengers (forecast demand) for each time period can be prospected from the past data.
The MATS as applied to Debonair Pizza gives t a quick response to meeting consumers’ demands with minimum opportunity loss, and the make to order strategy as applied to Pizza Vine is able to meet customer requirements in terms of flexibility and customization of their menu as required by the customer. DEBONAIR PIZZA VS. PIZZA E VINE IN COMPARISON Pizza Vine Procurement The option of selecting the supplier is completely at the discretion of the buyer (Branch Manager). Famous Brands, the owners of Debonair, has conveniently setup a sister company which supplies all the consumables necessary for all the Debonair branches.
Therefore the ordering for all pizza ingredients can be done through one company. Orders are placed electronically and goods are delivered within specified times. Replenishing orders for new inventory is based on current inventory levels. Procurement The procurement function is the responsibility of the Head Chef who is responsible for the selection of suppliers. The selection of suppliers is mainly based on their ability to source the best quality products at the best price. The ability to establish and maintain long term relationships ensures that the products are always at a consistent quality to cater for their target market.
Suppliers are not only niche market specialist (like the organic farmers and specialist deli’s) but also commercial suppliers. All seven stores use a similar ordering system and Order directly from the suppliers chosen by the Head Cheat Distribution Famous Brands who has their own wide network of suppliers. The distribution of products form the primary suppliers is monitored by the famous brand staff. The branch manager is only responsible for tracking orders due to the branch from Famous Brands warehouse as well as looking at the supply/demand within the outlet.
Cashiers / Wait staff – As this is only a tiny part of the distribution it offers, the countertops seen. ‘ice personnel is responsible for the waiting on customers who decide to eat at the premises. Take outs- Depending on how busy the outlet is, they can range from having one to 4 different drivers averaging about three meals per trip. The general policy for the drivers is as soon as the food is ready they dispatch it. The average delivery time from placement of order over the counter is 1 0 minutes.
Distribution The distribution of meat and toppings from suppliers to the seven stores is one on the same day as the order is purchased (literally in hours from the time the request is made). The distribution cycle is short with the product being produced and directly delivered to the stores and from the stores to the end customer. All meals are consumed on the premises as meals are all sit-down. The time taken for the cooked meal to go from the kitchen to the customer table is much longer than the average time it takes at the Debonair restaurant with customers waiting for an average of 20 minutes for their gourmet meal.
Scale of capacity and the demand capacity: Debonair’ capacity leads demand since its strategy is a make to stock concept. The level of this inventory will depend on anticipated forecast demand which varies with time. Response to fluctuations in demand in terms of capacity timing The branch manager is always aware of their micro and macro events (forecasting demand) that impact the business environment e. G. World Cup, days of the month, holidays, etc The restaurant knows all the busy times of the month, which are end of the month, weekends and holidays.
The Manager keeps a record of all ordering throughout the year and uses that as a guideline for reordering. There is a general 3 day lead time from placing of order from Famous Brands to receiving of order at the branch outlet. Scale of Capacity and demand capacity: Pizza Vine is largely targeted at the affluent individuals who are able to pay a premium for gourmet meals made to order with the ability to change the order around to meet their requirements. The level of inventory is dependent on the number of booking and anticipated number of walk-in (which is a very small percentage (10%) of total capacity.
Response to fluctuations in demand in terms of capacity timing. Forecasted trends monitored over the years assist n being able to understand capacity and requirements throughout the year as well as being able to monitor events and holidays in and around the city that can impact demand. Supply Chain Management Objectives Quality The decision of the Manager to choose Famous Brands as their one and only supplier ensures that the best quality product gets served all the time and on time.
The manager constantly does spot checks to ensure the staff maintains a hygienic environment. Speed To maintain speed of service delivery staff are trained on the use of the computerized ordering systems which links the kitchen to the front cashiers. As soon as an order goes through at the achier side, the order appears on the kitchen order screen. Orders that have been done are marked off and placed on a pick-up tray ready for collection. This requires great coordination between kitchen staff and cashiers especially when there are peaks in demand.
Dependability Keeping a contingency stock of materials and ingredients enough for at least 3 days’ supply ensures that the supply from the outlet to meet customer demand is dependable all the time. There is also a back-up system that runs on gas in case there is an equipment fault or power outage to ensure a bendable supply. Flexibility There isn’t much flexibility regarding the menu and lead times in serving the customer. The reason for this is that there are specific time allocations for the set meals, with planned procedures and work flows.
The moment you add flexibility into the menu it undermines the objective of quick turnaround times. Supply Chain Management Objectives Quality of products and personable top class service as well as relationship building is key to their success. E. G. Meet and greet, resolving issues in the shortest possible timeshare and creating an atmosphere people would pay for. The owners are personally involved in the business and will dispatch mystery shoppers to the store to ensure that the food is top quality.
The mystery shopper will rate the food and these impacts on the bonuses of staff and the store management which ensures that there is a constant drive to keep the quality of the food and service and atmosphere at extremely high levels at all times. Speed Food is prepared with care with quality and service being a priority and therefore will take longer to prepare than the average take-out. Peak periods require more staff on duty to cater for the higher demand periods and this is he responsibility of the general manager.
