End to End Planning for Recovery in the Hospitality Sector

The Current Challenge for Hospitality

The disruption caused by Covid-19 has left the hospitality sector in crisis, but companies that responded quickly, slashing overheads, closing outlets or providing ‘to-go’ are now seeking ways to rapidly recover EBITDA. That said, historical learning regarding customer behaviour may no longer be a reliable basis for planning for recovery. The need to maintain low overheads as sales recover erratically means operational efficiency and optimal supply chain costs could prove essential to maintaining positive cashflow and recovering profit in the next 6 months.

Applied ‘End to End’ Learning

For years fast-moving consumer goods (FMCG) manufacturers have adopted an end-to-end planning process called ‘Sales & Operations Planning’ (S&OP). The process balances the design and ongoing promotion of the product range with the impact such sales complexity has on operations and the supply chain; an optimised range promoted to drive sales in line with what operations can efficiently manufacture and the supply chain can cost effectively supply. For example, promoting beef dishes when lamb prices rise or taking the marginal prawn sales out of the range to ease manufacturing and supply chain complexity. Some fear S&OP may result in reduced sales, but FMCG experience tells us it more than makes up for that in EBITDA impact through greater manufacturing efficiency and reduced supply chain costs.

Take Action

In the last 10 years Hospitality success has been measured in incremental and like for like growth, via new restaurant openings and evolved menus, but Covid-19 sees sales down >50%.  So, recovery has to be rapid and material, in a market where C-19 impact on customer behaviour means sales forecasting continues to be difficult.

Most hospitality businesses traditionally consider the impact on operations and supply chain as they evolve their menu or store design. However, this is often a sequential process; design the menu/store with the brand and consumer in mind, then consider the implications for operations, with the procurement team finally engaged after the decision-making process to source to budget. The result being that key decisions and positions regarding menu and design have been taken way before the impact on the supply chain is considered.

In the new world, there is a need to ensure that menu and store design continue to meet the genuine needs of the customers and the brand. However, in order to keep costs of goods sold under control, as companies manage cash-flow and EBITDA, a simple form of S&OP could add real value, quickly.

Accelerate Recovery

One of the key ingredients for effective S&OP is a strong supply chain management representative on the team, with excellent market insight and the capacity to act quickly to balance rapidly changing supply and demand in the sector. This is traditionally an area where many hospitality businesses have been weak and indeed may be weaker now as they have been forced to make cuts in their procurement teams.

One solution would be to bring in additional capacity, market insight and process expertise from a third party, capable of challenging the thinking and who have a deep-seated understanding of the impact on operations, customer, and brand. Not easy to find in a sector where traditionally procurement sits at the tail of a process and is focussed on buying goods & services and supplier issue resolution, rather than end to end value creation.

The Solution

Procure4 is a team of supply chain management experts with international experience across Food and Beverage manufacturing as well as Hospitality. Procure4 are passionate about brands and the customer experience, having worked for some of the most successful companies in the world. However, we are not shy when it comes to challenging traditional thinking and have a strong track record of engaging functional leaders to adopt innovative solutions that delivers auditable EBITDA growth. As such, we are confident that we can help Hospitality businesses recover through an end to end process of re-design and ongoing, cross-functional management of profitability.

Timing is critical. Many operators will naturally want to work to methods that were successful historically focusing first on the customer, then operations and postponing procurement mobilisation. Sequential thinking may still result in operational efficiency and cost reduction, but the impact could be too late to underpin real recovery in the critical next 6 months.

Procure4 is offering ‘end-to-end’ thinking now! Providing the additional capacity and insight to ensure that the burden on operations, marketing, development chefs is reduced, whilst a cross-functional approach to recovery is established and costs of goods sold are tightly managed, easing cash-flow pressures and delivering auditable EBITDA enhancement immediately.

You will be surprised at how quickly we can create real value for your organisation through People Powered Procurement. Click here to contact us today.