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One-stop shop: How tech can revolutionise your costings

01 April 2018 by

Operators now have access to procurement systems that can show anything from how many staff you need on a Saturday night to what is your best-selling dish. Elly Earls reports

Procurement is about a lot more than prices, stocktaking and inventory. Every­thing from social media sentiment to staff turnover and the weather impacts demand and therefore purchasing decisions and business performance.

Thanks to application programming interfaces (APIs), it's easier than ever to get all this information in one place. And courtesy of complex statistical algorithms, it can all be crunched in a matter of seconds. Some systems can also work out which information is pertinent to each person in the business and present it to them in a way they can easily understand.

A restaurant manager, for example, might be informed he needs two more staff next Saturday night, while a catering company's procurement director would be more interested in how the entire business is performing against the market and how much they can save in a particular product category.

Mike Shipley, analytics and insight solutions director at cloud-based forecasting and cost control software company Fourth, explains: "By bringing all of this data together in one place you can make much better business decisions because you have that content about what's driving your performance."

From paper records to button clicks

Businesses have had access to much of the data they need to make informed purchasing decisions for a long time. The problems have been getting at it in a timely fashion and extracting useful insights.

"The man-hours required to get the data that technology can now provide is staggering," says William Gorol, managing director of purchase-to-pay and procurement software company Procure Wizard (now part of Access Group after its acquisition earlier this month). "Even answering a simple question like 'how much did we spend last year on chicken?' would historically have involved asking multiple suppliers to provide the data in the hope that they could do so in a timely manner, and then stitching together the data received into a common format that you could use."

It was a similar scenario in the payroll department. Not only did managers have to trust that paper timesheets were accurate and hope that they'd be submitted on time, but the information in them would have to be manually entered into a spreadsheet in order to calculate each employee's hours.

Today, a single click of a button can not only pinpoint the expenditure on a commodity group such as chicken, it can also tell you product details, average spend per unit, profitability of chicken dishes, current stock held and average price paid. Meanwhile demand forecasting can be linked with staffing requirements to ensure operators are never under-resourced at peak times or over-resourced when business is slow.

Technological advances are also giving business owners access to more granular detail about menus, including allergen information and the gross profitability of each individual dish. Plus, they can view real-time stock data at the click of a button, rather than doing a manual stock-take. Previously, by the time the stock-take was finished, the information would already be out of date.

Millions more lines of data

There are also several million lines of data operators can now get access to that weren't available even just a few years ago.

Companies like Prestige Purchasing, for example, compile data from various suppliers in the market so operators can understand what a good market price is at a particular time.

Together with its partner CGA, Prestige also produces the Foodservice Price Index (FPI), which shows by category and subcategory what inflation is each month.

"We draw down data from suppliers, which on aggregate are over 50% of all transactions between suppliers and caterers in the marketplace, adding up to about eight million lines of data per month," Prestige Purchasing chairman David Read explains. "Previously, caterers have tended to use the Consumer Price Index (CPI) as a guide to what's happening in food, but the reality is that the FPI and the CPI are hugely different."

Through Prestige's monthly FPI report, operators can find out how much inflation has gone up in a particular category and why, as well as how they can mitigate that increase. "Our reports also forecast inflation by category," Read adds. "This can enable operators to redesign menus or respecify/re-source products from other geographies, for example."

Actionable insights

The really clever thing about the best procurement systems on the market today, though, is their ability to bring together all of these pieces of information, as well as insight on how businesses are performing on social media and what the weather will look like for the foreseeable future, in one place in an easily understandable format.

"There are several systems in the market that now consolidate different pieces of information and aim to provide useful business insight," says Sarah Dovey, director of efficiency at procurement and margin improvement specialist PSL. "Forecast covers, local events and weather can all contribute towards more accurate staff scheduling and ordering, while social media scores and trends can be used to influence future and seasonal menu choices and can then help with tendering and price negotiation.

"It should be easy for operators to get actionable insights. Good systems will be able to gather third-party data and provide clear information that does not need any further interpretation by the user. Dashboards on laptops and phones should be commonplace and valuable for operators. They don't want to log into different systems to find this out."

The devil is in the detail, according to Shipley. He says that Fourth's demand-forecasting feature makes suggestions based on everything from expected rainfall levels to what people were saying on Facebook last Saturday and how these factors are likely to impact demand.

"Based on all these factors, we can predict that a business is going to take, say, £3,000 today and split that revenue up by 15-minute increments, so the team know exactly when to schedule staff, how much food to buy and when it needs to be delivered," he says. "Things won't go out of date, they won't order too much, and equally they won't run out of stuff when it's busy and end up disappointing their customers."

The system can even recommend how many staff should be working during a particular time period or point out which products aren't being consumed and how much the order should be reduced by to minimise wastage. It also makes suggestions on which suppliers to use based on price and reliability, and through an integration with the FPI, benchmarks a business's performance against the market.

Crucially, only the recommendations that are relevant to a particular member of staff will be delivered to them. "We look at it on a role-specific basis and try to embed it in people's workflows," Shipley says. "Then the manager can use their own experience and knowledge specific to their site - for example, the council might be planning to close down a road for a few days - and overlay that on top of what the system is recommending. That saves them probably a good few hours over trying to put it all together manually."

Improving forecast accuracy

There aren't many parts of the food and drink procurement process that are still heavily reliant on manual processes, but two that stand out for Gorol are the early and latter stages of contract management.

"We would envisage that over the next few years almost all contracts will be managed through a contract management solution that provides analytical benefit to the buyer and maximises the business benefit for the supplier to provide outcomes that surpass what's commonly achieved through manual processes," he predicts.

"Systems will not replace the skilled procurement professional. However, they will give them the tools that have been freely available to others in the past to remove labour-intensive tasks, leaving valuable time for contract review and face-to-face negotiation."

Slightly longer term, blockchain technology could also have a significant impact on the procurement process. "It hasn't really found its way into the foodservice supply chain yet but when it does, it will open up transparency right the way back up the supply chain, giving businesses the ability to track individual products and see where they were sourced from and whether they comply with their standards," Read says. "Once it gets really established, it will stop things like the horse-meat scandal."

In the meantime, the focus of software providers will be improving their predictive algorithms to help clients order the right products and schedule staff better. While this may mean bringing in new data streams, such as information about geopolitical events and their impact on customer sentiment or local roadworks and one-off festivals, it will be important to weigh up the cost-benefit of anything new.

"Artificial intelligence is only as good as what the system knows, but you've got to work out what are the key bits of data that are going to make the most difference to improving the accuracy of your forecast," Shipley points out. "If you can move the needle by 10% and it doesn't cost much to bring that data in, then it's probably very worthwhile. But if the needle's only going to move by a marginal amount and cost you tens of thousands of pounds, then it's not worth it. You always have to weigh up the ease and cost of getting it versus how much it will improve the accuracy."


Finding the best fit

While more data can undoubtedly improve purchasing decisions, it's important that operators don't forget about supplier relationships. For Rachel Dobson, managing director of buying specialist Lynx Purchasing, this means both maintaining the relationships that work well and knowing when it's time to switch up.

"Successful purchasing is built on relationships, clear communication and confidence," she says. "The danger with a long-term operator-supplier relationship is that it can become too cosy. It's important for the operator to compare prices and service regularly and know which other suppliers are out there. That's not advocating switching for the sake of it, but having the confidence to discuss changing market conditions and customer expectations with your suppliers, and adapt accordingly."

At Lynx Purchasing, the team works with operators to understand their business and match them with suppliers who are the best fit. "That's not about simply crunching the numbers and buying as cheaply as possible, but about finding products and suppliers that are a good fit with the style of the operation, which isn't something a spreadsheet can tell you - it only comes with experience," Dobson stresses.

"We don't put any obligation on an operator to buy from a particular supplier, and we work on a handshake - there are no contracts. Effective purchasing isn't straightforward, but getting it right can make a real difference to the bottom line."


Menu management

procurement
procurement

The detailed allergen, nutritional and costing data that today's best menu management systems can provide and analyse are making life much easier for chefs, too.

While in the past, they would have had to manually obtain information on allergens and product prices in order to keep customers informed and work out the profitability of their dishes, this can now be done automatically through the likes of Pelican Procurement Services' online menu management system Piranha.

For Toby Sharman, group executive chef at HQ Theatres, the system has been a game-changer. "Twelve months into using the Pelican's Pi menu management system, Piranha, not only are we seeing the financial benefits, but more importantly, our customers are benefiting hugely from consistency in terms of portion size, quality, cooking methods and presentation," he says.

Plus, as the pricing, allergen and nutritional information is all kept up to date automatically, Sharman and his fellow chefs are spending a lot more time developing their food. "The recipe costing process is extremely straightforward and allows me to create very detailed recipe specs that are followed throughout the group to give that food consistency," he adds.

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