November 30, 2000

Food and Beverage: Linking the Electronic Supply Chain
By Rick Bruns, Contributing Writer, Lodging Magazine

New systems can now connect everyone from the dining table to the food vendor in an electronic supply chain. In the restaurant of tomorrow, guests give their orders to a waiter holding a wireless data entry device. The orders are transmitted to the kitchen, speeding service, reducing errors, and increasing time spent by server staff with guests. And there's much more to come.

The data from the handheld device, now in the restaurant's computer system, pass through an interface to the inventory and supply ordering software. The software breaks down an order into its components-entree, side dishes, and beverages-to be reordered from vendors. The software checks the current inventory, forecasts likely demand, and recommends reorder volumes. The manager checks the system regularly, makes adjustments as needed, and sends the order.

It's not science fiction. Competitors in the fast-moving arena of information technology for the hospitality industry are already installing this kind of electronic, streamlined supply chain system in freestanding and hotel-based restaurants.

One leader in the field is Ameranth Technology Systems, Inc., of San Diego, California, which provides handheld devices based on the Microsoft® Pocket PC platform and the Microsoft Windows® CE operating system. Ameranth's 21st Century Restaurant package of software modules allows restaurant employees to handle all kinds of transactions, including payment processing and even valet parking, without trotting away from the guest to use a countertop terminal. One Ameranth customer, the Improv Comedy Clubs chain, has just won a "Moby" award for its use of mobile communications technology to improve service and keep guests smiling. Guests waiting in line outside for the next show can order their dinner at a specified table from a roving server. The device's barcode reader can also confirm a ticket that was purchased through the club's Web site. The barcode can even tell the system-and the kitchen-what the guest wants for dinner. The Microsoft SQL ServerT database also helps eliminate annoying confusion over reservations and double-booked tables. "No matter how the customer contacts the club," explains Keith McNally, Ameranth vice president of business development, "the database is updated for everyone."

Systems like Ameranth's interface with those that help management control their inventory and restocking process. A leader in this field is Eatec Corp., based in Emeryville, California. The latest version of its software, EatecNet X, allows management to use a Web browser to access its many capabilities. "It's Web-centric," says Eatec President Peter Marguglio, "meaning that with the Web as its center, an unlimited number of people can use it," instead of the hierarchical structure of uploading data to a computer at a chain's headquarters.

Running on a Microsoft Windows NT® Server, the EatecNet X software interfaces with the POS system to get data on what is being ordered by customers. It checks the inventories (including supplies in the several stages within a hotel F&B operation, from a storeroom to multiple kitchens) and, using data from the food service operation's history, it projects likely demand and creates a recommended reorder. The data it works from also include recipes, so that the order reflects all ingredients needed.

The Purchasing Link
The power of such a system to deliver benefits becomes clear when the link to purchasing is established. This can mean not only linking to specific vendors in B2B (business-to-business) Web-based structures, but also through the online systems that allow buyers to shop continuously among many vendors. Linking the costs of the ingredients back through the recipe to the menu price and sales, the manager can see one of the most critical but elusive pieces of data about the entire operation. "You can ask our system what items contribute how much to the bottom line," says Marguglio. "It tells you what is profitable and what to push, with a menu mix analysis that helps the top and bottom line."

System Concepts, Inc. (SCI), in Scottsdale, Arizona, is a 20-year-old leader in supply chain software for food service operations. Its FOOD-TRAK package can link from the POS system, including handheld technologies, to the rest of the enterprise-from the back office financial system to the in-room minibar-and to the online ordering systems of vendors. It also provides a forecasting tool that speeds the order-building process while controlling costs.

Reflecting the powerful trend in many areas of business software, the latest offering from SCI is not only e-purchasing via the Web but also accessing FOOD-TRAK itself as a service with SCI as the application service provider. Restaurants and food retailers are leading the trend to automate the supply side of their operations. And, while the lodging industry in general lags behind them, those in the industry say, some hotels are installing such systems.

Future Links
While great advances are being made in the supply-chain process, those benefits can't be fully realized unless the manager is buying what customers really want. More sophisticated customer relationship management systems are helping on that front, and they are emanating from the POS system leaders. NCR, the venerable retail technology provider based in Dayton, Ohio, is helping some of the leading names in food service, such as Applebee's Neighborhood Grill and Bar chain, with data warehousing software.

"The software gives the manager a recommended order quantity," says NCR Vice President Miles Stephenson, "and you have the ability to change it, for example, for a special event like a football game in town that weekend. The system then tracks that to compare what was ordered and what sold."

"Applebee's uses the Eatec system to reduce product cost and improve quality," says John Fallucca, associate director of operations services, Applebee's, International, Inc. "Our restaurant managers use Eatec to provide theoretical food cost information that is used to compare against actual food cost. Based on the results, we are able to identify areas of opportunity and make adjustments to reduce food cost while simultaneously improving quality by providing a better, fresher product with greater consistency."

Stephenson expects to see the food service industry develop much more accurate forecasting in the future, adopting tools now in use in the supermarket industry. "Even new product introductions can be forecast," he explains. "They don't have a history but the system can look at other products with like characteristics."

InfoGenesis, in Santa Barbara, California, another leader in POS systems, recently won a Microsoft Retail Application Developer (RAD) award for its Revelation software. It, too, is now being offered in an ASP (application service provider) fee-based structure, as e-Revelation.

The company's clients include the just-opened, ultra posh Bacara Resort, right in its hometown, and the Sydney, Australia, Super Dome Olympic venue.

"Food service operations are going to become more and more automated," says InfoGenesis Marketing Manager Maureen Sullivan. ASP's will also become more common because of the relationship they build between the restaurant and the software vendor in service and quality. "The support requirement puts pressure on the vendor, who only makes a profit after a long, successful relationship," she says. The quality ASP also provides backup systems and greater security for the client's data, she adds.

The Missing Link
For all the promise of the technologies now available, and what's on the horizon, a missing link remains in fully automating the supply chain: the top executive.

When he offers his wares to senior decision makers, says Eatec's Marguglio, "the one big problem we run into is the perception that the system causes more work in the stores: getting it implemented, training, building the data for forecasting. There is a lot to do."

And yet, looking at the bigger picture, work done by employees and management related to the supply chain will be greatly reduced, accelerated, and improved in quality by the system. NCR's Stephenson notes that avoiding bad food-purchasing and menu decisions also saves production labor costs. Looking only at food buying savings, Marguglio says a restaurant with $2.5 million in annual sales would spend about $800,000 on food and beverages. Shaving just 6 percent off that through improved buying would save $48,000, well above the cost of the software.

Looking ahead, Marguglio says, "The big question is the degree of human intervention." He foresees some daring food service operators setting up purchasing systems that automatically order supplies, make substitutions for unavailable items, check deliveries, and even pay for them without a manager's approval, "but that's a little scary," he adds.

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