Restaurant Purchasing: Taking Stock

At O’Charley’s, taking inventory in the supply chain means much more than counting product.

By Mary Boltz Chapman, Editor-in-Chief -- Chain Leader, 7/1/2007

O’Charley’s has been creating benchmarks so it can determine whether self-manufacturing and -distribution is the best value for the company.

Since Larry Taylor joined O’Charley’s Inc. as chief supply chain officer in June 2006, he’s been evaluating 20 years of purchasing practices. The Nashville, Tenn.-based company, which also owns Ninety Nine and Stoney River, distributes all the products to its stores and manufactures much of it as well.

Taylor, whose resume includes Carlson Companies, Pizza Hut, Taco Bell, Burger King and McDonald’s, says he’s been spending most of his time benchmarking.

Starting Point

Key to that is strategic sourcing reviews. In many organizations, Taylor says, buyers begin with a request for proposal from suppliers, then base their decisions on price and perhaps a few other variables.

"[O’Charley’s has] 10 steps to the sourcing process, and No. 8 is the RFP," he explains.

The previous steps involve analyzing industry cost drivers, the customer base and sourcing strategy. "All of these steps happen before you ever get to the RFP, which is almost the culmination," Taylor says.

Taylor created balanced score cards to ensure that O’Charley’s supply chain was working toward the same objectives as the company. All of his employees then understand how their roles contribute to the organization. The four major areas measured are finance, customer service, process and technology, and people development.

Once the team’s strategy was in place, it focused on specific metrics. "We had to have the metrics in place to at least have the organization understand the value that the supply chain brings," Taylor explains.

For example, the company can now track competitive advantage. "When you contract a price, you want to show the organization that there is either a competitive advantage or disadvantage," Taylor says. "And over the long haul, there ought to be an advantage."

Decision Making

Taylor is using the metrics to determine if self-manufacturing and -distribution is still the best value. O’Charley’s operates facilities in Nashville and Woburn, Mass., where Ninety Nine is based, to supply its stores twice a day. Based on value analysis, the company decided to close the manufacturing facility in Woburn and discontinue the production of salad dressings completely.

"And we are examining whether a meat manufacturing facility and self-distribution still make sense," he says. "We want to grow our concepts. I tie up a lot of capital in many of the supply-chain activities. That’s one of the reasons benchmarking has become so important."

Meanwhile, Taylor will continue to optimize the supply chain at O’Charley’s, looking for synergies across the three concepts such as common products, partnering with non-competitive companies for purchasing co-ops, and working with supplier partners to drive costs out of the system.

All of it based on benchmarks, Taylor explains: "You first capture data, and then you’re able to mine the data. Now what is it telling us?"