5 Keys to Manage Restaurant Supply Chain Risk

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Steps to Evaluate and Manage Restaurant’s Supply Chain

Any restaurant typically relies on a wide range of suppliers for the commodities and services that are critical to its ongoing operation and success.

Everything from electrical power and gas provided by utilities, to parts for cooking and cleaning equipment maintenance and repairs, foods and beverages served at the establishment generally must be procured from outside sources.

Unfortunately, whether they are simple or complex, restaurant supply chains tend to be vulnerable to numerous unforeseen circumstances, including widespread natural disasters, incidents of terrorism, fires, and supplier business failures.

Regardless of whether a restaurant has a single location or operates multiple locations throughout a region or around the country, it should have a thorough understanding of its critical business interdependencies and take steps to manage any potentially significant outages by key suppliers. Here are five steps to evaluate and manage your restaurant’s supply chain.

1. Start with a List

Create an updated list of all suppliers, including key contacts at each. Make sure you have their phone numbers and email addresses so you can reach them in a crisis or emergency situation.

2. Identify Top Suppliers Based on Value

Prioritize suppliers based on the value of the commodity or service they provide, and develop estimates of the potential operational and financial impacts on your business of any downtime or outages of varied lengths. Request details of your key suppliers’ business continuity plans, so you can assess their level of preparedness; if your restaurant has just begun working with a supplier, check how they have navigated through outages in the past.

3. Investigate Alternative Options

Explore and evaluate your options in the event you might need to replace a supplier. For instance, does it make sense to invest in a backup generator should your electric power be interrupted for a sustained period of time? How quickly will you be able to replace a critical food supplier and what are the costs likely to be.

4. Review Your Insurance Policy

Work with an insurance advisor to check on whether and how your existing insurance policies might address a revenue loss as a result of a supplier’s inability to provide a critical commodity or service. One coverage option, contingent business interruption insurance, gives you the opportunity to list specific suppliers or all suppliers. However, their outage must be for a specified duration and caused by an insured peril, such as physical damage resulting from a fire, earthquake or hurricane. Specialty policies may cover loss due to a recall, communicable disease, adverse news or publicity, food-borne illness and certain other risks.

5. Develop a Plan

Create a team within your establishment or restaurant group to deal with any supplier outage and manage the event. In addition to individuals who will be responsible for developing and implementing contingencies for a range of potential incidents affecting key suppliers, your team should include a designated person to coordinate your restaurant’s recovery activities and communication with your insurers.

Supply Chain Risk Management

For assistance with managing supply chain risk and procuring appropriate insurance, contact Restaurant Programs of America at (866) 324-1099.

 

jeffrey-hallman-vice-president-rpa

By Jeffrey M. Hallman

Vice President

RPA Insurance Services, LLC