QSRs Take Stock

Two chains discuss promotion struggles during NRA Show workshop

Published in CSP Daily News

CHICAGO -- Price promotions and limited-time offers have long been foodservice gold for quick-service restaurants. But such campaigns are also historically fraught with logistical obstacles, particularly for QSR chains working through several distribution centers.

We had a difficult time telling the manufacturer how much [product] we were going to need because we didn't have good data, said Mike Ochs, vice president of supply chain solutions for International Dairy Queen, during a workshop at the National Restaurant Association Show 2006. Thus, it was [image-nocss] with great relief that Ochs welcomed an opportunity to work with supply-chain experts Instill Corp. on its new promotion management system.

The system uses a combination of software and data services to look inside the product pipeline and carefully monitor and change its flow as necessary. The test also included the Independent Purchasing Cooperative, which represents about 20,000 Subway restaurants.

Price promotions and limited-time offers involve a significant amount of risk, said Jeff Smith, vice president of marketing for Instill, during an NRA Show workshop titled, Maximizing the Effectiveness of Promotions & Limited Time Offers. The NRA Show 2006 was held in Chicago May 20-23.

Smith said the risks retailers face with such promotions include two extremes: being overstocked if the promotion doesn't sell or running out of stock if the promotion is a success. Each leaves the retailer either discounting or throwing out a lot of product or upsetting customers.

When you run out of it, the franchisees start to horde product, said Dennis Clabby, vice president of purchasing for IPC/Subway. That's why Clabby got on board with the promotion management system and found some real benefits.

We're testing up to six sandwiches at any one time at between 100 and 300 stores, he said. I couldn't handle the inventory for that on my own. Promotion inventory management, however, has allowed Clabby to reduce out-of-stocks, reduce overstocks, improve performance by matching supply with demand, share inventory information and reduce administrative costs by eliminating the need to gather and compile data manually.

Ochs also is pleased with the results after having initial doubts that distributors would want to participate and offer up their stock information through an automated system. But that wasn't case, he said. Many distributors are stretched on personnel to watch inventory. So they appreciate that someone is watching it closely.

Similarly, Ochs has seen benefits on the store level. This year so far, we have not had any issues with overstock or understock on our limited-time offers, he said, noting that Dairy Queen runs at least one limited-time offer each month. It really has helped to deliver better on our promotions calendar. When our advertisements go out, our franchisees know the products are going to be there for the run of the limited-time offer.