“We really try and maintain the lowest cost possible to our customer, and I think they appreciate that,” Haith said. “But because we offer a fast-casual, high-quality product, they’re going to be willing to pay a little more and they also understand prices are going up everywhere. No one likes inflation, but we’re all weighing quality vs. value.” For an Asian-influenced concept like Teriyaki Madness, many of its supply chain woes come from trying to ship ingredients overseas. A particularly thorny conundrum was the Sriracha sauce shortage, for which the company had to find a substitute. Haith also said that the brand has had a lot of issues with distributors from China. “One of the most egregious examples was we had soy sauce being shipped over from China and it was stuck on a boat in Los Angeles Harbor,” Haith said. “They were actually putting it on planes and flying it in for us. … We’ve started to offshore or buy many of these ingredients domestically, and we’re willing to pay a little bit more in order to guarantee the consistency of supply.” Teriyaki Madness is not the only company switching over to mostly domestic suppliers to avoid complications from overseas shipping. Smoothie King may not have to deal with poultry sourcing headaches, but fruits and vegetables can be challenging to source domestically. Smoothie King vice president of supply chain Barbara Mayrand said that the company has begun nearshoring ingredients (or shipping from a nearby country instead of far away) to ensure more consistent ingredient availability and pricing. “A lot of our fruits and vegetables are brought in from outside of the country because some tropical fruits just aren’t grown in the United States, like pineapple,” Mayrand said. “So, instead of having just one or two pineapple suppliers, we have five. …We were previously only buying pineapple out of Vietnam, Thailand and the Philippines, and now we got Costa Rica approved as an additional growing area. … With all of the ports backed up, you could have your pineapple sitting off the coast of California for four months in a freezer container.” For Texas-based smoothie chain, Smoothie King, nearshoring goes hand in hand with diversification of suppliers. Many operators are trying to increase the number of distributors they have relationships
with, because you never know when disaster will strike — from labor shortages to crop failures or a shipping boat sitting off the coast of Los Angeles. Panera Bread has a similar strategy. “You have to have multiple supply partners to be able to innovate,” said Gregg Waterman, chief supply chain and manufacturing officer at Panera Bread. “We need to have ownership of that recipe and we intend to have secondary suppliers. That doesn’t mean they won’t be a partner of ours, but you have to establish [that you have multiple partners] early on so you’re not stuck. And if there’s an issue with one supplier you have another one to turn to… Suppliers know that they’re not 100% predictable.” When creating new menu items, Panera always consults and works closely with its food and beverage innovation team to make sure that they are introducing plentiful suppliers (and strong relationships) to create multiple backups for new ingredients. For example, when Panera introduced its new chicken sandwiches earlier this year, the company had multiple chicken suppliers that participated in the development process from the start. “Previously, we may have just had one supplier that we partnered with from the beginning,” Waterman said. “It creates the spirit of a more competitive environment when distributors are involved in the creative process from the beginning.” One of the downsides to working with multiple providers is ensuring consistency of quality no matter where you source your chicken or pineapple from. Focus Brands is in the midst of a multi-year plan to simplify its supply chain, and will work on decreasing its number of suppliers by 2025. The company is also working on a supplier score card to look at the relationship.
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| INTERACTIVE INDUSTRY UPDATE
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