supply chain management project on adigas catering services

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Supply Chain Project Report on Adiga’s Catering Services

Supply Chain Management Project Report

Supply chain of Adiga’s Catering Services, Bangalore to SAP Labs, Bangalore

Submitted To:

Prof. Saji Gopinath,

Professor, Indian Institute of Management, Kozhikode

Submitted By:

Girimurugan Natarajan (ePGP-03-030)

Panneer Selvam (ePGP-03-052)

Prashant Vashishtha (ePGP-03-055)

Siva Kumar NV (ePGP-03-081)

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Table of Contents Executive Summary ................................................................................................................................. 3

Process & Context ................................................................................................................................... 3

Strategy/Market of the Business Unit ...................................................................................................... 4

Current structure of Supply Chain Model ................................................................................................. 4

Weakness and Improvement ................................................................................................................... 9

Improvements in the process ................................................................................................................ 11

New processes which can change the structure of the supply chain ...................................................... 12

References ............................................................................................................................................ 15

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Executive Summary

Adiga’s sprang from humble beginnings to become a renowned name in fast food, with 10 restaurants serving many customers each day. It is a most well known name in the fast food restaurant business in Bangalore, Karnataka.

Popularly known as ‘Adiga’s, this chain of vegetarian restaurants / fast food joints was commenced by a

second generation entrepreneur and an engineering graduate, K N Vasudev Adiga in the year 1994. Adiga’s is an offshoot of the famous “Brahmin’s Coffee Bar” at Basavangudi - Bangalore which

was STARTED IN THE YEAR 1965 by his father, the visionary – late Sri K V. Nageshwar Adiga, alias Nagesh Rao.

Over the years, Adiga’s has established itself in the minds of people as an entity born out of an

entrepreneur’s commitment to quality and service.

Customer/Consumer:

SAP Labs India is SAP's second largest Research & Development and Global Services & Support center in the world. Founded in November 1998, SAP Labs India is one of the four global development hubs (Germany, US and Israel being others) of SAP that contribute to all areas of the SAP product value chain- Research & Breakthrough Innovation, Product Development, Global Services & Support and Customer Solutions & Operations. Around 4500 employees work from this center which is second only to its head-quarters in Walldorf, Germany.

Process & Context Adiga’s operates into mainly food business with division in following categories:

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Restaurant: Adiga’s is a premier chain of vegetarian RESTAURANTS in Bangalore. A/C restaurants, high quality, tasty and authentic vegetarian food, customer care, cleanliness, hygiene and highly affordable prices are the USP’s of Adiga's.

Catering: Over the years, Adiga's through its different outlets and outdoor catering has served to millions of very satisfied customers.

Fast food: South Indian cuisine which caters in form of assortment of dosas, idlis, vadas and uttapams.

Supply chain is an important aspect of the whole business process.

So we would be looking into the supply chain process of Adiga’s primarily from Catering (especially corporate houses like SAP) business perspective.

Strategy/Market of the Business Unit Adiga’s caters to corporate houses like SAP for lunch where it caters to approximately 5000 people.

Break-up of this:

As we are mainly looking at the supply chain model of Adiga’s for the catering to corporate house like SAP, we will get into more details about this supply chain model.

To cater to such large number of people for food requires an effective supply chain model as it is a very crucial business flow. If lunch is not served on time then it can cause serious issue for organization like SAP as saying goes “No army can fight on empty stomach”.

Adiga’s caters to other corporate houses as well similarly to SAP.

Current structure of Supply Chain Model For Adiga’s to cater to the needs of 5000 people for lunch daily requires a robust supply chain in place which starts from suppliers of Raw materials & semi-processed consumable food items as well in-house

4500

200 200

Employees

Housekeeping & Security

Delegates/Guests

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resources to work on raw materials to process them. This is followed by effective logistics mechanism in place. This whole process and elements of supply chain has to work in tandem to leverage the results effectively.

Same has been captured in the form of a diagram as shown below:

SAP

Prem

ises

Adig

a’s p

rem

ises

Tran

spor

tatio

n/Lo

gist

ics

Supp

liers

Supply chain model starts with Suppliers for Adiga’s who supply raw materials for food items and also semi-processed food items. This is then stored at the Adiga’s compound and worked upon to turn it into either fully processed food items or semi-processed food items which need to be worked further. After that it is transported to corporate houses like SAP for further work and consumption accordingly.

All elements of Supply chain are important and contribute their fair share in the effectiveness of supply chain but some elements are the Pivots based on them the whole supply chain revolves. Such element in this supply chain model is Logistics part. As everything depends on how effectively and on time delivery of food happens at SAP office from Adiga’s compound, so we will get into more details about Logistics part of the supply chain.

Before we get into the Logistics aspect, there are some other important factors which need to be understood:

Raw materials procurement happens on a very regular basis. o Vegetables are bought in bulk every Sunday & Wednesday o Pulses & Spices are bought for the whole month at the start of every month.

Food supply has to consider following aspects:

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o Optimum food supply with no shortage o Also to avoid unnecessary food wastage due to excess production. o Food shelf-life is also a critical factor o Perfect balance need to be there for demand of various cuisines like North Indian &

South Indian cuisines.

Inventory management is very important for food materials as any kind of mis-handling or improper planning can lead to food materials getting stale or unusable and can cause serious health issues for consumers. So Inventory management is an important aspect which Adiga’s looks into with utmost care. Adiga’s has put cold storage in place for keeping Vegetables and food items fresh and avoid them from getting stale & rotten.

So Inventory Management & control policy at Adiga’s is more of Periodic Review policy with a base-stock level based approach.

Information flow is something which is not a very effective approach at the moment. Improvement in this area is something which we will cover later in this report. At the moment we will focus on how the information flow takes place. At SAP side, there is no fixed mechanism to inform Adiga’s on how many people would be taking lunch every day (SAP offers free lunch to its employees so expectation is that majority will avail this free lunch offer). So major source of information available with Adiga’s currently is based on past consumption numbers of employees taking lunch. This number can also vary as some employees would be on vacation or out of town for customer visits/business trips. And also some delegates and guests would also be present in office premises.

So demand calculation has to undertake these aspects for determining the exact quantity of food to be prepared. But calculating the demand simply based on past consumption patterns can cause Bull-whip effect at times. During festival seasons & holidays which fall near week-ends, employees prefer to take off and demand would go automatically but if this information is not taken into account then this may cause major fluctuations in demand patterns.

The existing supply chain structure of Adiga’s works with the concept of 80% known demand for longer term and 20 % demand which could arise in the short term.

The Catering order could come from the following market:

1. Corporate Demand a. Short term demand (Ex: corporate functions and inaugurations) b. Long term demand contract (Ex: Supply for Cafeteria like in SAP Labs, India)

2. Government Events and Rallies 3. Marriages and family functions 4. Smaller Parties (with at least food for more than 50 plates. Ex: Birth Day parties)

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Adiga’s booking process has not evolved by any scientific or managerial analysis but as experience & learning from their presence in the business for last 45 years. There are huge dependencies on the experienced managers in the catering service and on their judgment rather than on a scientific analysis and software tools.

Adiga’s books the order as a package with the billing done on the count of the plates ordered. If a family is planning a marriage and is approaching Adiga’s Catering services for the food planning and supply the Adiga’s following the below process to book the order:

The booking process is defined in a way to handle the demand keeping in mind the capacity in the Kitchen and the resources. The Kitchen capabilities are increased whenever there is a contract for a long term contract (Minimum of 1 year).

This enables Adiga’s to keep track of the demand and supply by controlling the ordering process.

Adiga’s has been the caterer for SAP Labs India for last 5 years. The legal contract is renewed for every year and the number of the plates and the menu and the cost is re-calibrated.

The contract also has information on the number of days by which SAP should give prior notice to Adiga’s about the decrease or Increase on the Demand.

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Adiga’s relies on the three 3rd party providers for the following services:

1. Whole sales Vegetable supply twice every week 2. Whole sales Grocery supplier. Monthly once supply for non-perishable items and weekly once

for the moderately perishable items. 3. Supplier for the utility services like servers, cleaners etc who work on the customer sites

From this we can know that Adiga’s is following “Procurement outsourcing” and the “Supplier consolidation” as the principles in its supply chain which has been suggested by the Purchasing Chess Board.

Weakness in the existing supply chain

The biggest challenge in the catering industry is the Inventory Management and Demand Management. Since catering industry is very dynamic and there is always a fluidic scenario in inventory management as shown below:

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Challenges in Inventory Management:

1. Inflation of the vegetable and grocery prices 2. Increase in fuel prices which has impact on the final profit 3. Introduction or request for new recipes and menu would result in re-working the raw materials

required 4. It is very difficult to know the exact amount of raw materials used in the menu since it can have

variability based customer request, cook, kitchen and also the season. 5. The variability also is due to the perishing nature of most of the good and the ultimate food

wastage

Challenges in Demand Management:

Catering customers like SAP would like to reduce the food wastage to the minimum by forecasting the demand.

1. The Demand in corporate like SAP can vary due to absentee, new joiners, Guests visiting the Campus, so this would be there should be some buffer which results in food wastages. The demand in SAP can also go down during Holiday or festival seasons.

2. The demand for catering orders would go up for Adiga’s during events like: a. Marriage season b. Elections c. Holiday season d. Festival season e. New corporate customers placing short term orders

3. Adiga’s should foresee these challenges in the demand and plan for its procurement. The

demand pattern change for corporate customer can be management by the legal clause by which Adiga’s is informed about the demand change in advance. But same cannot be implemented for other orders.

Adiga’s currently does not have defined processes by which these challenges in the Inventory and Demand management are take care. These are areas which Adiga’s can concentrate in “Strategic alliance” with the customers to minimize.

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Improvements in the process

Demand forecasting

Demand forecasting is a major challenge in the catering industry and Adiga’s is not unique in the case and faces the same challenges. As stated above the demand can vary due to many reasons.

This could be due to time factors, events and new success from the corporate sales teams. Adiga’s should have mechanism by which it can predict the change in demand based on the past records and forecast the demand in the future.

There are software like Supply Chain Management (SCM) and SRM available from SAP which can be used to improve this process. From the already available Demand History of these Materials, we can generate the Demand Forecast based on the plan version and generate reports which can be shared with all the departments and effectively send the procurement orders.

Adiga’s should concentrate more on the corporate accounts rather than smaller short term orders since the corporate accounts provides the long term constant demand cycle which is easier to predict and plan. While the short term smaller scale order are very difficult to forecast and demand plan them.

Use of HCM systems at customer (SAP) end

SAP can also forecast demand by using its Human Capital Management software internally used. Since as per the policy of SAP each employee will have to apply for leave 1 week before this information collected from HCM system can provide better insight into the demand pattern. For example: There will be huge absenteeism during festival seasons, long weekend. This information can be shared by SAP with Adiga’s to plan the demand in more details and avoid wastage.

Menu/Recipe based Inventory

Adiga’s should create an inventory list of the items which are created for each of the items in the menu and the recipe. This can be used to plan the procurement orders based on the weekly menu provided by corporate like SAP to Adiga’s.

Since these menu are finalized before hand and we know the demand cycle we can calculate the exact raw materials required for these menu and thus reducing the wastage and the storage, stocking of these raw materials at Adiga’s warehouses.

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These reductions in wastage and the storage cost will not only improve the profit margin but also enable Adiga’s to provide fresh food to customers.

Menu proposals

Instead of giving option for customers to create their own menu, Adiga’s should create various packages and limit the menu available in catering. Unlike the restaurant business catering does not need to provide all the different various recipe option in catering orders.

This defined menu will help us to forecast the raw materials required.

Strategic alliance

Adiga’s can enter into strategic alliances with other caterers to outsource some of the contracts if Adiga’s cannot full fill then on time. They can also alliance with others to create some good which they don’t need to produce in larger quantity like Sweets.

Unbundled prices

Adiga’s should enter into Unbundled pricing with its suppliers and Customers. This would enable it to price and pay the supplier the exact order which was placed and not be bound by the weekly or monthly supply from the Vegetable supplier and Grocery supplier.

Total life cycle concept

Instead of focusing and utilizing software only for Billing and Accounting, Adiga’s should use this software to plan the entire life cycle from demand to supply.

New processes which can change the structure of the supply chain

Managing the supply chain effectively is a very critical part of successful business in all industries. But, with the catering industry, if you get it wrong you will have deeply dissatisfied customers. Just a few hours early or late can make the difference in food quality, and the costs of wasted stock comes straight out of profits and reduce the profit margin and the operations of Adiga’s.

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The principle behind the supply chain management (SCM) is simple. It is about procuring right items at the right time and at the right price and storing them for no longer than is necessary. But, as catering orders and the customer chains get larger and the range of goods they handle grows, the task becomes more complex.

The catering industry is the worst of both worlds; Adiga’s have a very disparate supplier base and a broad customer base. Coupled with this, you have a very short life cycle and time to market. Everybody wants fresh stuff - it is a battle of logistics.

There are established software suppliers that can help. SAP, which provides SCM software under the SAP Business One can help smaller SMEs to have the required software to manage their supply chain and demand forecasting. SAP will support a fully automated replenishment process that updates daily or even more frequently. This could allow kitchens to replenish ingredients more efficiently and quickly, resulting in reduced stock levels and shortened order times.

However, major software implementations such as this can be costly and time-consuming, and are usually only attempted by large businesses with large IT budgets. Since Adiga’s is a smaller player it can also implement the software from other retail providers.

There are few technologies advancements which can be used by Adiga’s to its advantage:

RFID technology:

Radio frequency identity tagging (RFID) is currently attracting a lot of interest from retailers aiming to use it to track large amounts of goods through the supply chain. A small chip can be attached to most items, emitting an identity code which can be picked up by special receivers. When these are then hooked up to database software, the codes can be matched with individual products or items. The system is similar to bar-coding, with the advantage that it can be done not with hand-scanners but automatically. For example, an item's code could be recognized when the item passes through a warehouse doorway. This will help Adiga’s to keep track of the amount of Raw materials moving from its Supplier to its Warehouse and Kitchen.

A real time data will help it to place the procurement orders automatically using the IT solution which we discussed earlier.

GPS Tracking:

The real-time data provided through the GPS Tracking System in the catering trucks now helps Adiga’s customers by improving their supply chain processes, better evaluate delivery times, monitor container routes, and most importantly, reduce costs of risk management.

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The GPS sensor devices report on the utilization of the trucks and also the environmental conditions inside the trucks such as temperature, humidity, shock, vibration and light, which can be used to track the perishable properties of the items and plan the delivery accordingly?

These sensing capabilities help to detect and alert incidences of cargo theft and damage, offering a higher level of security and product integrity.

Adiga’s can now keep the Customers can now be kept in closer touch with the delivery of the products that they order. Adiga’s can even provide a portal from which a customer like SAP Labs can monitor product delivery cycle, position, ETA and their specific order as it moves along the way. This can be both good and bad in that SAP can see stops in the process which raises concerns about delivery dates, etc. Strong communications must exist between the two so that this does not turn into a disaster.

The catering Semi trucks and bigger trucks from suppliers can be the first step in the monitoring process. Trucks and vans both include GPS Tracking systems to help monitor their progress.

Operational method of Adiga’s in terms of logistics is that they put the food in mini-trucks & vans which come to SAP office. It unloads the food material & supply at the SAP premises which is being worked upon by the Adiga’s workers to give it finishing touches and serve for SAP employees for their lunch. After un-loading the food material, vans and trucks go back to Adiga’s premises and come back later in afternoon to pick-up the workers and containers. Only way to track the drivers and route is via mobile phones. There is no GPS (Global positioning system) or walkie-talkie based communication model. One of the biggest challenge with this approach is that in case of any break-down, or traffic congestion, fall-back option is little trivial. Adiga’s has to look into if any other vehicle is free or not and present in which area. Tracking and contacting such vehicle is very trivial and can cause severe delays for the delivery of food to SAP office or any other corporate house where Adiga’s caters to. It has happened in past that due to vehicle break-down and traffic jams, lunch has been delayed.

Better tracking through GPS is something which will take care of such eventualities as it will give exact picture which vehicle is on which route and catering to what need. Fall-back can be accordingly planned in such situations.

This business activity is being integrated with real-time ERP processes more and more. What this means is that ERP at the business is chopping the processes down into small information so that it can be monitored at more places along the line. This system of checks helps in many ways and raising a flag and alerts the managers on possible issues.

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References

http://www.adigas.in

https://www.supplychain.nhs.uk/product-areas/catering/

http://restaurantinventory.com/

http://www.jpolls.net/category/catering-software

www.sap.com

http://www.indiaonestop.com/SAP/sap.html

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