Pivot. That’s the keyword of 2020 and 2021 for the restaurant and hospitality industry. We’ve seen case studies of how restaurants are changing their business models and modifying their operations to adapt to waves of lockdowns and Covid-19 responses. However, those examples are generally focused on the forefront of the operations surrounding the expansion of take-out/delivery, innovative practices, and community outreach/corporate support. Here at FoodRazor, we’ve kickstarted a new initiative to highlight some insights into the back-of-house operations for the industry from our database.
We’re here to answer the question: Has the pandemic changed the way restaurants place their orders for ingredients? With restrictions still being introduced in places like Singapore, this question remains all the more relevant. We look at the numbers to try and find the answers.
We calculated the number of days between orders made to the same supplier for each restaurant in Singapore and averaged it out for all of the restaurants in FoodRazor’s database.
Between 2019 and 2021, the number of days between orders to the same supplier decreased from 6 days to just under 4 days. There was an even sharper drop starting in July 2021 to just 3 days and less. This is a clear indication that businesses are ordering more frequently. We postulate that restaurants could be ordering more frequently in smaller quantities to hedge against sudden changes in pandemic management regulations.
For the most part, restaurants are spending less per invoice. Since the start of the pandemic in 2020, the mean amount spent per invoice per week for the average restaurant has been lower than the same week in 2019. This is with the exception of the tail-end of 2020 and the start of 2021. Total expended per invoice has decreased overall from a mean of $300 to somewhere around $275.
The dip starting in Week 20 of 2021 coincides closely with the tightening of Covid-19 measures starting May 2021 and has continued to this day (early October 2021).
More interestingly, the variations in total amount spent per receipt appear to have narrowed. In 2019, the average total per receipt per week ranged greatly from $250 to more than $400 with no clear seasonal patterns. However, in 2020 and 2021, this range appears to have narrowed. Restaurants are essentially ordering similar amounts more consistently in comparison to 2019.
This could be an effect of restaurants getting better at managing their overall costs either due to their adoption of FoodRazor or the exigencies of keeping a business afloat amidst trying times, or a combination of both. Another explanation for this trend could be that restaurants have been avoiding ordering seasonal big-ticket items and are sticking to safer menu items.
It is important to note that this measurement is not the same as the total number of items ordered. The basket variety measures the number of distinct products ordered per invoice.
At the start of 2020, the number of unique products ordered per invoice was generally lower than that of 2019. This began to change around April and May 2020 when the number of unique products ordered increased before decreasing towards the end of the year and stabilising for the entire 2021 to date. In recent weeks, however, the number of distinct items per invoice has trended lower than the numbers in 2020.
Changes in the number of unique products ordered at the start of the pandemic could be attributed to menu changes caused by the Covid-19 government regulations. On the other hand, the stabilisation of the number of unique products ordered could reflect the longevity of early-pandemic menus.
The downward trend in recent weeks can be attributed to the tightening of restrictions curbing dining-in. This can have the effect of reducing demand, hence the lower stock-in volumes. Further, if restaurants are ordering more frequently, then it necessarily follows that they require fewer items each time.
To sum up the overall trends, we can take a closer look at the behaviour of restaurants and the pattern of their order values across the past 12 weeks.
Looking at the weekly difference in the value of goods stocked, the majority of restaurants have decreased the overall value of goods that they stock for most of the past 12 weeks. Some have sustained their level of ordering. More surprisingly to note, there is a number of restaurants that actually raised their weekly value of ordering for most of the past 12 weeks.
The increased ordering frequency and reduced basket cost have a direct operational impact on suppliers. Some questions that suppliers should think about include whether or not there can or should be more flexibility in their Minimum Order Quantity (MOQ). Suppliers also need to weigh their Returns on Investments (ROI) more carefully since there could be logistical sunk costs involved with having to deliver small amounts frequently.
The reduced basket variety is an indication for suppliers to relook at their inventory structures and their offerings. With restaurants being more cautious in their menu engineering and purchasing decisions, preferring to offer “safer” menu items, perhaps suppliers should reconsider offering seasonal food items, etc and place more emphasis on regular food items.
On the whole, we can see that the relaxation of pandemic management measures did not appear to have caused a return to 2019 ordering patterns. Pandemic-induced changes in ordering patterns are likely here to stay for good, as it’s coupled with restaurants that think that the current situation might persist for a while longer and prefer cautious purchasing decisions, especially with the recent announcement of restriction extensions until November 21.
To tackle rising food costs and high MOQs, restaurants could potentially look into bundling with other restaurants within the vicinity to hit the MOQ for certain suppliers or to negotiate for lower unit prices of goods, or at least, try to renegotiate terms with suppliers, who are no doubt affected by these changes as well.