Executives see Web clicking as enhanced procurement tool

At the intersection where the rapid morphing of technology impacts the traditional business practices of foodservice, it can be difficult for operators to get their bearings. Everyone agrees that e-commerce has the potential to change the foodservice industry dramatically, and the evidence is mounting that the revolution is well under way.

At the annual Multi-Unit Foodservice Operators conference, held in Atlanta this September, a panel of industry executives and e-commerce vendors convened to shed light upon and bring clarity to at least one aspect of the e-commerce puzzle -- Web-enabled electronic procurement.

Participating in the discussion were Mack Tilling, founder and chief executive of Instill Corp.; Joe Donnarunna, senior vice president of purchasing for Fine Host Corp.; Linda Perry, vice president of sales and integrated solutions for Visa USA; and Gary James, a Blimpie's franchisee from Phoenix.

Mitch Irsfeld, editor of Nation's Restaurant News, moderated the panel and set the stage for the discussion by citing statistics on the rapidly growing number of people who are connected to the Internet. According to Irsfeld, the number of baby boomers and senior citizens using the Web grew by more than 18 percent in 1999, while more than 50 percent of college students now have access to the Web from their dorm rooms.

The spread of Internet access throughout all sectors of society is changing people's expectations of how business should be conducted, Irsfeld said. He added the view that adaptation to new Web-based technologies is crucial not only to streamlining business practices but also to attracting and retaining new talent to the industry.

"The Web is an enabling technology, not a replacement technology," Irsfeld said. "But the deployment of e-commerce technologies can and will inevitably have a meaningful impact on foodservice."

Tilling, pointing out that Instill is focused on improving the efficiency of the supply chain, began the discussion of e-procurement by focusing on some of the obstacles the foodservice industry faces as it attempts to leverage new technologies into cost savings and margin improvements.

"Today something like 70 percent of the orders from a foodservice operator to a distributor are phone and fax transactions," Tilling said. "As an operator, the first problem is, How do you control the daily ordering process?"

The potential benefits of a Web-based system of e-procurement include connectivity through one interface both within organizations and between foodservice purchasers and the numerous manufacturers and distributors that service them, Tilling said. "At the corporate level significant benefits of being able to automate and have electronic purchasing are better visibility and a better handle on what you are buying as a company and who you are buying from," he said.

E-procurement also offers the entire foodservice industry the potential to capture and use valuable data about which products are selling, where they are selling and even who is purchasing them, Tilling said.

Fine Host's Donnarunna said his contract foodservice company recently adopted Instill's Purchase Web system to automate purchasing for 900 facilities. He said the decision to use e-procurement came about because Fine Host was looking for ways to "make order placement faster, easier and more efficient at the unit level, improve our product consistency, eliminate off-spec purchases and maximize our national programs and rebates."

To Donnarunna, another benefit of e-procurement is the power it gives him as a purchasing executive to "truly evaluate our distributors' performance."

He explained, "We will be able to create report cards that will tell us how many out of stocks and on-time deliveries there are."

Currently, approximately 50 percent of Fine Host's facilities are up and running on the system, and the company already is realizing a bottom-line benefit of improved collection of rebates, Donnarunna added.

After automating procurement, the next logical step is to automate payment, according to Perry from Visa USA, who pointed out that 98 percent of the commercial transactions on the Internet involve the use of credit cards.

"We are taking costs out of the procurement process as well by making payment electronic," Perry said. "On the supplier side we automate the invoice and take 'float' out of the game. On the purchasing side we simplify record keeping and provide tools for financial management."

James uses e-procurement at his Blimpie's franchise in northern Phoenix for supplies and equipment.

"Ordering and payment via the Web saves me time and money," James said. "Running a small operation keeps you pretty busy; about the only time I have to do things that don't involve taking care of customers is in the evening. It's nice when I can get online at night and order supplies at night."

At this point James is not purchasing food via the Internet, but as the technology becomes more widespread in the industry, more small operators like himself will adopt it, he predicted.

"As operators, we spend a lot of time manually doing things that eat up time, and time is very critical, James said. "I would like to see e-procurement fully integrated."

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