Accurate inventory management is crucial to running a successful business because it directly impacts a company’s bottom line and is key to maximizing profits. Having an accurate handle on inventory enables a business to become more resilient and know what they can sell and when they can sell it, helping mitigate out-of-stock scenarios.
At one point, inventory management was a meticulous, lengthy and manual process for the Independent Purchasing Cooperative (IPC), an independent member-owned, managed and governed cooperative of North American Subway franchisees, which is responsible for approximately 24,000 Subway restaurants.
“Conducting inventory would take two to three hours per restaurant per week, assuming there weren’t any mistakes,” said Rick Buttner, senior director of supply chain operations at IPC. “Franchisees had to pull pricing from their latest invoices and add up all the dollar figures. If their food cost was way off, they had to go back and find the mistakes. It was a painstaking effort.”
A Standardized Approach
With Subway franchisees spending tens of thousands of hours conducting inventory, IPC sought to not only automate their inventory management, but also bring efficiencies to the overall business to save time and money. More than 10 years ago, IPC began adopting GS1 Standards in collaboration with GS1 US, the not-for-profit information standards organization. IPC built a foundation for traceability by leveraging those standards, which included identifying products with Global Trade Item Numbers (GTINs) and locations with Global Location Numbers (GLNs) to accurately pinpoint restaurants, distribution centers (DCs), suppliers, products and plants so that items could be visible and tracked anywhere in the supply chain.
They also set out on a journey to share master product data via the Global Data Synchronization Network™ (GDSN®), the world’s largest product data network. IPC required vendors to leverage GDSN for sharing master product information. This investment in global standards, quality data and supply chain visibility would be the company’s cornerstone in establishing automation for their inventory management process.
“Everything in our supply chain is based on GS1 Standards. Our suppliers and distributors all adhere to our GS1 Standards requirements. It has become the foundation for the way we do business,” explained Buttner.
However, it took marriage of an application, GoVentory (white-labeled for IPC as SubVentory), along with GS1 Standards to drive true impact on inventory control. Built by a former Subway franchisee, GoVentory automates the inventory management process by utilizing GS1 Standards to achieve optimal supply chain visibility. Communications in GoVentory are two-way, with distributors supplying order guides and invoices, and restaurants placing new orders through the app and uploading the inventory to the Subway POS.
For instance, when pack sizes are published to the GDSN, accurate insight is gained into product volume, which illuminates the rate of consumption for limited-time offer (LTO) items. Vital to any foodservice operator is freshness. When a GS1-128 barcode is scanned, product delivered outside optimum shelf-life with impending expiration dates is flagged, so proper action can be taken. Comparisons of ordered quantity to invoiced quantity are also greatly enhanced when the order arrives at the restaurant. The invoice is already in GoVentory and the restaurant can validate the delivery against the invoice, a process that now only takes minutes, compared to hours. This approach has maximized savings by reducing waste and by right-sizing inventory. IPC estimates labor efficiencies alone exceed $70 million each year in cost avoidance in North America.
“Without visibility into restaurant inventory, we’re flying blind,” Buttner added. “When restaurants order more than they should, it does two things: it supplies misleading data as to what is being purchased, which has a ripple effect on future orders, and the franchisee can have leftover inventory that goes to waste.”
GoVentory also provides alerts when operators are notified of product withdrawals or recalls. Operators can acknowledge the alert and enter the impacted inventory by scanning the GS1-128 barcode or typing in the information. IPC can also reach out to franchisees from within the app to send notifications to their cell phones.
While GoVentory manages inventory, ordering, forecasting and recall notifications, another legacy platform called QualityNet is used for quality-complaint management. If lettuce arrives looking wilted, QualityNet routes the complaint to the proper DC and supplier to obtain credit. Barcodes have date and lot information encoded that help DCs and franchisees access the information needed for better management of expirations and shelf-life.
Benefits Are Realized
Leaning into data quality and leveraging the power of standards with automation has led to tangible benefits for IPC. Team members working in the restaurant can now focus on the guest experience, rather than devoting hours of labor toward manually taking inventory.
By using barcodes that have date and lot information encoded, DCs can be more accurate and efficient in their stock rotation, avoiding expired or short shelf-life product deliveries and unexpected costs. By leveraging the GDSN, DCs reference a single, consistent data source for shelf-life and storage temperature information, ensuring proper food handling. Additionally, GoVentory has saved franchisees tens of millions of dollars due to increased labor efficiencies, and maximized savings through waste reduction and minimization of theft by right-sizing inventory.
Looking ahead, with the support of Avery Dennison, a certified GS1 US Solution Partner, developers are exploring the introduction of a radio frequency identification (RFID) technology at the case level, as well as introducing artificial intelligence (AI) into their inventory management program. By leveraging RFID and AI powered by global standards, it’s expected that IPC will save on additional labor costs and be able to increase accuracy and traceability by further automating the inventory process.
Managing inventory is key to operational success; however, the process can be cumbersome, especially for a franchised business. With the right technology and standards for unique identification and data sharing, operators like Subway franchisees can get back to what they do best – serving guests.