Question

Darden Restaurants (subject of the Global Company Profile at the beginning of this chapter), owner of popular brands such as Olive Garden and Red Lobster, requires unique supply chains to serve more than 300 million meals annually. Darden’s strategy is operations excellence, and Senior VP Jim Lawrence’s task is to ensure competitive advantage via Darden’s supply chains. For a firm with purchases exceeding $1.5 billion, managing the supply chains is a complex and challenging task.

Darden, like other casual dining restaurants, has unique supply chains that reflect its menu options. Darden’s supply chains are rather shallow, often having just one tier of suppliers. But it has four distinct supply chains.

First, “smallware” is a restaurant industry term for items such as linens, dishes, tableware and kitchenware, and silverware. These are purchased, with Darden taking title as they are received at the Darden Direct Distribution (DDD) warehouse in Orlando, Florida. From this single warehouse, smallware items are shipped via common carrier (trucking companies) to Olive Garden, Red Lobster, Bahama Breeze, and Seasons 52 restaurants.

Second, frozen, dry, and canned food products are handled economically by Darden’s 11 distribution centers in North America, which are managed by major U.S. food distributors, such as MBM, Maines, and Sygma. This is Darden’s second supply line.

Third, the fresh food supply chain (not frozen and not canned), where product life is measured in days, includes dairy products, produce, and meat. This supply chain is B2B, where restaurant managers directly place orders with a preselected group of independent suppliers.

Fourth, Darden’s worldwide seafood supply chain is the final link. Here Darden has developed independent suppliers of salmon, shrimp, tilapia, scallops, and other fresh fish that are source inspected by Darden’s overseas representatives to ensure quality. These fresh products are flown to the U.S. and shipped to 16 distributors, with 22 locations, for quick delivery to the restaurants. With suppliers in 35 countries, Darden must be on the cutting edge when it comes to collaboration, partnering, communication, and food safety. It does this with heavy travel schedules for purchasing and quality control personnel, native-speaking employees onsite, and aggressive communication. Communication is a critical element; Darden tries to develop as much forecasting transparency as possible. “Point of sale (POS) terminals,” says Lawrence, “feed actual sales every night to suppliers.”

What are the complications of having four supply chains?

Where would you expect ownership/title to change in each of Darden’s four supply chains?

How do Darden’s four supply chains compare with those of other firms, such as Dell or an automobile manufacturer? Why do the differences exist, and how are they addressed?

Answer 1

1. What are the complications of having four supply chains?

The complication of having multiple supply chains are as follows:

• There is a need for continuous coordination and communication to ensure regular supply.

·         The quality assurance and production follow up will have to be done at multiple sites.

·         The cost of traveling will be higher as the quality assurance; production coordinator has to travel to multiple locations.

·         Inefficiencies or failure of one supplier can affect the entire production process.

·         Lower purchase volume from each supplier can lead to higher cost of procurement as supplier dictates his prices.

1. Where would you expect ownership/title to change in each of Darden’s four supply chains?

·         First, in “smallware” supply chain:

• The ownership changes when the linen, dishes, tableware, kitchenware, and silverware are received at the Darden warehouse in Orlando.

·         Second, frozen, dry, and canned food products:

• The ownership changes for frozen, dry, canned foods when they reach the 11 distribution centers in North America.

·         Third, the fresh food supply chain (not frozen and not canned):

• The ownership of fresh food supply changes when it reaches the restaurant and is accepted and handed over to the manager.

·         Fourth, Darden’s worldwide seafood supply chain:

• The ownership of seafood supply chain changes as soon as they are received at the 16 distribution points.

1. How do Darden’s four supply chains compare with those of other firms, such as Dell or an automobile manufacturer?

Both Dell/automobile manufactures and Darden's supply chains have the following    similarities:

• Both are primarily concerned with quality and safety and plan their supply chain and logistics accordingly. Each food item has to be traced to its raw material to ensure good quality, similarly where each part came from has to be known for the safety of the car and avoiding disruptions.
• Both automobile manufacturers and food industry are trying to get the localized supplier to ensure better control and less cost of coordination.
• Discipline and agility is critical to ensure fast, efficient good quality supplies both for the automobile industry and food industry.
• The automobile industry has a just in time supply chain to reduce the cost of inventory and increasing supply chain efficiencies. The food industry needs freshness and quick regular deliveries to ensure good quality food is served.

1. Why do the differences exist, and how are they addressed?

• Dell and automobile manufacturers have a supply chain with better shelf life, Darden products except for small ware like linen, dishes etc have a limited shelf life and need to be turned around fast.
• Dell and automobile brands take delivery directly at their plants to have just in time efficiencies in manufacturing, perishable products of Darden have to be supplied in refrigerated and predefined temperatures to ensure safe and quality delivery of the raw materials.
• Food supply chain requires reliable supply chain to meet the consumer requirement of freshly prepared food.