CHICAGO--(BUSINESS WIRE)--ArrowStream, a leading provider of supply chain management and logistics solutions for the foodservice industry, announced the findings of its Market Outlook Survey, revealing the top economic concerns of chain restaurant operators for the second half of 2008. Commodity and fuel costs top the list of margin pressure concerns, affecting profitability expectations and how these companies manage supply chains.

Survey responses were collected from 12 senior-level representatives of leading chain restaurant operators (quick service and casual dining restaurants) including Chief Operating Officers, senior supply chain executives and senior IT management. ArrowStream works with many national and regional chain restaurants that collectively represent more than 17,000 retail stores in the U.S.

When asked to name the top three margins pressures they will be facing in the last half of 2008, 83 percent of survey respondents named rising commodity prices (corn, beef, chicken, cheese) and energy costs (oil and gas) as the two most influential factors affecting margins. The third greatest concern, with 67 percent in agreement, was an ability to maintain revenue and traffic growth.

“While this is a relatively small survey sample, the respondents are senior executives in charge thousands of restaurants across the country, and their perspectives definitely provide valuable insight into the challenges of the current foodservice market and the need for increased focus on supply chain cost-efficiency and collaboration,” said Rodger Mullen, president and COO of ArrowStream, Inc.

Reflecting the impact of rising costs, 45 percent of survey respondents also expect profitability to decrease somewhat over the next 12 months, and 27 percent reported expectations of moderate increases in profitability.

Some of these survey results echo other industry studies, including the Datassential report that was presented at the International Food Marketers Association’s February 2008 COEX meeting. The Datassential study also found that rising commodity and energy prices are putting tremendous pressure on U.S. foodservice chain operators.

The top strategy cited by chain operators for easing pressure on margins to improve profitability was improving procurement processes and inventory control.

“Our customers are established, market-leading restaurant chains and foodservice distributors, and their clear indication that procurement and inventory control are keys to overcoming economic instability is telling,” said Mullen. “Because there are no indications that prices will decline in the coming year, chain operators and their trading partner must be assertive in controlling cost across the supply chain.”

Other key strategies for strengthening the year’s financial outlook include switching to lower-cost food and beverage products (64 percent), increasing menu prices (45 percent), simplifying the menu (18 percent) and revamping labor compensation practices (9 percent).

“In an environment where consumers are keenly aware of their pocketbook, chain operators must continue to offer value,” said Mullen. “It’s clear that chain operators prefer effective supply chain management as a key strategy to mitigating rising costs over increasing prices or reducing service.”

Operators Prepared, Cautiously Optimistic about H2 Outlook

The majority of chain operators (83 percent) report being moderately prepared should future changes cause further pressure on margins. Only 17 percent report not being well prepared should margin pressures continue to increase.

Moody’s and ISM business confidence indices suggest that the recession could be ending but changes are still in store. Nearly 55 percent of Market Outlook Survey participants stated that revenue in the second half is expected to stay about the same as the first half of the year. More optimistically, 27 percent of chain operators reported that they expect revenue growth to increase in the second half. Less than one quarter (18 percent) expect a decrease in revenue growth from the first half.

ArrowStream’s chain operator and distributor customers have on average gained a 20 percent reduction in inbound freight costs by leveraging ArrowStream Logistics services and have significant reduced in-store manhours and gained savings on order of $1M annually in recovered charges for their franchisees through ArrowStream’s OnDemand supply chain technology. The result is an advantageous competitive position in the face of rising commodity and energy costs.

About ArrowStream

ArrowStream has helped chain operators and distributors in the food service industry to more effectively manage their supply chain and reduce logistics costs by an average of 20 percent. ArrowStream's suite of online applications gives chain operators and manufacturers tools to synchronize and manage their supply chain data, thereby enabling panoramic visibility into the supply chain. ArrowStream OnDemand has a lower total cost of ownership that is proven to save time and improve decision-making regarding product supply, pricing, and LTO promotion management. ArrowStream’s management team, with more than 60 years of experience in the food service, software, and logistics industries, developed an innovative logistics management network that optimizes each customer’s inventory replenishment and routing, and substantially reduces transportation costs. To learn more, visit www.ArrowStream.com.

ArrowStream
Lynn Tsoflias
(312) 267-4300
ltsoflias@arrowstream.com
or
BWMG, Inc.
Carrie Foor
(630) 762-0754
cfoor@bwmginc.com