The Supply Chain Act poses significant challenges for many businesses. Find out how ERP systems can streamline compliance and reduce hospitality bureaucracy.
The Supply Chain Act is now in force and businesses, including those in the hospitality sector, are facing significant challenges in complying with its requirements. From rising costs to complex documentation requirements and restrictions on supplier choice, hospitality businesses are feeling the effects. But how can these legal obligations be managed efficiently in the hospitality industry?
In this article, we will explore how modern technologies such as ERP systems can help streamline compliance and make your supply chain more transparent and sustainable. Here's what you can expect:
The Supply Chain Act presents specific legal requirements and consequences for businesses in the EU and abroad. Here’s an overview of the key aspects:
The Supply Chain Act was passed by the European Parliament on April 24, 2024. The law applies to EU-based companies with more than 1,000 employees and an annual net turnover of more than 450 million euros. It also affects foreign companies operating in the EU with a net turnover of more than 450 million euros.
Companies affected by the law must ensure compliance with human rights and environmental due diligence obligations throughout their supply chains. This responsibility extends from procurement to disposal, meaning that companies must rigorously monitor their suppliers' compliance to prevent negative environmental and social impacts.
Companies must submit an annual report detailing their progress, as well as a climate transformation plan that aligns with the goals of the Paris Agreement.
The primary objective is to prevent human rights violations and environmental damage in global supply chains, while promoting sustainable business practices.
A study by the EU Commission found that voluntary standards have had limited success so far: only about a third of EU companies have voluntarily due diligence obligations. However, the introduction of the Supply Chain Act is already having a positive impact on human rights and environmental protection in supply chains.
Breaches of the Supply Chain Act can result in hefty fines of up to 8 million euros or 2% of global annual turnover, depending on the size of the company. In addition, breaches can lead to exclusion from public contracts, a significant issue for many hospitality businesses that rely on public events or government contracts.
A recent survey shows that a significant lack of human and financial resources is the main challenge companies face in relation to the Corporate Sustainability Due Diligence Directive (CSDDD). Companies also cited complex documentation, reporting requirements and a lack of visibility into their supply chains as additional hurdles.
Small and medium-sized enterprises in particular are struggling to manage the significant amount of data required for compliance. Collecting reliable supply chain information and analyzing it can be both time-consuming and complicated In addition, hospitality businesses often face a variety of data formats, which further complicates the task effectively assessing and rating suppliers.
Compliance with the Supply Chain Act can also drive up costs in the hospitality sector. To meet the standards, many restaurateurs opt for certified, but often more expensive, suppliers. This increases procurement costs and reduces profit margins.
Another major challenge is ensuring traceability and quality assurance of ingredients. Documenting every step of the supply chain can be a daunting task, especially for companies that work with a constantly changing set of suppliers.
For companies sourcing ingredients internationally, these challenges become even more complicated. Standards can vary from country to country, and meeting the consistent requirements of European directives becomes a complex balancing act.
To handle the extensive documentation and monitoring required by the Supply Chain Act, restaurateurs can turn to Enterprise Resource Planning (ERP) systems.
ERP systems help streamline business processes, making compliance much easier to manage. They allow you to collect, analyze, and report data efficiently, ensuring that you meet the legal requirements. Here’s how ERP systems benefit your business:
Transparency and traceability
One of the key benefits of ERP systems is increased transparency. They consolidate data from different parts of your business, providing a comprehensive view of your supply chain. This allows you to trace everything from the origin of ingredients to production conditions and ensure that suppliers are complying with regulatory requirements.
Efficiency, reporting and cost reduction
ERP systems eliminate the need for manual reporting, automating the process and saving valuable time. This allows restaurateurs to focus on what really matters: customer satisfaction.
In the long run, ERP systems can reduce operating costs by eliminating errors and unnecessary expenses. According to a study by the Aberdeen Group, companies that use ERP systems see a 23% reduction in operating costs and a 22% reduction in administrative costs.
Sustainability
Studies show that ERP systems also support sustainability efforts by helping companies reduce food waste and minimize unnecessary purchases. By centralizing data, ERP systems make it easier to track food waste and adjust purchasing behavior.
Centralized data and supplier management
ERP systems allow companies to record and store all supply chain-related data in one place. This reduces the risk of missing data and makes it easier to evaluate suppliers and their performance. Access to real-time data is particularly valuable in the hospitality industry, where suppliers can change quickly and adjustments are often required at short notice.
Integration with existing systems
Modern ERP systems can be easily integrated with other software, such as inventory management and point-of-sale systems. This integration ensures smooth communication and improves operational efficiency.
Integrating an ERP system requires careful planning. Here’s a four-step guide to ensure a successful implementation:
Before you start the implementation, you should think about your organisation's requirements and needs. Identify the data and processes you want to integrate into your system.
The next step is to choose an ERP system that is tailored to the needs of your hospitality business and has the functionality you need. There are already specialized solutions that offer functions such as stock management, supplier management and traceability. Also make sure that the ERP system is compatible with your existing IT infrastructure to ensure a smooth implementation.
Once you have made your choice, you can start implementing the ERP system. But don't forget to train your team, as this is the only way to ensure that the system is accepted and used efficiently.
Once successfully implemented, you can use the real-time data and analytics to monitor and adjust your supply chain as needed. Conduct regular audits and generate reports to meet the requirements of the Supply Chain Act.
Many restaurants still rely on manual processes such as Excel to manage their supply chains. However, without a digital solution, restaurateurs face numerous challenges when it comes to supply chain compliance.
Firstly, managing data manually is extremely time-consuming and error prone. Even small mistakes can result in incomplete or incorrect data. Without automated notifications, changes in the supply chain can go unnoticed.
Secondly, companies without digital systems often have to hire additional staff or invest in training to meet regulatory requirements, increasing costs and reducing operational efficiency.
In today’s fast-paced environment, having up-to-date, real-time data about your suppliers is critical. Without an ERP system, it’s almost impossible to proactively identify and address risks along the supply chain.
The ERP sector is evolving rapidly, incorporating cutting-edge technologies such as AI and automation. These innovations are making it easier for businesses to meet the requirements of the Supply Chain Act, while benefiting from better efficiency and flexibility.
Cloud-based ERP systems
In the future, ERP systems will increasingly be stored in the cloud. The advantage is that restaurateurs can access their data from anywhere. They have the most up-to-date information at their fingertips and can make informed decisions to meet the requirements of the Supply Chain Act.
Mobile ERP apps
With mobile ERP apps, restaurateurs can also place orders, track deliveries and monitor stock levels from their smartphone or tablet. This makes it easier to respond quickly and ensure that all processes comply with supply chain legislation.
Voice assistant integration
An interesting development is the integration of voice assistants such as Siri or Alexa. Voice commands such as "How many patties do I have in stock?" or "Which products need to be reordered today?" provide quick access to important information without having to operate digital devices. As well as making everyday tasks easier, voice assistants can help to monitor the supply chain more efficiently.
AI demand and order forecasting
Recent research shows that using AI in ERP systems leads to more accurate demand forecasting, optimal order matching and the elimination of errors – making it easier to comply with regulations. AI analyzes historical data and usage patterns. This means you always know exactly what products are needed, taking into account seasonal fluctuations and other influencing factors.
Inventory management
AI-powered ERP systems can also make inventory more efficient: Orders are automated based on current stock levels and delivery times. This reduces food waste and excess inventory, and makes it easier to track goods throughout the supply chain.
Product and supplier search
Finding the right products and suppliers can be time-consuming in the hospitality industry. AI-enabled ERP systems can now suggest alternative products that meet desired quality criteria. This allows restaurateurs to respond flexibly to changes in the supply chain and ensure that all their suppliers are compliant.
Usability und flexibility
The development of ERP systems is increasingly focused on usability and flexibility. People without specialist IT skills should be able to operate the systems easily. Future ERP systems will therefore be even more responsive, allowing restaurateurs to choose the functions they really need.
While the Supply Chain Act presents new challenges for hospitality businesses, ERP systems already offer an efficient solution to meet these requirements. From improved supply chain visibility to simplified reporting: ERP systems are already helping to monitor suppliers and processes.
As ERP systems continue to evolve, especially in conjunction with AI, it will be easier to meet the requirements of the Supply Chain Act in the hospitality industry while reaping the benefits of digitalization.
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