Strategic Purchase and Procurement: Shenzhen Ju’s Fusion Restaurant Co. Ltd

Strategic Purchase and Procurement
Solutions for the Restaurant Industry in Mainland China- Case Study of
Shenzhen Ju’s Fusion Restaurant Co. Ltd
By 
In partial fulfilment for the degree of Supply Chain and Logistics Management
_________________________
*Corresponding author E-mail: [email protected]
Submitted
Abstract
Purpose – Extensive innovation and strategic diversity of procurement practices in the restaurant pose challenges for Shenzhen Ju’s Fusion Restaurant Co. Ltd. The research investigates the gap within the restaurant procurement tactics based on the company-supplier relationship, SCM process, Just-in-Time (JIT) approach, lean process, e-procurement practices, Total Quality Management (TQM), and Financial Performance to propose responsive recommendations.
Methodology/Design/Approach – The qualitative research focuses on the secondary data and interview from the restaurant's CEO to explore the opportunities for Ju’s Fusion to minimize the present crises in procurement. The data analyzed with the triangulation technique by focusing on the financial information, literature review, and interview.
Findings – The analysis proposed that implementing e-procurement practices with the adoption of the web interface and mobile application will boost the restaurant's effectiveness in reducing operational cost, enhancing work efficiency, and expanding organizational activities.
Research Limitations/Implications – For business practitioners, the study highlighted the critical success factors for procurement advancement in the restaurant industry, which can be explored further with statistical techniques to add more value in operational performance and efficiency to sustain a strong position competitive market.
Originality/Value – for the business professionals, the theoretical research investigates the substantial effect of e-procurement and related factors on attaining a distinctive edge in the restaurant industry by overviewing the environmental effects and competition. Comparison with the Chinese and US retailers broaden the study’s scope in the targeted field.
Keyword – E-procurement, Mobile application, Web interface, Procurement, Supply chain, Restaurant Industry, Ju’s Fusion
Paper type – Descriptive Research Paper
Table of Contents Abstract ii List of Abbreviations. v Acknowledgements. vi Author Declaration. vii Chapter 1 – Introduction. 1 1.1 Project Background. 1 1.2 Company Background - Shenzhen Ju’s Fusion Restaurant 2 1.2.1 Current Methods of Food Buying and Procurement 2 1.2.2 Problem Identification. 3 1.2.3 Possible Outcomes. 4 1.3 Research Aim and Objectives. 5 1.4 Outline of the Dissertation. 5 Chapter 2 - Literature Review.. 7 2.1 Supply Chain Management (SCM) and Evolution. 7 2.2 Procurement in the Hospitality Industry. 8 2.3 E-Procurement and Emphasise on its Significance. 9 2.3.1 Agile and Lean Procurement 10 2.3.2 Just-in-Time (JIT) 11 2.3.3 Improve Financial Position and Innovation. 11 2.3.4 Company-Supplier Relationship. 11 2.3.5 Total Quality Management (TQM) 12 2.4 E-Procurement in the Restaurant Sector 12 2.4.1 Comparing Procurement Practices between the US and the Mainland, China. 12 2.5 Implementation of E-Procurement Process. 14 2.5.1 Examine Availability for E-procurement Practice. 14 2.5.2 Propose Relevant Objectives. 15 2.5.3 Eliminate Key Hindrances in Process. 15 2.6 Influence of E-Procurement on Ju’s Fusion in Mainland, China. 16 Chapter 3 – Methodology. 18 3.1 Research Framework. 18 3.1.1 Research Paradigm.. 19 3.1.2 Research Approach. 19 3.1.3 Research Design. 20 3.1.4 Research Strategy. 21 3.1.5 Research Dimension. 22 3.2 Data Attributes and Analysis. 23 3.2.1 Data Collection Method. 23 3.2.2 Research Instrument 24 3.2.3 Population and Sampling Technique. 25 3.3 Inclusion and Exclusion Criteria. 26 3.4 Data Analysis Technique. 27 3.5 Limitation and Delimitation of Study. 28 3.6 Ethical Consideration. 30 3.7 Chapter Summary. 30 Chapter 4 – Results and Discussion. 30 4.1    Interview Details. 30 4.2    Comparison between the US and Chinese E-procurement Restaurants. 32 4.3    Challenges for Ju's Fusion. 33 4.4    Strategic Solutions for Ju's Fusion. 34 Chapter 5 - Analysis and Findings. 36 Chapter 6 - Conclusions /Recommendations. 38 6.1 Present Procurement Issues. 38 6.2 Proposed Solutions. 38 Reference List 45
List of Abbreviations
B2B - Business to business
B2C - Business to Consumer
ERP - Enterprise Resource Planning
Iot - Internet of Things
JIT - Just-In-Time
RFID - Radio-Frequency Identification 
SCM - Supply Chain Management
SMEs - Small and Medium Enterprises
TQM - Total Quality Management
Acknowledgments
I want to acknowledge everyone who played a role in my academic accomplishments. First of all, my parents supported me with love and understanding. Without you, I could never have reached this level of success.
Secondly, my advisor and professors have provided candid advice and guidance through the research process. Thank you all for your unwavering support.
Lastly, I appreciate all the kind words received throughout this master's program. Without all of you, I would not be able to finish this process and my dissertation.
Author Declaration
I have read and understood the rules on cheating, plagiarism, and appropriate referencing as outlined in my handbook, and I declare that the work contained in this assignment is my own unless otherwise acknowledged.
I have also submitted no substantial part of the work submitted here in other assessments for this or previous degree courses, and I acknowledge that if this has been done, an appropriate reduction in the mark I might otherwise have received will be made.
Signed candidate__________________________________________________
You are required to justify your submitted thesis against the degree definition for which you are registered. It needs to be downloaded and pasted into the box below.
Project definition for my degree (as copied from ____________________________)
The project should relate to a logistics-related topic, e.g., purchasing/outsourcing, material/production control, inventory reduction, material flow, warehousing and distribution, supply chain management, or transport planning.
My project relates to this definition in the following way: it is related to purchasing/ outsourcing a fusion restaurant in Shenzhen, China. The narrative is about using innovative e-procurement platforms to improve its current procurement method and its revenue.
Chapter 1 – Introduction
With the changing dynamics of the business, small and medium enterprises (SMEs) face severe competition from the expanded firms' aggressive strategies, which disturb SMEs' position in a particular market. Henceforth, modern organisations concern about this issue and execute innovative strategies and tools to manage business conspiracies and enhance business performance extensively (Exposito and Sanchis-Llopis 2018). By emphasising the examples of giant retailers in the food, consumer, grocery, and other markets, they evolve the value chain activities by adopting e-procurement to improve process efficiency and cost-effectiveness that additionally values the firm with escalated profitability. Reviewing the significance of e-procurement practices, many global companies shift from the outdated supply chain process to the digital platforms to attain extensive benefits from the sources (Saastamoinen, Tammi, and Reijonen 2018). Therefore, the research evaluates the influence of e-procurement strategies to resolve the complexities of the value chain in SMEs by assessing the case of Shenzhen Ju’s Fusion restaurant in Mainland China.
1.1 Project Background
Supply chain management (SCM) is the core function in the consumer industry to succeed in a competitive environment. Nevertheless, procurement managers face problems in utilising adequate strategies to advance the procurement and purchase process's sustainability because of increasing cost, concern for high-quality, and economies of scale (Villena 2019). Moreno and Tejada (2019) highlighted that many restaurants face managing food expenses, which is about 10% in revenue margin. By considering this challenge, staying lean and agile is the productive approach to maintain resource supplies by creating a healthy relationship with suppliers. Further, restaurants’ management immensely emphasises the quality of food supplies and the cost to grow in the market. Likewise, handling logistics and procurement operations with logistics 4.0 technologies timely support the business to retain consumers and stabilise a strong market position (Bag et al. 2020). Henceforth, the project investigates the role of the lean and agile process of the supply chain on business productivity in handling the cost and supplies by observing the purchase and procurement strategies. The emphasis on e-procurement is another focus of the paper to maximise SMEs opportunities in China with automated procurement through related systems and tools. The restaurant shifted from no method to strategic procurement management by basing on target cost method changes the cost from target profit to target cost. In this manner, the report evaluates the e-procurement and cost problems in Shenzhen Ju’s Fusion restaurant and proposes relevant recommendations based on the e-procurement process to expand its restaurant industry opportunities.
1.2 Company Background - Shenzhen Ju’s Fusion Restaurant
Shenzhen Ju’s fusion has over 24 years of history, with an experienced operations management team. Founded in 1995, the establishment of the Great White Shark Seafood Restaurant (the predecessor of Ju’s Fusion) used an old building for its base in Shenzhen. At that time, the restaurant’s management invested more than 10 million Yuan. In 2004, the brand moved the restaurant to the newly founded hotel. Thus, it was not in one place for way too long. The retention rate is high among employees and suppliers for the restaurant due to the cooperative and learning environment. On the other side, consumers love speciality food such as dry abalone, which even the emperors prefer. Hence, Shenzhen Ju’s Fusion generates millions of profits from this particular item by selling it for 1000 Yuan, as it is priced for more than 300 Yuan in the market from the cost of 90-100 Yuan (Interview Info).
By investigating the relationship with suppliers, the company has about six to seven suppliers, which generates three million Yuan monthly. Conversely, the change in consumer preferences affects the business's profitability in the last two years due to the lack of food supplies procurement strategy in Mainland China (The Nanfang 2020). Additionally, the food ingredient procurement market is enormously growing recently and scales the demand for traditional foods. However, traditional food ingredient procurement is divided by countless small wholesale merchants across the country, making it difficult to form a scale effect. Due to the restaurant merchants' individual needs, the demand for the billing period, and increasingly diversified needs of different products. Those factors affect the performance of Shenzhen Ju’s Fusion in Mainland. In this case, the restaurant needs to acquire multiple suppliers to meet the emerging demand for speciality food like abalone.
1.2.1 Current Methods of Food Buying and Procurement
Among restaurants, the value chain mechanism is the core process to hit the market due to the increasing accessibility and on-time delivery. Moreover, restaurants focus on minimising the cost of purchasing ingredients and supplies to mend profitability and productivity with green technologies in the supply chain process (Chiu and Hsieh 2016). By indicating those concerns, Kasavana (2004) stated that e-procurement and online distribution channels are the substantial sources of improving the procurements and supply chain effectiveness. Web-based mechanisms, open technologies, innovative systems, and quality management are worthy in modern times to advance the procurement and purchase process's functionality. It shifted the outdated models into efficient ones to overcome the hindrances in accelerating the business performance with the extensive distribution.
The other research by Angeles (2005) supported the claim that online technologies such as RFID tools better fulfil suppliers and consumers' needs by eliminating errors in the process, making it leaner, and interchange data extraordinarily to monitor each activity. Likewise, Shenzhen Ju’s Fusion aims to grow the business with reduced logistics cost and improve the distribution system by implementing the Enterprise Resource Planning (ERP) system. The business examines the related problems for executing the new ones to enhance business reach and maximise profitability.
In Shenzhen Ju’s Fusion, the company’s products are mainly speciality ingredients, and the competition is not fierce. It is a good entry point mostly for small catering merchants, their bargaining power is enormous, and the original purchase relationship of these merchants is relatively reliable. These platforms progress products as much as possible based on more special food ingredients, which advances the opportunity for merchants and restaurants in China (Sodhi and Tang 2019). In this manner, the research magnifies the present problem of payment, purchase, and procurement in Shenzhen Ju’s Fusion to recommend social procurement and supply chain strategies to support business operations and performance.
1.2.2 Problem Identification
Overviewing Shenzhen Ju’s Fusion's case, the restaurant is threatened with external uncertainties, including competition, scarcity of supplies, quality issues, and distribution relationship problems. The research by Scholten and Fynes (2017) indicates that restaurants face challenges in the long-term accounting periods due to the excessive loss in profit margins. Further, the fierce rivalry affects the SMEs market with advanced innovation, which is another adverse influence on business. Managing supply relationships, refund issues, maintaining trustworthiness, manage distribution, cost-effectiveness, improve delivery outcomes, and enhance the quality of supplied goods are other highlighted problems with the outdated procurement system.
Recently, the company faces complications in dealing with profitability due to managing the logistics cost. Thereby, Shenzhen Ju’s Fusion aims to resolve the loopholes in procurement and execute modern e-procurement platforms such as ERP systems to expand opportunities in new markets and attract a larger audience with the extended network on online platforms. By reviewing the case, the problem statement identified is to assess the purchase and procurement uncertainties in Shenzhen Ju’s Fusion Restaurant Co. Ltd and recommend the strategic possibilities to expand the supply chain and procurement process in Mainland China.
1.2.3 Possible Outcomes
They are evaluating the identified problem and proposing the relevant solutions for SME-based restaurants in Mainland China. Shenzhen Ju’s Fusion and restaurants can advance their effectiveness and efficiency in purchasing and procuring the appropriate supplies by allocating the sources well with the adopted tools and tactics, including ERP. The top e-procurement platforms like hippo fresh, Meicai, and Liannong are great industry pioneers for small to medium-sized restaurant owners because they work progressively to overcome the supply chain concerns (Interview Information). Correspondingly, the research navigates the current food supply environment and bridges the gap by determining the cost-friendly and efficient method to procure their food supplies. Henceforth, e-procurement has an impactful influence on firm performance (Belisari, Appolloni, and Cerruti 2019). This research utilises the qualitative approach to collect data from tri-sources, including secondary sources, business financial reports, and interviews from Ju’s Fusion restaurant owner to support the design of a competitive e-procurement strategy in China’s restaurant industry. A business may be worth much more than the value of its tangible assets due to valuable business contracts, market outlets, production facilities, geographical location, and reputation of business or production, a revolution in technology, or optimised business practice. The research further highlights the food supplies e-procurement and supply chain performance tools that are actively used in successful e-retailing and food industries to minimise the cost and enhance the time-efficiency of the process to gain momentum in operations.
1.3 Research Aim and Objectives
The paper's primary aim is to propose strategic purchase and procurement solutions for the restaurant industry in Mainland China by specifying the case of Shenzhen Ju’s Fusion Restaurant Co. Ltd. The following are the objectives of the research.
* Objective 1: To compare and contrast the procurement tactics between the restaurant industry of Mainland China and US-based on the company-supplier relationship, SCM process, Just-in-Time (JIT) approach, lean process, e-procurement practices, Total Quality Management (TQM) and Financial Performance,
* Objective 2: To investigate the restaurant industry's challenges in Mainland China by highlighting the procurement and supply chain process of Shenzhen Ju’s Fusion.
* Objective 3: To recommend the restaurants' strategic solutions in Mainland China to expand future opportunities by adopting an ERP system and other e-procurement tools.
1.4 Outline of the Dissertation
Evaluating the effectiveness of e-procurement and modern processes of supply chain functions on the restaurant industry in managing the emerging crises from traditional practices supports the management in taking responsive actions in mitigating the logistics, purchasing, and procurement processes of the SMEs. The research also assists Shenzhen Ju’s Fusion in applying e-procurement tactics in business operations. The research follows the content guidelines to resolve restaurant business issues in Mainland China to lead towards the recommendations. Following are the six chapters in research including,
* Chapter One- Introduction. This chapter highlights the background of the research, background of the project, company, and the problem facing Shenzhen Ju’s Fusion. The introduction further briefs the outcomes of utilising strategic approaches and the paper's research aim and objectives.
* Chapter Two – Literature Review. The literature evaluates the supply chain's current strategy in Shenzhen Ju’s Fusion and compares the mainland's e-procurement and logistics processes, China, with the US organisations to understand SCM's modern trends. This chapter further reflects different SCM factors to support the management in making a better decision for updating the purchasing and procurement in the firm, focusing on agile procurement, lean procurement, JIT, SCM, logistics, financial analysis, and innovation.
* Chapter Three – Methodology. The paper's methodology highlights the method used in the paper to collect and analyse data based on research philosophy, structure, approach, design, ethical considerations, and research limitations.
* Chapter Four – Discussion. The discussion magnificently indicates Shenzhen Ju’s Fusion's financial performance while implementing the traditional SCM practices; compare it with the future possibilities to improve the business performance by highlighting the literature review.
* Chapter Five – Analysis. In this chapter, the research magnifies the triangulation process to discuss the strategic solutions for Shenzhen Ju’s Fusion and related restaurants to improve the procurement, purchasing, and logistics functions with the adoption of upgraded tools and strategies in the SCM process by emphasising the findings from interview, literature review and financial statements.
* Chapter Six – Conclusion and Recommendations. The last chapter reflects the report's summary and the recommendations for Shenzhen Ju’s Fusion to advance its procurement and logistics strategies.
Chapter 2 - Literature Review
Traditionally, the restaurant industry depends on labour-intensive work processes that require manual dealing, which needs time and money to attain success. The evolving processes in the SCM transform the procurement and logistics systems and activities that update the automated technologies to improve work efficiency and effectiveness (Noci 2019). The research by Moraitakis (2017) indicated that US-based organisations extensively optimising their supply chain to augment the quality-standard of the value chain and logistics. Moreover, the advancement in procurement innovation by executing artificial intelligence (AI) and other logistics 4.0 technologies change the dynamics of supply chain strategies in the new organisations (Koh, Orzes, and Jia 2019). Therefore, SMEs decide to move in a similar direction by successfully adopting the related tools to expand their visibility globally with immense accessibility and real-time performance.
By emphasising the significance of the restaurant industry's e-procurement process, the research evaluates the practices of procurement in mainland China and the US organisations to support the supply chain activities in Shenzhen Ju’s Fusion. For this purpose, the literature evaluates the reasons for Shenzhen Ju’s Fusion’s supply chain ineffectiveness in the modern era and how it improves with digital innovation by focusing on various examples from the corporate sector. The literature utilises various journals, media releases, and sources to review Ju’s Fusion case by proposing strategic recommendations to support the restaurant in managing its distribution in China and expanding its online sales.
2.1 Supply Chain Management (SCM) and Evolution
The supply chain is the business process that involves the purchase, production, and delivery of products and supplies by generating value for customers by involving intermediaries to make the process more efficient and broader (Zhu, Zhao, and Bush 2020). By observing the evolving trends in the supply chain in the last two decades, the particular approach transformed business accuracy, agility, and efficiency. Recently, organisations are involved in more than one supply chain mechanism to extend their reach into new markets. Henceforth, digital distribution and physical availability augment the scope of the brand in the modern era. SMEs utilise the two-way approach in the supply chain to maximise their network into the new target groups.
Christopher and Holweg's (2017) research indicated that the transformation in supply-chain affects the procurement process magnificently by shifting the focus from supplier-centric to the customer-centric approach, converting production-centric concern to the customer demand consideration. Other than that, maintaining a long-term relationship with customers and suppliers is the prime aim of optimised processes. Adding online channels by eliminating truck-based pipelines, adopting agile frameworks in procurements, adding innovative tools to operate corporate operations, and maintaining a competitive edge with reduced cost and upgraded networking is the extensive focus on the evolved supply chain. Along with such practices, there is the emerging significance of the automated systems in procurement, specifically e-procurement systems in food and grocery retailing.
For example, Amazon and Alibaba use innovation in their supply chain mechanism to outperform other market competitors (Sodhi and Tang 2020). Hence, they hit the value for customers with the modern tools, which also encourages SMEs to shift from the conventional practices to the updated ones for attaining advantage in the fierce rivalry as the web-sources in procurement offer an edge to the business with agile practices, JIT value, timely delivery, recycling advantages and forecasting the future complications to mitigate the risk primarily (Zhang and Tavitiyaman 2020). Accordingly, the advancement in technology embraces supply chain operations to progress massively from time with the execution of the industry 4.0 technologies to be more resourceful and effective in dealing with the external and internal supply management and allocation challenges to escalate business profitability by reducing expenses.
2.2 Procurement in the Hospitality Industry
The modern adaptations in business emerge new tactics in supply chain and advanced systems for logistics, operations, and distribution to reach customers efficiently with e-commerce, online platforms, and digital channels (Amling and Daugherty 2018). By understanding the shifting focus of businesses, many organisations consider transformation as the successful move to augment the quality of products and services with pace distribution in the target market. Moving away from traditional offline purchase processing to online presents significant savings, improving productivity enhanced operational efficiencies. Furthermore, modern management identifies that new tools also reflect consumers' buying behaviour that encourages firms to utilise the best techniques to make the service more efficient for maintaining the competitive edge in an aggressive market (Brandon-Jones and Kauppi 2018). Therefore, e-procurement attains more attention from the diverse firms globally to limit their cost and extend their performance in serving the target market with quality products and distribution on time (Wang and Yu 2018). Some procurement pros are hesitant to adopt a strategic procurement strategy; if a supplier provides fair prices and makes deliveries on time, there is no reason to risk the relationship. By employing supply chain tools in business with the web-interfaces and online technologies, brands, including restaurants in the hospitality sector, create an electronic marketplace, where the stakeholders interact through digital channels such as electronic hubs and e-marketplace. This approach helps increase communication in Business to business (B2B) and business to consumer (B2C) transaction and support retailers to offer 24/7 service to customers for escalating the value for focused groups to maintain consistent revenue with the firm. Considering several examples, including foodbuy.com, thesauce.com, and improve in HK, which are helping restaurants exchange values with e-procurement system within the operating markets.
Along with web-interfaces, online systems, and technical infrastructure, global SMEs automate supply chain strategies by adopting innovative tools. Other than that, by focusing on the importance of distribution centre, lower cost, and personnel in the procurement and logistics process, Altayyar and Beaumont-Kerridgea (2016) exemplified that those factors are vital and co-ordinate operations in the complicated supply chain. Likewise, Artificial Intelligence (AI) system provided with e-procurement is of great value to certain restaurants (Chopra 2019). Restaurant owners can use these apps to check what they ordered and what the system suggests. Henceforth, some restaurants prefer to outsource their procurement to other vendors to ensure the best outcomes and reasonable value of resources.
2.3 E-Procurement and Emphasise on its Significance
The growing focus on the economies of scale to target the mass market with the productive supply chain process reassure multiple governmental, public and private firms to maintain a healthy relationship with suppliers by improving transparency in t...