Subway's Supply Chain and Promotional Strategy

Introduction

• Subway operates tens of thousands of stores globally.
• Faces tremendous demand for raw materials to produce millions of sandwiches annually.
• Requires significant logistical planning and resource management.

Raw Material Requirements

• Subway buys:
  • 70 million pounds of chicken annually.
  • 60 million pounds of turkey annually.
  • 30 million pounds of pepperoni and genoa salami annually.
• Expansion of stores and promotions necessitates constant updates to equipment and facilities.

$5 Footlong Promotion

• Originated from a local Florida market, led to a spike in sales.
• Initially hard to accommodate nationally due to bread supply issues.
• Required planning and equipment to support the increase in bread demand.
• Sales of bread increased by 40% vs. a 20% increase in overall sales.

Supply Chain Management

• Initially, franchisees sourced their own supplies, leading to inconsistent product quality.
• Creation of the Independent Purchasing Cooperative to standardize supply purchasing and negotiate costs.

Specification and Quality

• High-quality specifications were established for products.
• Vertical integration strategy implemented to control costs and standards:
  • Control from grain fields to restaurant supply chain.
  • Predictive buying strategies to manage commodity price fluctuations effectively.

Cost Management

• 50-80% of product price comes from raw material costs.
• Strategic purchasing decisions based on market predictions (e.g., buying bacon post-Easter).

Maintaining Quality Standards

• The 'gold standard' in place to ensure quality and food safety requirements are met consistently.
• Measures performance over time to maintain high standards across all products.

Conclusion

• Subway's supply chain strategy balances demand, quality, and cost-efficiency.
• Strategic planning and vertical integration are key to accommodating growth and promotional demands.