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Friday, March 09, 2007

Preventing Food Cost Surprises

In my recent article, The Number One Cause of High Food Cost , I singled out improper ordering as the primary cause of high cost. If I'm right about the cause, the wise operator should spend more quality time on placing food orders. Since many of the tasks involved in placing an order with a vendor are time consuming and analytical, many operators spend their energy reducing the amount of time spent in this activity.

Initially, the time saved is put to good use in other key management areas. Once two or three months have passed, the time savings will generate less of an impact. Distractions will fill the time slot and the savings benefit will wane.

I'd like to see the same amount of time spent in a better fashion. You are already spending this time and it's built into your routine. If you spent the time more wisely, a significant benefit could be achieved.

Food cost surprises can be dramatically reduced. Better forecasts and tighter par levels can reduce inventory levels and the resulting spoilage. Spend most of the time forecasting demand and restrict weekly purchases to 30% of expected sales. Your inventory levels will decline (assuming you've been running a food cost percentage over this threshold). After several weeks, recalculate the necessary par levels for all key items.

As you fill more of your time allotment with this activity, your cost improvements will generate excitement. Forecasting will become a game everyone looks forward to participating in each week. Your actual food cost percentage will tend to be closer to the ideal cost target. Adjust the 30% figure above to the long term food cost target.

You may find a few extra hours. Effective bidding can produce major savings and innovations. Take some of the time and review your purchase specifications for all key items. A fresh look at these issues will have lasting results. Tiny changes in specifications can often produce big profits.

In addition to my 100% free Food Cost Control Blog, I have started a second resource which will be offered for a limited time for $100 per year. This online resource will include many posts like Slow Day vs. Busy Day. These articles will not be typical on the free blog. I'll be posting the following articles in the Linear Regression Techniques Group this month over in the new area:
Slow Day vs. Busy Day, Peak vs. Off-Peak, Manning Chart Analysis, Baseline Sales Projections, and Flexible Teams. Click below to join!

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