How Efficiently Is Your Bakery Run?
Running a bakery is an intensive affair, and savings need to be made at every corner to compensate for expensive equipment and ingredients. At the same time, sacrificing productivity and quality is not an option! In this article we will identify the biggest cost sinks that bakeries can suffer from, and how they can be mitigated. Here are five simple ways to manage and reduce the costs of your bakery while simultaneously increasing your profits to as high as 20%!
1. Balancing Price of Goods Vs. Volume Produced
There are three types of bakeries – those that specialise in artisan creations, those that exist on a local scale, and those that operate on a national level. Often you’ll find that bakeries produce goods at the volume proportional to their size. For example, artisan bakeries will take longer to create a single cake. This is because the trade requires time and care, usually done at the request of an individual client. Bakeries that operate on a national scale will mass-produce goods, have thousands of employees and usually operate on assembly lines to meet massive distribution needs.
Knowing exactly how much you can produce any given day or a week can serve as an important indicator of how you price your goods. The volume of baked produce created is also an indicator of the quality of the ingredients used, as it is incredibly expensive to use specialised flour that can’t be ordered in bulk to create bread in large quantities every single day. As such, controlling your prices based on how much you create is a way of setting the correct expectations and convenience for your customers. The right price can attract the right kind of demand and audience, and create stronger profits.
Lowering prices may not sound like an enticing prospect, but demand may dictate that this is the correct course of action. If you can sell more at a reduced profit margin, it is still likely that you will make more profit from sheer profit of sales than artisan bakeries that sell much less at a larger profit margin. Profit margins are thin in the foodservice industry – often as low as 3% – so be prepared to price accordingly to your cost control to maximise revenue.
2. Controlling Cost/Number of Ingredients
If you want to find out the cost of one of your recipes, check out Pricing Baked Goods! This is a free calculator which lets you view the price of each ingredient based on the quality and quantity bought. This allows for a comprehensive look at the gross cost of producing one of your products. Whether your cost of ingredients derives from their quality or volume (or both), it is paramount that you control your ingredient use to a sustainable and measurable level. One advantage of keeping track of your ingredients can lead to more efficient inventory management, and prevents last-minute restocking or excess volume that ultimately goes unused!
3. Labour Costs
Typical labour costs for bakeries can range between 20% and 30% of total operations. This can be a huge cost sink if mismanaged, so it is hugely important to ensure that the right people are working in the right places at the right time. Make sure that people are taking breaks when they need to, for the correct amount of time. Know whether your staff are arriving early or late and therefore fulfilling scheduled labour hours without going over what is assigned.
Artificially reducing labour cost percentage by increasing the price of goods is not ideal either – but everyone has a limit on what they will pay for your baked produce.
So how can labour costs be brought down organically? One of the best ways to enforce and investigate this is by centralising and managing it all in one place. Managers and executives can be given the ability to review employee performance and attendance. With proper workforce management, uncover opportunities to save on expenses in your business. Consider a specialised solution like Bizimply as a possible solution to your needs.
Bizimply simplifies workforce management for multisite hospitality and retail companies, optimising the entire people journey, with an all-in-one cloud-based solution. Employees can see their shifts and hours worked on their smartphones. Managers save hours creating and communicating schedules with simple drag-and-drop. Monitoring attendance is fool proof with photo capture and Bizimply automatically generates all staff timesheets for direct transfer to payroll systems. Bizimply gives managers full visibility over operational metrics such as sales per labour-hour and enables 100% compliance with labour law. Last but not least, the entire system is customisable, and the Bizimply team is always available to provide support.
4. Overhead Costs
No matter what, always keep track of your business’s utility bills. You might find that you are excessively using electricity or water in some of your operations. While they are obviously essential to the running of your business – just make sure that it is going only to where it needs. Conduct a review of power/water usage and what is causing that demand – you never know what you might find! More importantly, you might discover ways to streamline your operations by repairing or replacing inefficient equipment.
5. Time to Produce
You can calculate this by combining labour costs with the price of goods. Say that you are selling a high-end designer cake for about £500 – if your labour cost target aims to be around 20%, then that should mean that you should pay around £100 on employee manpower to create the cake. This cost would primarily manifest itself as staff wages, so if the average wage is £10 per hour, you can assume that it would take 10 hours for one person to create a cake worth £500. Of course this can lead to other queries, such as “does this cake really need 10 hours of manpower to create?”, but once you start asking questions that you can readily answer at your disposal, you are well on the way to making big savings in your business!
Overall, we have demonstrated that there are countless ways of improving on unnecessary costs in your business without sacrificing on quality. Know of any other cost-saving measures that led to success for your business? Let us know on social media at Facebook, Twitter or Linkedin!