DAYTON, Ohio -- Dorothy Lane Markets here is taking a hard line on profitability in its fresh departments with software aimed at cutting food costs and tailoring product mixes to customers' needs.
With a computer program that's used widely in food-service operations, the upscale retailer expects to raise the bottom line by 3% to 4% in each of its fresh departments in the first year, officials said.
The program initially has been implemented in the bakery but soon will be expanded to Dorothy Lane's catering and food-service operations. The meat department will be next, and then the rest of the perishables departments, said Scott Fox, bakery director, for the two-unit independent.
The new system can catch invoice mistakes or shorts, track inventory, provide nutritional information, make ordering easier and is an invaluable tool for creating a product mix that sells and is profitable, the bakery director added.
"We've already saved a lot of money in bakery and we're not even using all the facets of the program yet. The first week we saved $2,000 right off because we picked up billing errors with it," said Fox.
But what's important in the long run is that the program can help Dorothy Lane forecast what products to make when, assign appropriate retail prices to items to ensure a good overall profit in the bakery, and, at the same time, deliver quality and value to the customer with each product, Fox said.
Dorothy Lane's in-store bakeries feature a large variety of from-scratch artisan breads, and a variety of other products made from scratch and from mixes.
Software programs like the one used by Dorothy Lane are becoming more of a necessity as supermarkets' fresh departments increasingly take the spotlight and feature value-added products as differentiators, industry experts told SN. As a result, the departments have much more in common with traditional food-service than with Center Store, and can apply strategies and technologies that have been used successfully in traditional food service, they said.
"It's entirely different than when a product arrives by the caseload at the back door and then is sold in ones and twos up front [as packaged, shelf-stable products are in the grocery store]. The way fresh departments are operating today is bringing in a whole lot of different things, putting them together into one product, and selling that. When you're doing that, it's much harder to control costs. You need help," said Howard Solganik, president Solganik & Associates, a Dayton, Ohio, consulting firm that works with supermarkets.
Solganik said systems designed for the complex food-service industry can be successfully applied to supermarkets' perishables departments, particularly to their deli/food-service, bakery and catering operations, and Fox at Dorothy Lane concurred.
He explained that the software program used by the retailer, Foodservice Suite, was developed by The CBORD Group, Ithaca, N.Y., and needed no adaptation to make it work in his bakery operation.
"Basically, it gives me the information I need to make the right decisions, quickly. The terminology we use is different than what's used in restaurants and institutions and hospital food service, but we're both making products to be sold and this system helps us do that profitably."
CBORD has been creating such software systems for the food-service industry for 25 years, but just recently began to work with supermarkets, said Lisa Dundon, the company's media group manager. She said the challenge is in showing supermarket operators how the software can be applied in their value-added departments.
"This is the same software that Hard Rock Cafe and the U.S. Army are using. The difference in working with supermarkets is in the training and communicating with the people who'll be using it," she said.
For example, a food-service operation manages its menu to make the overall profit it wants on dinner, taking a higher or lower gross margin on particular products. The same is true for food service or bakery in the supermarket, except it's called case management. And, instead of dinner, the time period analyzed might be a day or half day, said J.B. Lockwood, CBORD project manager.
A veteran of Wegmans Food Markets, Rochester, N.Y., Lockwood said he got his exposure to supermarket food service in the years that Wegmans was developing its Market Cafe concept. He's been working with Dorothy Lane to implement the program and has just finished supervising the second wave of on-site training there.
"We're about halfway through the process with CBORD so we're not even using all the program's capabilities yet," Fox said. "But, by easily accessing what sales history and other data we have at this point, we can already more accurately forecast production needs. We had been doing it with good guesses, but this is more scientific."
That accuracy not only helps control stales, but enables Dorothy Lane to keep its ingredients inventory at a lower level.
"I can also go to a PC at any time and see what my gross margin is on any given product and it will be up-to-date," Fox said.
The system automatically changes each item's gross margin when the cost of ingredients changes.
"For example, now when an invoice arrives, it is entered into the system immediately and if there's a price change, the program adjusts the gross margin on all the products that contain that ingredient. Say flour came in this week at $9 a bag instead of $8.75 a bag. When that invoice is entered, it will automatically update the cost on all my recipes, showing the new gross margin. I can go to the PC and pull up cream puffs, for instance, and I'll know what my cost is today making that item," Fox said.
If the price change diminishes the margin enough to warrant action, that action can be immediate. There's no time lag, Fox explained.
"We'd call the vendor. We might raise the retail price or we might eliminate the product altogether. That could happen, especially with a seasonal item," he said.
The system also automatically keeps track of inventory, subtracting from it as production is completed, and provides nutritional information for each item. It also scales recipes.
"In the past, we'd make batches of 40 or 60 loaves of a particular artisan bread. Well, if our need today is for 53 loaves of sourdough bread, we can hit a button and the computer will spit out a recipe for exactly 53 loaves. That's a huge benefit because it'll help us out a lot with controlling stales. Before, if we needed 53 loaves, we'd have to make a batch of 60, and that gave us seven extra loaves we had to try to sell," Fox said.
Other efficiencies will be realized as Dorothy Lane gets everything factored in, like labor costs, and gets its systems linked up with its suppliers and its fresh departments linked to each other on the system, Fox said. Fox said he's particularly appreciative of the program's features that will make ordering more accurate and quicker. The system will enable him to order directly from suppliers via a modem.
"We're trying to get our vendors to interface with us so we can do the ordering at the PC. But already, we can use a template based on past orders, that even has the price we expect to pay, based on history. And down the road, we're looking at using a hand-held unit to scan inventory and stales.
"The program is very detailed and in-depth. It does everything we need it to do, probably things we don't know we need it to do yet," Fox said.
Just having the capability to easily track the movement of individual products and having their gross margins accessible quickly gives the retailer information that can help him boost his profits, other sources told SN.
"Many retailers don't get individual item movement back at the office, especially on those products that don't have a standardized UPC. When you do have that capability, you can adjust the menu -- or variety in the case -- for better profitability," Solganik said.