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RBA OFFERS RECIPE FOR FIGURING PROFIT

BOSTON -- Calculating true profit in the bakery is a hard job, but a software package being developed by Retail Bakers of America is designed to help.That's what Peter Houstle, executive vice president of the Laurel, Md.-based trade group, told attendees at the recent Taste Show and Seminar held here by the New England Dairy-Deli-Bakery Association. Houstle was one of the seminar speakers at the two-day

BOSTON -- Calculating true profit in the bakery is a hard job, but a software package being developed by Retail Bakers of America is designed to help.

That's what Peter Houstle, executive vice president of the Laurel, Md.-based trade group, told attendees at the recent Taste Show and Seminar held here by the New England Dairy-Deli-Bakery Association. Houstle was one of the seminar speakers at the two-day event.

"We tend to forget that baking is a manufacturing process. It's not just opening cartons and putting product on the shelf," Houstle said.

"And the amount of labor required differs with each product, depending on what the item is, what process is used to make it, and what the batch size is," he added, emphasizing the necessity of figuring in labor costs for each type of item.

He stressed the importance of figuring out which individual products are making money in order to choose the product mix that makes sense and the processes by which the products are to be made. A retailer can't even know if he can afford to use a loss leader unless he knows what money-making item he can balance against it, he said.

In conjunction with Manhattan, Kan.-based American Institute of Baking, RBA is in the process of developing a matrix system that will enable retailers to calculate their net on any product, Houstle said.

The labor-costing matrix isolates the time required to perform each task in the production of a variety of bakery foods. Variables include ingredient methodology (scratch, mix, frozen), production methodology (hand, machine) and batch size. Batch size is important because economies of labor are realized with a large batch.

AIB's baking staff is currently in the process of timing the procedures required to make a huge variety of products that fall into these categories: bread and rolls, cakes, cookies, muffins and quick breads, sweet doughs, puff pastry, pies, fancy tortes and doughnuts. As they are completed, AIB will release the results to a select group of bakeries for "reality checks," Houstle said. The aim is to establish industrywide performance standards for specific tasks.

Using a qualified baker in a sterile environment, AIB videotaped procedures and then counted the seconds involved in each step.

"That's not to say there aren't individual factors to take into consideration in a real operation. But production losses due to poor layout, for instance, or improper stocking procedures, inefficient production scheduling or inadequate employee training can be isolated and therefore addressed more precisely," Houstle said.

The matrix will allow retailers to plug in their own labor values -- based on the wages they pay -- and the costs of their ingredients. Once that is done, via a formula, the true bottom line can be revealed, he said.

"It'll be easy to see, too, which products are particularly labor-intensive," Houstle said, adding that some may be a surprise. "And remember that the higher the labor intensity, the higher your cost of sales in that category will be." While its major function is to help calculate the bottom line, the matrix -- since it will provide industry-standard times for completing particular tasks -- can also be used to establish performance standards and training tools, and to determine levels of compensation, Houstle added. The matrix system, too, will remind retailers to include all the true costs, Houstle said. "The cost of ingredients, for example, isn't just a bag sitting in the storage room. It's delivering and warehousing, and even in the storage room, someone is charging you for space," he said. Fermentation or bench rest adds to the process time in scratch production. So does clean-up time, Houstle reminded his audience.

"And there's not just your payroll in the bakery, but there's a cashier upfront someplace collecting money on your behalf. There's parking lot maintenance. All those 'other' costs should be assigned on a square foot basis," Houstle said. "When you take ALL those costs and subtract them from gross sales, then you find out if you're making money," he added. More than ever, as competition heats up, retailers need to know quickly whether they'd make money on a particular product that a customer may have asked for, he said.

"Even if you have a system that you believe is working, the matrix system can confirm for you that yes, indeed, it is working," Houstle said. It can also help identify profit-eaters that can possibly be eliminated with a minimum of effort, he said. "For example, you may find that you've lost 5% or 10% of efficiency because someone put the rolling racks on the other side of the operation," he added. If help is exposed as a negative factor when measured against industry standards, or if it's a widely ranging variable, a manager may decide it's worth it to train a full-timer instead of using several part-timers.

The matrix system, to be offered in hard copy as well as a software package, is expected to be completed and ready for distribution by March 1996, when RBA holds its 78th annual convention-exhibition.