Manage your production costs well to ensure you turn a profit in today’s competitive world of baking
|Be sure that you buy the minimum requested by a supplier to avoid extra charges for delivery. Sometimes it is better to pick up an order with your own truck, or to negotiate your own transport.|
We have to manage our pricing well to keep our businesses alive in this competitive world. Sometimes you are not able to increase prices because customers or buyers are asking for a better price based on the volume of business they give you. In these cases, the only way to keep profits up is by getting production costs down.
Here are some ideas to reduce costs.
Be a smart buyer
If you split your purchases between two or three suppliers, you will not get the same price as if you bought all your flour from the same distributor or manufacturer. The best way to get a better price is to be loyal to your supplier. Meet your supplier and discuss giving him or her your volume instead of always playing with the price.
I know that some people buy from two suppliers to protect themselves in case of a strike, or to negotiate a better price from week to week. But when you switch from one distributor to another, you may get a different yield, which changes your profit. Emulsified shortening is an example of why it is important to compare yields. You may buy a 20 kg cube of shortening for $5 less than your usual supplier charges, but if you make cake icing, you may not enjoy the same yield, since the cheaper shortening does not incorporate as much air as the other. This difference will cost you more by forcing you to put more icing on each cake. If the density is changed, the icing will be heavier by volume.
Be sure that you get products with the same specifications from each supplier. Consistency is the best way to save on cost. Doing it right, all the time, is the secret to getting consistency and preventing rejected products – the most important loss in the baking industry.
The other way to get a better price is by paying your supplier within the terms of your agreement. If your supplier always has to call you to get a cheque, you will pay more for your ingredients. Paying on time earns you the respect of your supplier, and he will always be ready to do his best for you.
Be sure that you buy the minimum requested by a supplier to avoid extra charges for delivery. Sometimes it is better to pick up an order with your own truck after making your delivery, or to negotiate your own transport.
There are some ingredients that you can replace to meet a certain selling price. In some cases you can replace:
- Butter with margarine (in croissant, cake, icing)
- Shortening with oil (in bread or pizza dough)
- Olive oil with canola oil
- Skim milk powder with whey powder or soy flour (in croissant, bread, cake)
- Cream with milk (in pastry filling)
- Cocoa powder with cocoa substitute (in chocolate products)
The most important thing when substituting any ingredient is to get the same dough or batter texture as usual. Rich formula does not necessary cost more than lean formula – it all depends on the yield.
For viennoiserie, it is possible to reduce the size of the units and keep the same selling price. Six croissants at 65 g may be reduced to 60 g while keeping the same volume through use of a good roll-in fat and by improving the process. Five grams by unit looks like nothing, but it helps to increase profit by 7.69 per cent. You can play with the size of any product except for the standardized bread loaves (450 g, 675 g and 900 g).
You can also alter your formula to include starches, wheat gluten, fibre, protein or gums, which can increase absorption in your products.
Control product weight
Controlling your baking is another way to get consistency. The weight of your product changes after baking because of moisture lost. If your baking time is consistent, you will be able to control product weight to meet the final selling weight. A 675 g bread is usually scaled at 770 g ± 5 g, and undergoes 13 to 14 per cent moisture loss during baking and cooling. Giving more weight on each product can cost you a lot on volume. I have seen some bakers giving 20 to 25 g over the selling weight, which costs them a lot in the long run.
Improve your processes
Good control of your process will give you consistent cost. You may have to ask yourself if there are new ways to make your product without changing the quality. Is there new equipment that will make it faster with less effort? Be ready for change. Too many bakers are afraid to ask for help because they do not take time to look for new processes.
You may have the best dough, but baking is the most important part of your production process. If your products are under-baked, they will collapse and have a shorter shelf life. Over-bake and you will dry out or even burn your products. It’s important to bake your product at the same temperature for the same length of time from batch to batch.
Use Proper packaging
A cheap package does not add to product appearance and can even shorten shelf life. Good packaging will help to reduce returns because it will protect your product, lengthening shelf life. Using the same size packaging for most of your products will help to get better buying volume than using different size packages.
Mario Fortin is an international bakery consultant and owner of FORMA-LAB, a consulting service for bakers and suppliers. If you need technical information, send your questions to firstname.lastname@example.org.
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