The Client and our role:
We were engaged with an F&B company who had a central kitchen, own outlets, franchised outlets and online sales. F&B industry is very peculiar in the sense that the input cost keeps on changing almost every day and the selling price is constant over a period of time. As a result, the changes in the cost of goods sold (COGS) are huge and frequent. To top it up, many SME players don’t know their food cost.
Our role was to look into current organization structure, find the gaps, if any, and bring in more operational efficiencies as well as cost reduction.
We worked together for over 4 months and one of the issues we faced was to identify reasons for changing COGS.
Context
The Company was trying to expand internationally through franchisees and one of the main points was to give assurance of the range of COGS. The franchisees were asking the ways and means to control input costs so that the bottle line could be maintained.
They had a huge central kitchen working in three shifts employing more than 80 people in the kitchen itself. The kitchen was supported by the procurement staff who would buy fruits and vegetable daily.
The food deliveries were scheduled keeping in mind the operating times of the outlets and convenience of the actual deliveries.
People
- Didn’t know what they were supposed to do
- Didn’t have skill sets to do what they were expected to do
Technology
- The ERP wasn’t implemented to give adequate reports
- People were not trained to operate the ERP
As a result, the work flow was not organized at all. It was case more of firefighting than organized environment. There was no material or work planning that was happening as a routine function. Needless to say, wastage was much higher compared to industry standards.
Impact
We continued to work with them for further six months. The major achievements were:
- We were able stabilized the COGS and we knew exactly the reasons for variance.
- We reduced the input cost by nearly 2% over a period six month.
- Reduced wastage by 0.6%
- The most important, the staff started looking at as someone who can identify the problem and correct it.
Solution
We decided to address low hanging fruits first by interviewing people and understanding what they are supposed to and what they were doing. As expected, we didn’t find any written job description and people were working only on oral instructions.
Hence, the first step was to write job descriptions.
Once we rewrote the job descriptions with the help of HR team, we found that the current people didn’t have the required skill sets to operate ERP and hence most of the information generation and reporting was manual.
The second step was to train people on ERP and other soft skills like reporting
While training people on ERP we realized that ERP was not implemented properly and hence most of the reports were not generated or the timing of the reports was wrong.
The third step was to make amendments to ERP and ensuring the desired results.
All this took us good three months to work and needless to say- lot of resistance to change. The plus point was that the senior management was firmly behind us and supported in every action, even though some of our actions were abandoned over a period of time.
We also reorganized the entire team. We were able to get rid of one of senior person costing USD 100,000 (CTC).
We also changed the procurement method. For few items, we entered into long term contracts with guaranteed rates and quality. For few items, we engaged people visiting the wholesale markets and supermarkets to look for deals on various products.
Call to action
If you are working in F&B industry and want to improve your productivity, do call us and we can help you reach where you want to be.
