Unleash The Power Of Supply Chain Control
Long term care food management programs can be more profitable with a little streamlining.
Kelly Rodriguez
8/1/2012
With the number people aged 65 and older set to double in the next 20 years, the growth in assisted living will likely continue.
Still, market uncertainties have always been challenging. With fluctuating costs and the future of government spending in question, running a successful food service program is always a challenge.
In addition, long term care communities must also balance freshness, quality, and nutritional concerns, both to maintain the health of residents and to attract new ones.
So how can food service programs manage two of their largest expenses—salaries and supplies—without compromising quality and thus patient care? Re-evaluating the supply chain is the most practical approach to cutting costs while directly benefitting the bottom line.
Reduce Supply Expenses
Supply chain management in most assisted living food service programs encompasses planning, acquisition, quality control, storage, and disposal. In addition to food supplies, purchasing includes capital equipment acquisition; technology-related items, which can improve operational efficiency; staffing services; and other purchased services.
The potential benefit of improved supply chain management is significant because every dollar cut from supply expenditures drops straight to the bottom line. To achieve the same bottom line impact, food service managers will have to increase top-line revenue many times over, so why spend money to make money if it isn’t necessary?
Manage Inventory To Manage Costs
In food service especially, no other component of the supply chain is as closely related to customer service, customer satisfaction, and cost reduction as is managing inventory.
Fresh, high-quality ingredients, including a variety of seasonal fruits and vegetables, keeps residents in good health and can serve as a differentiator to attract new customers.
A smoothly running supply chain recognizes that inventory is costly to maintain, and having the right amount of inventory to meet customer needs is essential.
With changing tastes and more dining options available to individuals, nursing home and assisted living managers need to strike a balance between making sure that the food service program is well stocked, but not overstocked with excess inventory.
Following are four tips to help managers get a handle on inventory and the creation of an inventory management system:
- Know the ABCs of inventory. Evaluating usage trends to get a sense of the most ordered items will often reveal that a large percentage of food that residents order, which is often as much as 80 percent, represents only 20 percent of total inventory. Creating an A-B-C ranking system of inventory usage helps managers predict replenishment rates. An ABC stock system classifies stock items according to criteria that determine their importance. For example, class A items would be the top 10 percent of items that have highest priority while class B items are the next set of items, perhaps, the top 20 percent, and so on.
- Get rid of dead stock. Determine when the last time inventory was truly assessed. In particular, take a look at the “received” date. Containers of foods that are used infrequently not only take up storage room but can also spoil, creating a hazard if inadvertently used. Implement a process for regularly checking and clearing old and out-of-date products from the inventory.
- Consider “just-in-time” purchasing. Some organizations have found that doing business without an inventory store room works well for their food service program. For a smaller facility, a system that brings in needed items a day or two before they are to be used may offer flexibility and cost savings. But it’s important to monitor product flow and have triggers in place to alert staff when a critical product is running low. Also, tracking variances over time and standardizing product selection are key to making a just-in-time ordering system work successfully.
- Consolidate and standardize. A good rule of thumb is that the greater variety of items offered to residents, the higher the overall inventory costs will be and the harder it will be to monitor usage. For larger facilities, it may make sense to reduce the variety of a certain type of food so that managers can negotiate better prices, service levels, and payment terms by increasing the volume purchased.
Consider Partnering With A GPO
A group purchasing organization (GPO) may be the solution for some food service managers. GPOs are organizations that leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of members. While GPOs are commonly used to purchase clinical products within the health care industry, some may not realize that they offer products to all areas of operation, including food service. If considering a GPO, here are some tips to get started.
- Talk to the purchasing department. Some communities are already GPO members. Then, begin discussions about accessing the purchasing contracts that are in place for supplies and equipment.
- Assign a person to manage the food service supply chain. This should be someone who knows the program and knows what products are used most, how the program runs, and what has worked with vendors.
- Invest in information systems. This effort will support the operational decision making the building requires. Alternatively, the GPO may have products or services that support data need.
- Continually look for standardization. To identify if there’s an opportunity to reduce the number of brands being used, managers should adopt policies and procedures to streamline and improve the menu and nutrition systems.
- Track appropriate metrics. The facility’s purchasing department may have appropriate metrics to monitor for cost and service. Establish a tracker that visually shows the progress of the metrics, and update it monthly.
- Partner with a distributor. With the support of a GPO, partnering with a distributor could help food service managers ensure that the facility is taking advantage of all the contract discounts available.
With demographic trends supporting growth, working with a GPO can provide facilities with quick solutions that yield lasting results.
Kelly Rodriguez is a strategic account executive at Provista, a leading supply chain improvement company that helps facilities in the health care, education, hospitality, and corporate markets improve their financial performance.