There are many moving parts to controlling food costs and the price being paid is only one factor.  The other key components impacting food costs are:

· The Menu
· Waste
· Portions
· Purchasing
· Theft

The most critical component of all of the moving parts is the Menu.  The Menu can impact areas such as:

· Products purchased
· Labor required
· Per resident day costs
· Nutritional supplement requirements
· Resident satisfaction
· Food service equipment needed

All of the above components tie into not only your food costs, but labor costs as well.

Standardized recipes need to be used and followed.  If they are not followed and additional ingredients are added, this seemingly small change can add significant costs to the food service department.

Many times recipes have been developed for the ideal number of residents to be served but unless you are at 100% occupancy, over production may be taking place.  To determine what this would cost, you take your per resident day food costs and multiply it by the number of empty beds and you will see how this really can add up during the year.  Also, keep in mind that over production may increase your labor costs. 

ADVERTISEMENT:  Dietech, our software that can help you track and manage your resident’s dietary and nutritional needs, allows you to produce the exact number of meals required, not some rounded up number.

The portion size on each meal is another area that needs to be reviewed as menus are changed.  An easy way to determine if portion sizes may be too large or a particular item on the menu is not being well received is to watch the trays come back after meal time and note what is left on the trays.  The portion cost is not the per unit cost.  Too often we consider for example that 6 #10 cans are equal so everything is based on the case price to calculate the per unit cost; however, quite often different brands have more edible portions than others so using the case price is not the best way to determine if you are getting the best deal.

Purchasing is about more than just price.  Purchasing too much or too little increases costs.  Purchasing too much may create storage issues, money being tied up while inventory sits, food spoilage, as well as theft since it is easier to take something when there is a lot sitting on the shelf. 

Purchasing too little can cost you if unnecessary trips to the store are required, buying off contract and therefore, higher prices, a lack of consistency of the product and not having material safety data sheets on required products.

Finally, theft certainly can add to your costs.  Systems need to be put in place to as they say “keep the honest employees honest”.  There is no fool proof method but constant vigilance needs to be enforced.  Employees are not the only potential culprits; delivery people, sales people and unauthorized individuals may represent a potential problem as well.

So as you analyze your cost reduction opportunities, look beyond just the price of the product to where the real savings can be achieved.

Doing a comparison of prices is the easiest step in what should be a multi-faceted approach to securing the best price.  Too often to the detriment of the facility, this step is the only one undertaken and usually the lowest price is chosen without taking into account other very important factors and steps needed to secure the best deal.

Of course the number of steps that need to be taken to obtain the best price will vary based on the product, its complexity and relationship in use to other products.

Provided below are factors to take into account to achieve the best price, not necessarily the lowest price: 

1. Does the product come in different sizes or quantities per case that will provide a lower cost per unit used?
2. If the product is one that the quantity used is less than the package size, can the balance of the product be used or is it thrown out?
3. Is there another product that can perform the same function at a lower cost per unit used?
4. Is the product readily available through your normal distributors or will it require a special order?
5. Is there a minimum quantity that you will be required to purchase which could add to your inventory costs?
6. Is the product used in conjunction with other products, what is the impact?
7. Will training of staff be required and if so, how much time will be taken away from their normal responsibilities?
8. Can technology be used to reduce staff time and/or make the products use more efficient?
9. Can converting to a new product free up staff time?
10. Can you change your process to reduce or eliminate the need for this item?
11. Talk with other facilities, your group purchasing organization and suppliers to determine if there are other options.
12. What is the length of price protection?
13. Will the product improve the health and well being of your residents?

If you would like to learn more about controlling costs, please visit our website at www.primeservicesinc.com, or if you would like to meet with your PRIME Service’s Representative to discuss opportunities to control costs at your operation, please call our office at 866-585-3344.

All suppliers want to be the primary vendor to your operation given that you of course meet minimum orders and pay your bills timely.

The two key reasons for utilizing a primary vendor are better overall pricing, as well as better service.  Of course a prime vendor program should provide additional benefits such as fewer deliveries, fewer invoices, fewer items backordered and much faster response time to any problems.

When evaluating a prime vendor program as opposed to splitting your orders between two or three suppliers, you of course need to take into consideration the above points.  These points need to be weighed between the use of a prime vendor program and multi-vendor approach.

A prime vendor relationship must be established for a definite length of time.  The suppliers that were not successful in becoming your primary vendor should be given the reason and when they will have another opportunity.  It is important to maintain a good relationship with suppliers that were not awarded your business as things change and you may need to call on them during the course of your agreement.  You want these suppliers to be responsive to you and this will only happen if they feel they have a fair opportunity to gain your business at the conclusion of the current agreement.

Too often a prime vendor relationship becomes an on-going relationship with no definite length of time agreement.  In almost all of these cases, the prime vendor loses sight of the value and importance of your relationship and starts to take it for granted.  Ultimately you may be treated as just a me-too customer and all the initial benefits are gone.  Yet many operations stay in this primary vendor relationship because they are afraid of change and know that even if the service and pricing is not as good as it used to be, it is still a known entity versus exploring other options.

In any relationship with suppliers, we must remember that there will be a time when changes will have to be made.  Allowing any supplier to become securely entrenched in your operation will increase costs and decrease service levels as they start to take your account for granted.

• Prime vendor programs work when definite time frames are established.
• Prime vendors should provide better costs and service.  This must be monitored.
• Work with other facilities or your Group Purchasing Program to organize a prime vendor program that will provide more purchasing power.
• Maintain a good relationship with the suppliers not awarded the prime vendor agreement.
• Don’t become overly comfortable with just one supplier.

A term that we seem to be hearing about more and more is “Managed Order Guide”.  A managed order guide helps direct the person placing orders to the specific product that has been approved for use at your operation. The purpose of the managed order guide is to maintain a consistency in terms of the product being ordered.  The product that has been approved for use within your organization should have been evaluated for quality as well as price considerations.  These product evaluations must be an on-going endeavor and not a one-time event.

The products that your organization has evaluated and decided on are products that meet the needs of your operation; therefore, product substitutions by your supplier need to be frowned upon.  The managed order guide, in addition to providing a brief description, should also provide the following:

• Brand name
• Pack and size
• Price
• Distributor and/or manufacturer number
• Inventory level to maintain

An effective managed order guide will keep quality of product consistent, as well as lower total costs.  The guide lowers total cost because of the product evaluations that have and continue to be conducted, as well as discouraging off inventory ordering.  In the many situations we have studied, off inventory ordering is one of the largest contributors to increased costs and inconsistent product quality.  Also, keep in mind that a Material Safety Data Sheet may be needed for new products that are brought into stock.

A managed order guide can work equally well within a manual or automated ordering system.  The key to a successful managed order guide is the constant evaluation of products being ordered and the consistency in ordering the same approved products.

Finally, as the economy has not improved and people as well as companies have become more desperate, order scams have increased. A managed order guide along with the approved list of suppliers goes a long way in helping to insure that your operation is not victimized by a scam.

Each year during August, September and December, office supply usage goes up.  We have tracked this usage for the last seven years.  During August and September, your employees may find it easier to grab some supplies for their school age children than running to the store.  In December, these same items make great stocking stuffers for the holidays.

The money spent on office supplies is only one to two percent of your budget, yet these supplies cause much more of a headache because everyone seems to have an opinion on what they want.  It is important to control the office supplies provided for people to do their job.  An order guide of approved supplies should be  created and adhered to.  There should be no off contract order guide purchases allowed.

An order guide will also help to standardize the supplies used and therefore keep costs down if done properly.  For example, at one facility, they were ordering pastel colored post-it-notes at twice the cost of the single colored post-it-notes because the pastel color matched the wallpaper in an office.  Further, don't assume that smaller 5" x 8" ruled paper pads are less expensive than the 8 1/2' x 11' ruled pads.  Many times the office supply distributor gets better pricing on the products they do a larger volume on and in this case, it would be 8 1/2" x 11" paper pads.

Five easy steps to control office supply expenses are:

1.  Create a standardized order guide.

2.  Utilize bids with net pricing for the items on your order guide.  The PRIME Service's Group Purchasing Program can help.

3.  Monitor inventory levels.  Overstocking of supplies costs money because invoices will be paid long before the supplies are used and it increases the chances of pilferage.

4.  Talk to your office supply distributor to see where they get the best deals and use these items in your order guide.

5.  Communicate your office supply ordering policy to all staff.  Orders should be coordinated through one department not placed by several departments. 

Don't waste money, let PRIME Services assist you in reducing costs, increasing cash flow and improving operational efficiency.

Every two or three years most long-term healthcare facilities go out to bid for their food and associated supply needs; however, every year it seems the cost per resident day increases. The question that must be asked is, is the overall increase in costs per resident day justified? It is not enough to create a Request For Proposal (RFP), receive bids back from the distributors and choose what is considered to be the best proposal. An active involvement must take place on an on-going basis to evaluate and re-evaluate all factors that contribute to the expense of running the food service department.

It is easy to say that the food and supplies have been bid out. It takes a very dedicated effort to keep costs per resident day down. This effort needs to encompass activities such as:

• On a quarterly or semi-annual basis, run a descending dollar report. Understand these expenses and how you may be able to reduce them. Typically about 20% of your physical items will be responsible for about 80% of your spend.
• Question the size of products being purchased in terms of waste as well as determining if a smaller size may be a better value.
• As new menus are implemented, have a supervisor in the dish room watching what food and supply items were not eaten or used. Evaluate whether these items should be on the menu or placed on the resident’s tray.
• Monitor and understand your costs per resident day overall and by category. How do these per resident day costs compare with other facilities.
• Technology can be a great tool to improve operations and reduce time spent on repetitive actions.

Improve Food Service Department Operations and Reduce Costs:

In the majority of long-term care operations, food is the number one supply expense and therefore, all costs associated with it must be evaluated on a regular basis.  Below are 25 suggestions to help you keep your food service department costs in line and improve operations.

• Use a purchase order system. 
• Understand inventory turnover and at what level your categories of products should be at. See our news story on Inventory Turnover.
• Understand how your distributor prices your account by "markup" or "margin", a big difference in terms of what you pay. Note most operations think they are on "markup" but are actually on "margin" and are therefore paying more.
• Check and verify all deliveries.
• Use a scale to weigh appropriate products.  Understand what you are weighing, for example, product or ice.
• Check prices and verify that you are paying the correct prices. For more information please see our new story on Invoice Price Verification.
• Use a Group Purchasing Program to help you lower costs.
• Decide where brand names are needed and where house labeled products can be used.
• On a regular basis, evaluate products by doing blind cuttings to verify that you are receiving the quality expected and that there is not a better product fit for your operation.
• On at least a yearly basis evaluate potential distributors.
• Make sure your distributor advises you of any specials available.
• Don't be afraid to make changes.
• Be aware that product theft will cost your operation.  Implement procedures and systems to reduce this risk.
• Perform intake studies on a regular basis. Understanding what residents are not eating will help lower your food and supplement costs by providing meals that are consumed by the residents.
• Monitor your meal cost per resident day see how it compares to similar operations.
• Know your labor cost per resident day and how it compares to similar operations.
• Employee turnover is a large expense to your operation. Understand how to reduce turnover.
• Keep informed of training programs to improve knowledge and operations for better resident care.
• Technology can be a great tool and time saver.
• Place orders electronically and utilize the reports available to improve your operation.
• If using a manual tray card system consider upgrading to an electronic version.
• If the food service department is performing resident care functions manually, consider upgrading to an electronic tool to manage and streamline all the resident care functions in a program like Dietech.
• Once you have automated your resident care functions use the available reports to help control your costs and implement procedures to improve resident care.
• Poor production control leads to increased costs.
• When creating your menu, understand products that can be substituted for one another and which ones are in season or more available as this will help to price out your menu at a lower cost.

We would like to hear from you if you have found other ways to reduce costs or improve operations.  Please send your success stories to info@primeservicesinc.com and if you would like us to mention your name, we will give you credit for your story on our website. 

Typically 35% of a long-term healthcare facility’s operating costs are non-labor. Of this amount, roughly half is attributed to the food service department. The director of food service has so many responsibilities that supply costs are often overlooked. It is certainly not from a lack of knowledge, but more from the standpoint of priorities and having the time to implement and monitor systems to control the dietary departments’ supply costs.

If you feel that your costs per resident day are not in line with where you think they should be, we are providing below some suggestions to help. As with any system, this must be an on-going process and not a one-time event. Some of these ideas are fairly simple to implement where others are more complex. If staff and/or time do not permit, PRIME Services can assist you in understanding how to lower your costs per resident day.

It is easy to say that the food and supplies have been bid out. It takes a very dedicated effort to keep costs per resident day down. This effort needs to encompass activities such as:

1. All orders should be inspected, verified and counted.
2. A scale should be used to weigh appropriate products.
3. Understand inventory turnover for dietary should be between 23-26 turns per year. Being outside of this range on either side it not good.
4. Understand how your distributor prices your account by “mark up” or “margin”. There is a big difference in the prices you pay between a 10% markup vs. a 0% margin.
5. Place orders electronically and utilize reports available to improve your operation.
6. Product theft will cost your operation. There should be controls on all exit doors and delivery areas.
7. An order guide should be followed based on what is on the menu. Items that are ordered and are not on the menu need to be questioned.
8. On a regular basis, evaluate products by doing blind cuttings to verify that you are receiving the quality expected.
9. Don’t allow suppliers to substitute products without your permission.
10. Don’t allow suppliers to go into your storeroom and determine what is needed.
11. Do you know how your costs per resident day compare to other facilities similar in size?
12. Make sure staff knows how to use equipment and does not use excess products/supplies, thinking that if one is good, two must be better.
13. Use a Group Purchasing Program to help lower your costs.
14. Check prices and verify you are receiving the correct contract prices.
15. All suppliers must be thoroughly evaluated and preferably a request for proposal should be sent to competing suppliers at least every two years to keep your pricing competitive.
16. Communicate with suppliers to let them know of any problems and learn from them, ways to reduce costs such as increasing order size, taking fewer deliveries, buying close out items and what specials they may have.
17. If products come in damaged or not at all, make sure you receive the appropriate credit on your invoice.
18. If using a manual tray card system, consider upgrading to an electronic version to save on time.
19. If you are performing resident care functions manually, consider upgrading to an automated system to manage your residents’ needs.
20. Don’t assume larger sizes are less expensive than small sizes on a comparable basis, like per ounce.
21. Intake studies are time consuming, but they can help understand what residents are not eating. This information if used properly, will help to lower foods and supplement costs.
22. Technology can be a great tool and time saver.
23. Don’t be afraid to make changes to benefit your facility.

PRIME Services has worked with many facilities to assist them in establishing systems and helping monitor them to reduce total costs. You may not have the staff and/or time and this is where can assist you and bring a focus to this area.

For more information, please contact Valerie at 866-585-3344, Ext. 115, or email valeried@primeservicesinc.com.

Thank you