LAUREL, Md. -- The Retailer's Bakery Association here is making its profitability matrix computer program available this month, having completed field-testing of the retail aid.
The program, which is designed specifically to help retailers determine true or net profit per product, has been developed over the last year and a half by RBA in conjunction with the American Institute of Baking, Manhattan, Kan.
For the past four months, the program has been tested by a sampling of retailers ranging from small independents to large chains. Adjustments were made to the program as RBA received feedback from retailers during the testing.
"But the real beta test will be when it's out there in the world. This is Version 1.0. I'm sure there will be many more as people start using it in the workplace. Everybody's computer and particular experience differs," said Peter Houstle, RBA executive vice president.
Some retailers who have used the program were surprised at what their biggest profit-eaters are, Houstle said. "For example, some found that it was the layout of their production area or a particular piece of equipment that made their production inefficient and costly," he explained.
Time and motion studies carried out at AIB's facilities in Kansas were used to determine an average pace for each task in different production modes. Using the matrix, which covers the production of 50 different products, retailers can determine exactly what their costs are per product. From there, it's easy to set pricing per product to ensure an adequate profit, Houstle pointed out.
The user enters batch size, wage rates and production process. He also keys in his retail price points for each product. The program enables him to determine what percentage of the retail price his costs constitute.
Demo disks available from RBA offer a preview of the program. They take the user through production of chocolate chip cookies from a mix, Danish production from frozen dough and bread baked from scratch.
"Traditionally, supermarket in-store bakeries have taken their departmental labor costs and applied them to all products across the board, but if they do that, they're missing opportunities to make money and, in fact, could be losing money. Retailers need to focus on the products that make money for them," he said.
In that regard, Houstle added, "In-store bakeries would be far better off focusing their efforts on quality. They can differentiate themselves with quality, and set price points accordingly."
Supermarket in-store bakeries in particular need to put their product profitability in context with the rest of the store, because they're competing with the commercial aisle and the frozens department, Houstle pointed out.