Drops In Oil and Corn Continue

They made the recession official this week. Clearly, we can see the drop at the pump with lower oil costs making the refined product much cheaper. As the cost to get to work declines, disposable income increases. Even with less cheap credit available, this is a good trend for our industry.



Lower oil prices should help dispose of the hefty fuel surcharges at the bottom of your invoices. Our friendly distributors will enjoy much lower fuel costs and lower cost of sales. If you are on a cost plus contract, you'll be seeing much lower costs for many items.

Corn market prices continue to stay well below the brutal prices of this summer. Corn is everywhere in the food chain. My daughter is allergic to corn and we comb the aisles looking for staples made with sugar. It is always a challenge.

Lower corn prices will eventually lead to lower costs to feed animals. Meat and dairy prices should reflect this drop in the months ahead.


Source: TFC Commodity Charts

Commissary Question

Hello Joe,

I have been an avid reader of you blog for some time now & I have always wanted to ask you a question that I have not come across in your blog & I believe I have it.

We have just opened our CPU to help with consistency first & foremost with a hope to find savings from labor & food costs. What we have noticed is the running costs are something we need to work with & to accommodate them we are spreading them out over all locations, this in the end I find a little unfair as this isn't a reflection on the location “actual” costs. If you could point us in a direction to help the units show the better costs & how we should take care of the CPU expenses. We have discussed charging per item plus a percentage (5-7%), setting it up as a separate business ... Not sure which way we should turn...

With thanks!


Athanasios

I'd expect you to focus on expected CPU benefits and expected CPU costs. Benefits include: consistency, shared resources, shared production labor, lower unit production labor, lower unit investment in major equipment and large drop size for major suppliers. Costs include: packaging, delivery fleet, special equipment, maintenance on the fleet and equipment, delivery labor, administration expenses, rent of the CPU facility, insurance and many other unexpected expenses.

Try to avoid turning the CPU into a full blown warehouse with cases being broken down into smaller shipping units. Keep the initial focus on consistently producing high volume batch recipe items. Try to ship these key production items as cheaply as possible.

Encourage your units to avoid excessive deliveries by splitting the commissary expenses into production costs (allocated by shipping unit) and delivery costs (allocated by delivery). Build the production cost allocation into every container shipped. Higher volume units will bear more of these costs. Rather than a % method, I'd prefer a container charge. This charge would cover all non-delivery expenses associated with the CPU. If the CPU expenses were $200,000 per year and you shipped 100,000 containers, you would charge $2 per container.

The delivery costs should be allocated by actual deliveries. If you had 1,000 deliveries per year and the costs of the fleet (including maintenance), labor, etc. totalled $100,000, the cost would be $100 per delivery.

Some Good Books For Food Cost Control

Josh asked some great questions about yields and shrink this month. I recommend two books for more detailed information on standards. Francis Lynch has a new edition of his great reference tool The Book of Yields: Accuracy in Food Costing and Purchasing and I prefer the paperback book over the CD.

Mary Molt's classic catering book Food for Fifty (12th Edition) has excellent yield and standard portion information.

You can also get yield information on meat from the must have industry standard. The NAMP's The Meat Buyers Guide : Meat, Lamb, Veal, Pork and Poultry has zero fluff. I love the tables at the beginning of each section.