Cutting costs is always a challenge, but it is even more difficult-and
important-in the current economic atmosphere. FSD talked with Fredrick
Girard, director of nutritional services at 169-bed Cheshire Medical
Center, Dartmouth-Hitchcock Keene Clinic in New Hampshire, to find out
how he is cutting costs to boost profits.
In what creative ways have you reduced labor costs?
Due to decreasing patient activity and belt-tightening by facility employees, our overall meal volume is decreasing. In order to maintain productivity, we have had to reduce hours. Several methods to accomplish this are: Ask for volunteers to take time off, adjust schedules to match expected patient activity, don't call in relief to cover unexpected absences, use management labor to supplement hourly staff and reduce service levels for things such as floor stocks and catering in order to reduce hours. We are also closely watching sales volume using our POS to uncover any opportunities related to decreasing demand at our various food service stations.
How have you reengineered your menu to cut costs?
We have reduced the meat proteins offered on our salad bar and sell these separately from another location. We have implemented a self-service fruit and yogurt bar sold by weight so margin is maintained. We have eliminated expensive packaging from our home meal replacement items. We sell more ethnic casseroles, which has helped reduce food costs as well as added interest to the menu. We have eliminated all bottled beverages from our catering services, which has been a huge savings, as well as an important part of our Healthy Food in Healthcare Pledge.
What changes have you made in your purchasing practices to cut costs?
Instead of relying on our GPO distributor, we aggressively shopped all our available produce vendors and have been able to reduce our cost tremendously by doing this. We hold our fresh produce vendor accountable on price by being persistent in our evaluation of all competing pricing and we inform [the vendor] when we notice our market basket cost creep up compared to competing vendors. Fresh fruit and vegetables are a huge part of our budget and this has given us enormous savings over our past practice without having to cherry-pick the vendors. Also, we recently performed a detailed audit of the value our GPO distributor was bringing to us. We [used that audit to push] a competing national distributor very hard on price to ensure we were indeed maximizing our value before resigning with our GPO distributor.
How do you cut costs without sacrificing environmental/healthy practices?
We integrated the Healthy Food in Healthcare Pledge into our department mission and vision statement. Not only do we wish to achieve maximum financial responsibility, but we also ensure our decisions aren't contrary to our commitments under the pledge. We still source local and organically grown products when available to us, we watch for opportunities to reduce the waste stream as well as save money-usually these happen together anyway-and we structure our services and menus in such a way that we encourage healthier food behaviors. We provide choices in our retail operation as well as catered functions that reduce unhealthy choices and increase healthy choices. The healthier choices are priced marginally lower than the unhealthier choices. By doing this, we promote whole-grain breads, whole-wheat pasta, more vegetable-based proteins, ovenable fries, etc. Eliminating bottled beverages from catering functions was huge; It's a healthier food behavior, as well as cost saving.
At what point do you feel it is necessary to raise prices/pass off increasing costs to customers?
We use our POS system to watch volume and contribution margin. We are most concerned with increasing raw cost on our high-volume movers. Often we will make menu adjustments to try and stimulate volume on the highest margin menu items before considering price increases. However, when we notice a vendor cost increase impacting our overall dollar margin, we will pass on the marginal increase in the form of a higher price. Most recently we were able to reduce the price per pound on our salad bar by removing the high-cost proteins and replacing these with more vegetable proteins. We then increased prices on low-volume movers, such as calzones and pizzas, which incidentally were considered less healthy. In this way we maintained margins as well as enhanced our pledge accountability.