The recent enquiry into the quality of aged care led Dietician Dr Cherie Hugo to research on more than 800 aged care facilities in Australia and found on average, homes were only spending $6.08 a day on food per resident.
“The dollar figure is far less than other adults in the community, who eat about $17 per days’ worth of food, and $2 less than is spent on Australian prisoners.”
In an interview with Graham Wood, Food Services Specialist at Expense Reduction Analysts, we discussed how you can find savings on the supply of food and related costs in order to maximise the quality of food, whilst not breaking the budget.
An accomplished senior Executive Manager in the corporate world, Graham has over 25 years’ international experience across manufacturing and services businesses. In Australia, he has held General Management positions with the Spotless Group and P&O Australia. He has previous work experience in the UK where Graham held senior Operations and Technical roles with some of Europe’s largest manufacturers, working with both Northern Foods and Unilever.
Graham, what is your experience with the cost per day of catering in aged care and other facilities?
I would say the generally our clients are spending at least $7.50-9/day on food. They come to us for assistance in reducing their costs, whilst maximising the quality of the produce they are purchasing.
Is there a competitive market for sourcing food and catering supplies in the Perth market?
If your organisation is purchasing food and catering supplies, you are likely to have been led to believe that there is little competition and that your options for buying more cost-effectively are limited or non-existent.
A few examples might be:
- Your meat supplier may tell you that prices have increased due to market conditions with the effects of the drought and that much of our meat is being exported.
- Your general products distributor will charge whatever they say the going rate is for your preferred items.
- Dairy suppliers will no doubt have told you that cream and cheese prices have increased considerably.
- Fresh produce prices are changed on you almost daily with ‘market conditions’.
- What suppliers rarely seem to do is reduce prices when market prices drop!
Despite these claims, if approached in the correct way, there certainly is a competitive market in Perth.
How can organisations be sure they are accessing competitive prices?
Consumers need to be able to access real information about what’s happening in the market. This could be through looking at Perth market price reports, or Australian industry price reports. That way, suppliers’ claims can be checked.
Where do you find that clients are typically overpaying?
- By buying a level of quality of goods which is higher than what is required and not knowing the best value option available for each item.
- By suppliers substituting a more expensive brand for the one which is the client’s preferred brand – sometime a supplier will claim the preferred brand is out of stock and will supply the more expensive brand. This may be done without any advice being given to the client about the substitution.
- Overstocking – some situations where the supplier is doing a weekly stocktake and re-ordering unnecessarily.
- Are supplier specials really for your benefit – or theirs – to reduce unwanted stock levels?
- Are the packs you are buying the right size for your needs – is there wastage because of over-sized packs? It is important to know which the best size for your needs is.
How does the customer assess the opportunities for savings when looking at competitive offers?
Most companies will generally have a panel of suppliers covering the different segments of their food services, for example; dry goods, meat and chicken, dairy and bakery. There are multiple suppliers of all these products in Western Australia, and it may also be possible to consolidate the number of suppliers and make savings that way.
We see many organisations receiving deliveries two or three times a week, from multiple suppliers, and paying invoices too often. Consolidating the number of suppliers and reducing the frequency of payments can bring the cost of processing invoices down significantly.
For example, if there are five suppliers delivering twice a week, that would mean 10 payments/week (40/month). If the number of suppliers was reduced to three and payments were made monthly, that would reduce the number of payments to 3/month. We estimate that it costs approximately $50/invoice in the cost of processing and payment. So, there are significant savings to be achieved there alone.
Another factor to consider is the cost per serve or the cost of food per person per day. It is important to track food costs and ensure that the cost of food corresponds to the number of people being fed.
What value would be added if Expense Reduction Analysts were engaged to review these costs?
We are reviewing many different organisations’ food costs at any one time. This gives us access to up-to-date benchmarking information. It also gives us leverage with suppliers who are keen to win attractive accounts and are consequently very competitive in their quotes.
We review the food costs on an ongoing basis to ensure that the savings are maintained and that any price increases are checked to be appropriate and in line with real market conditions. With fixed-term pricing put in place, Expense Reduction Analysts is able to undertake a complete audit of all invoicing and ensure that the price actually paid is the price agreed. This saves our clients’ significant extra costs from frequent supplier overcharges.
Having an external consultant such as Expense Reduction Analysts also frees up an organisation’s internal resources to get on with the business of running their core business. Most of our clients are time-poor and value the benefits of having a specialist reviewing and monitoring their food costs.