Successful Service Department Management

Transcription

1 Successful Service Department Management Course 5: Managing Direct Expenses A Management Series for Supermarket Deli, Bakery and Cheese Department Managers

2 Course 5: Managing Direct Expenses Successful Service Department Management A management Series for Supermarket Deli, Bakery, and Cheese Department Managers PO Box 5528 Madison, WI education@iddba.org First Edition 2011, International Dairy Deli Bakery Association No part of this publication may be altered without the express written permission of the International Dairy Deli Bakery Association. The information presented in this book has been compiled from sources and documents believed to be reliable. However, the accuracy of the information is not guaranteed, nor is any responsibility assumed or implied by the International Dairy Deli Bakery Association.

3 Successful Service Department Management Series About This Series The Successful Service Department Management series has been designed specifically for deli, bakery, and cheese department managers. Its purpose is to provide you with the information you need to manage your department successfully. Whether you are a newcomer to management or an experienced veteran, this educational series will help you gain knowledge of the workings of your department. This series is divided into seven courses: Course 1: Understanding the Concept of Profit Course 2: and Merchandising Course 3: Increasing Gross Margins Course 4: Controlling Inventories Course 5: Managing Direct Expenses Course 6: Developing a Profit Center Team What You ll Learn: How to determine profit, margin, and gross margin for your department s products and for your department. How to use merchandising techniques to increase sales in your department. To explain where shrink comes from and how to reduce it in your department. How to write an effective order for your department. To read a department profit & loss statement knowledgeably. To write a department schedule that maximizes customer service and profitability. How to build employee motivation through training and communication. Successful Service Department Management includes six courses, a Final Quiz, a Final Quiz Answer Key, and an Associate Tracking Tool. As you work through this series, you ll find: Exercises Skills Enrichment Activities Answer Keys PDF Links to FREE Job Guides at IDDBA s Web site How To Get The Best Results This Successful Service Department Management training series has been designed for you to take all six of the courses from start to finish or to choose course subjects based on your needs. To get the full benefit of the series we recommend that you take one course per week in the order we ve provided and complete the Skills Enrichment Activities (SEA). However, you can customize this based on your available training time, what works best for you, and the needs of your business International Dairy Deli Bakery Association i

4 Successful Service Department Management Skills Enrichment Activities The Skills Enrichment Activities are at the end of each course. They will help you further your professional development by giving you a chance to apply the knowledge and skills you ve learned in each course. Using information unique to your department, the SEA process will give you insight that could impact department profitability and prompt you to make new management decisions. It will also help you examine new ways to motivate and inspire your team. You may choose to do one, several, or all the enrichment activities. IDDBA Job Guides for Department Associates Some of the concepts and skills you learn will be helpful for your department staff to know. After all, an inspired, motivated team is one of the best investments you can make in your pursuit to greater profitability and customer engagement. These free, downloadable IDDBA Job Guides cover topics like Understanding Profit, Reducing Shrink, the G.R.E.A.T. salesmanship model, etc. Use them during on-the-job training and coaching sessions. Progress Record Use this Progress Record to keep track of your course and exam completions. Course Name Completion Date Skills Enrichment Activities Completion Date Job Guides Used Course 1: Understanding the Concept of Profit A: Category Profit Analysis B: Department Operating Report Understanding Profit Course 2: and Merchandising A: Store Display Test Capturing Impulse with G.R.E.A.T. Success B: Plan an In-Store Promotion Sign Management and Effective Communication A: Generating Profit by Increasing Prices Course 3: Increasing Gross Margins B: Generating Profit by Promoting High-Margin, Slow-Moving Items C: Generating Profit by Determining Which Categories Should be Promoted Course 4: Controlling Inventories Course 5: Managing Direct Expenses Course 6: Developing a Profit Center Team Final Quiz A: Analyzing Ordering Methods B: Ordering for a Difficult Category C: Analyzing Mark-Downs D: Analyzing Other Sources of Shrink A: Tracking and Creating an Hourly History B: Creating a Task List C: Creating a Daily Assignment Schedule A: Improving the Interviewing and Orientation Processes B: New-Hire Questionnaire C: On-Going Positive Feedback Challenge Reducing Shrink ii 2011 International Dairy Deli Bakery Association

5 Course 5: Managing Direct Expenses Direct Expenses In earlier courses in this series, we ve covered three areas vital to increasing the overall profitability of a department: building sales, increasing gross margins, and controlling shrink. In this course, we ll look at another area that can significantly impact the department s gross profit contribution managing direct expenses. Direct expenses are the costs charged to the department for all labor, supplies, and transportation required to operate the department. What You ll Learn: How to Write an Effective Schedule How to Control Supply and Packaging Cost How to Control Transportation Cost How to Calculate Your Department s Contribution to Overhead As you would expect, these expenses vary depending on sales. As sales increase, you ll need more hours to meet customer needs and more supplies to package products. For that reason, it is important to track direct expenses in relation to sales. Although the dollar amount of direct expenses may go up as sales rise, as a percentage of sales, expenses should remain about the same or even go down. As you can see, managing direct expenses does not necessarily mean reducing expenses. Rather it means monitoring expenses to be sure they are not increasing disproportionately to sales. The controllable costs that make up direct expenses include : Wages and salaries Supplies and packaging Transportation As you may have noted on our sample Operating Report, wages and salaries are, one of the largest single direct expense in the department. To see how we might better control this significant cost, let s look first at scheduling International Dairy Deli Bakery Association 3

6 Successful Service Department Management Scheduling Writing a good schedule can be a challenge in any department. Some hours of the day are busier than others, some days of the week are busier than others, and some weeks of the month are busier than others. This variation in the workload makes scheduling especially difficult. Because scheduling is so important, many companies have developed their own systems and procedures to help managers do a better job. Since each company s methods are a bit different, the scheduling information in this course will show you one way to develop an effective schedule, which you can then adapt to your own needs. Regardless of what method you use, scheduling requires careful planning to avoid spending more hours than needed to get the work done or not spending enough hours to meet customers needs. Developing an effective schedule involves three types of activities: Projecting sales and labor needs Scheduling hours for the week Scheduling daily assignments Projecting sales and labor needs Before you can begin to schedule, you will need several kinds of information: The projected sales, or sales forecast, for the coming week in the department. Percent of sales for each day of the week The total number of hours to be scheduled for the week International Dairy Deli Bakery Association

7 Course 5: Managing Direct Expenses There are several ways to estimate, or forecast, your sales for the week. If you keep sales history from year to year, you can use the projections from your Fresh Item Management System: Start with last year s sales for the same week. Adjust the sales figure up or down by the percent your sales are running ahead or behind last year s figures. Adjust for any significant changes, such as holidays, special events, special promotions, and the like. If you don t have last year s sales, another way to forecast is to: Average the last four weeks sales to find average weekly sales. Adjust for any significant changes, such as holidays, special events, first of the month, and the like. After you arrive at your sales forecast, you need to determine what percent of your sales occurs on each day of the week. To find out, you ll need your daily sales for the last four weeks. Your store manager should have that information if you don t. Once you have your daily sales for the four weeks: Add the sales dollars for the four Mondays together and divide by four to find the average daily sales for Mondays. Do the same for the other days of the week. Now add each week s sales and divide by four to find the average weekly sales. Divide each of the average daily sales by the average weekly sales to find the average percent of sales by day. Skills Enrichment Activity A: Tracking and Creating an Hourly History Parts I & II 2011 International Dairy Deli Bakery Association 5

8 Successful Service Department Management E X A M P L E Scheduling You have 233 hours to schedule this week. Day % of sales #of hours Sunday 11% 25.6 hours (11% 233) Monday 9% 20.9 hours (9% 233) Tuesday 13% 30.3 hours (13% 233) Wednesday 13% 30.3 hours (13% 233) Thursday 15% 35.0 hours (15% 233) Friday 19% 44.3 hours (19% 233) Saturday 20% 46.6 hours (20% 233) When finished, your breakdown should look similar to this: Percent of sales by day Sunday 11% Monday 9% Tuesday 13% Wednesday 13% Thursday 15% Friday 19% Saturday 20% 100% The final piece of information you need before you start scheduling is the target number of hours to schedule for the week. Most organizations give their managers a labor target for their department. If not, you can use your past sales and scheduling history as a basis. Once you have these numbers, you are ready to start writing the weekly schedule. Scheduling hours for the week Scheduling for the week involves deciding how many hours will be scheduled for each day of the week. Since the hours to be scheduled are based on the expected sales, you can use your breakdown of percent of sales by day to figure the number of hours to schedule. Once you know how many hours you have each day to work with, the next step is to determine what tasks have to be done each day and how much time each task will take. This brings us to the concept of fixed and variable hours International Dairy Deli Bakery Association

9 Course 5: Managing Direct Expenses Fixed hours are the hours required to do certain jobs that keep the department operating, even if there are no customers. They include activities like: Cleaning and sanitizing all equipment, cases, and surfaces Taking inventory and writing orders Keeping records Merchandising and setting up special promotions Checking in deliveries Setting up cases Variable hours are the total hours required to process products and serve customers. These include such activities as: Receiving and storing merchandise Preparing products Pricing, packaging, and displaying products Cleaning and sanitizing utensils Waiting on customers In many companies, the amount of time it takes to perform every fixed and variable task is already calculated for the manager as a scheduling tool. If your organization does not calculate the time required for fixed and variable tasks, you will need to make some estimates yourself. To do this: First, figure the time required for all fixed tasks. Decide how much time is needed on each day of the week for: Cleaning Administration/merchandising Setting up cases Deliveries 2011 International Dairy Deli Bakery Association 7

10 Successful Service Department Management Write down the total hours required by day Next, figure the time required for all variable tasks. Based on your projected sales for the week, decide how much time will be needed each day of the week for: Receiving and processing the load Preparing, packaging and displaying products, stocking shelves Replenishing cases On-going clean up Customer service Write down the total hours required by day Finally, add each day s fixed and variable hours together and compare to your target hours for the day. Make adjustments as needed to meet your targets. When you have determined your fixed and variable hours for each day of the week, you re ready to schedule daily assignments for each day of the week. Scheduling daily assignments The first step in scheduling any given day is to gain a clear understanding of the distribution of the work throughout the day. While the timing of the case set-up and production work is fairly easy to determine, the timing of customer service needs is usually harder to predict. A great way to help you analyze your customer service scheduling needs is to use hourly readings to create an hourly sales history for the department. Creating an Hourly History Obtain an hourly sales and customer reading for every hour the store is open, for at least four weeks. Enter the amount of sales by hour and the number of customers by hour on a daily form. (After four weeks, you will have figures for four Mondays, four Tuesdays, etc.) International Dairy Deli Bakery Association

11 Course 5: Managing Direct Expenses Add each day s sales, and each hour of each day s sales for all four weeks and divide by four to obtain an average. (Example: Add the sales for all four Mondays together and divide by four. Then do the same for each of the four hourly sales totals for Monday (for example, from 7-8 a.m.) together, then divide by four. Continue with the other days and times.) Do the same for the customer counts. Enter the average hourly sales and customer counts for each day on a weekly form. Total the average hourly sales and average customers per day across the bottom and calculate the percent of weekly sales that each day represents. Calculate the percent of sales per hour by dividing the hourly sales by the day s sales total. Once the form is completed, you will have a good picture of your service needs throughout the day. The sample chart on page 15 shows the sales and customer count for every hour that the store is open during the week. For each hour, the number of customers are shown in the left column; sales are shown in the middle column; and percent of the day s total sales that occurred during that hour is shown in the right column. One very effective way to schedule each day is to graph each job assignment on an hourly chart. To schedule each day, use the following sequence. Department workloads vary: 1. Beginning of day workload a. Food preparation b. Case set, stocking c. Customer service 2. End of day workload a. Final clean up 2011 International Dairy Deli Bakery Association 9

12 Successful Service Department Management b. Close down activities c. Customer service 3. In between workload a. Customer service b. Packaging c. Majority of cleaning activity These activities form the basis of your schedule. While the amount of work involved in each of these areas may vary each week, all of these daily activities must be scheduled. In addition to these every day tasks, there are tasks which are done only on certain days. You may need to schedule for special cleaning activities, building displays and placing signs for ad promotions. For example, cleaning the donut fryer may need to be done on Monday and building displays may need to be done on Wednesday. Add these special tasks to your list, under the day of the week they occur. The more detailed your list of activities, the easier it will be to schedule the work. Once you have listed all the tasks for each day, note the time frames in which each activity is best accomplished. For example, when should production of various items be done? When should cases be set? When will customer service be needed? When should close down begin? International Dairy Deli Bakery Association

13 Course 5: Managing Direct Expenses Note: The times listed indicate a range when it s best to do the task meaning that the task may be interrupted to do another task (usually customer service). It does not mean the task will actually take that number of hours to complete. BAKERY DEPARTMENT TASK LIST Every Day Tasks Best Time A. Production Donuts 2 a.m. 6 a.m. B. Production Breads, cakes, etc. 2 a.m. 6 a.m. C. Production Cookies, pies 11 a.m. 3 p.m. D. Packaging 6 a.m. 9 a.m. 2 p.m. 4 p.m. E. Set cases, stocking 6 a.m. 7 a.m. 3 p.m. 4 p.m. F. Break out 3 p.m. 7 p.m. G. Cake Decorating 6 a.m. 3 p.m. 4 p.m. 8 p.m. H. Major clean up end of each shift I. Customer service 7 a.m. 11 p.m. J. Close down 9 p.m. 11 p.m. K. Final clean up 10 p.m. 11 p.m. Daily Tasks Best Time Monday Cleaning donut fryer 9:30 a.m. 10:30 a.m. Tuesday Receiving and storing order 11 a.m. 12 p.m. Wednesday Build Displays 1:30 p.m. 3:00 p.m. Thursday Place signs for ad promotions 1:30 p.m. 2:30 p.m. Friday Special end-of-week cleaning 9 p.m. 11 p.m. Saturday Sunday Once you have an hourly sales history and a task list, you are ready to create a daily assignment schedule. A daily assignment schedule helps you to plan the number of shifts needed to complete the tasks on the task list for each day of the week. For example, given the week s promotions and anticipated sales, how many employees will be needed on Monday for each type of production work? How many people will be needed for packaging? For customer service? By building a daily assignment schedule that reflects your target hours and labor requirements each day, you are creating an effective weekly schedule with all activities planned for your employees. If you do not already use such a tool, the example shows how it can be done. The instructions that go with the form follow. Skills Enrichment Activity B: Creating a Task List 2011 International Dairy Deli Bakery Association 11

14 Successful Service Department Management How to Complete the Daily Assignment Schedule Day of the Week (1): Fill in the day of the week this schedule is for. Date (2): Fill in the month/day/year this schedule is for. Labor Hours (3 5): You ll need to know how many labor hours you ve been allotted for the week (3). Then figure the percentage of your weekly sales that will be sold on each day (from your sales history) (4). Multiply the number of hours for the week by the percentage of sales for the day. Write this number in Today s Labor Hours (5). Special (6): Note anything special about this day, date. For example, the day before Thanksgiving, week before Christmas, 4 th of July, SuperBowl, etc. Department Tasks (7): Write in the tasks that need to be done every day and other tasks that need to be done on this day of the week from your task list. Number of Employees Needed (8): Calculate the number of employees you ll need each hour your department is in operation, including production time. Schedule the production time first. Filling in the Schedule (9): If you need two people from 2 a.m. to 3 a.m., draw a line across the middle of the box for that hour in row one (to show the first employee) and in row two (to show the second employee). Continue through the hour boxes for that shift. If you need three people from 7 a.m. to 8 a.m., draw three horizontal lines in that column, moving down the rows. Remember to schedule breaks and lunches as needed, according to your store s policies. Continue through the day. When you are finished, there should be a line through each box where employees are needed. Hours (10): Write in the number of hours that person will be working if the shift is 2 a.m. 11 a.m., write 8 in the column. Total Hours (11): Add up the numbers in column 10 to double check your schedule. Shift Hours (12): Write in the hours the shift is for, such as 2 a.m. 11 a.m. Name (13): Finally, write in the name of the person who will be working that shift. Skills Enrichment Activity C: Creating a Daily Assignment Schedule Note: To get the full benefit of this scheduling system, fill in the blanks for Name (13) and Shift Hours (12) last. The idea here is to create a picture of your actual scheduling needs for each day. Then you can define the shift by writing in the hours in (12) and assigning the shift to the person (13). Planning a daily schedule with individual work assignments gives you a highly organized, productive workflow that eliminates wasted labor hours International Dairy Deli Bakery Association

15 Course 5: Managing Direct Expenses Daily Assignment Schedule 1 Day Saturday 2 Date 9/5/20 3 Labor Hrs. for Week Today s % of 13.8% 5 Today s Labor Hrs Special N/A Shift 1 AM PM Hrs 8 Emp. Needed X X ½ 3 2 2½ X Name 2a 11 A D/I H 8 2a 11 B D/I H 8 6a 3p D/E E/I 8 7a 4p G/I I/H 8 11a 4p C/I I/H 4½ 3 8p I/G H 4½ 4 10p I/F I/K 5½ 6 11p I I/J 5½ 7 Department Tasks: a. Production: Donuts b. Production: Breads, Cakes c. Production: Cookies: Pies d. Packaging e. Set Cases/Stock f. Break Out g. Cake Decorating h. End-of-Shift Cleaning i. Customer Service j. Close Down k. Final Cleanup l. 11 Total Hours International Dairy Deli Bakery Association 13

16 Successful Service Department Management Tips for effective scheduling A good schedule is one of the department manager s most important tools for managing the department effectively. When writing the schedule, here are a few tips to keep in mind. Schedule to clean as you go. Clean-up is a part of every job performed in the department. It should be a part of everyone s assignment. If equipment, utensils, and counters are kept clean throughout the day, the final evening clean-up will be a manageable process. However, if all clean-up work must be done by the closing shift, chances are something will suffer either customer service or sanitation standards. Avoid rote scheduling. A schedule is only as good as the planning that goes into it. Writing the same schedule week after week is a sure way to create long-term problems in the department. Each week s schedule should reflect your weekly merchandising plans, your anticipated changes in sales volume, any seasonal changes or upcoming holidays, as well as changes in production requirements. Schedule key people for complete coverage. One common pitfall in department scheduling is unbalanced scheduling that is scheduling all key people for the same shifts and the same days off each week. To provide the best coverage for the department during all the hours it is open, you will need to: Schedule at least one supervisory person to work each shift to oversee staff duties during all open hours. Rotate key people s shifts and days off so that they can work with newer employees during both days and evening hours. Vary department managers schedules to work some evenings and Sundays so that you are aware of total department operations throughout the week. Schedule training time for new employees. Your department is only as good as the people who staff it. While scheduling training time may cost money in the short run, it will pay off in the long run. When scheduling a new trainee, you ll need to carefully consider who provides the training. At least a portion of the trainee s time should be spent with the department manager International Dairy Deli Bakery Association

17 Course 5: Managing Direct Expenses Hourly History Hours Sunday Monday Tuesday Wednesday Thursday Friday Saturday # Cust. % # Cust % # Cust % # Cust a 7 8 b 3 c 16 d % # Cust % # Cust % # Cust % e Total $1801 $1036 $1198 $1122 $1697 $2009 $2197 f % /Day 16.3% 9.4% 10.8% 10.1% 15.3% 18.2% 19.9% g Total Cust h Total Weekly $11,060 a The hour being reported b Number of customers c Dollar amount of sales for that hour d Hourly repcent of day s sales e Total dollar amount of sales for the day f Percent of sales for that day (divide total sales per day by the total sales for that week) g Total Customers h Total weekly sales 2011 International Dairy Deli Bakery Association 15

18 Successful Service Department Management Exercise 1: Scheduling 1. You are writing your sales forecast for next week. According to your records, last year s sales for the same week were $5,270. This year, department sales have increased 3% over last year. In addition, next week is Easter week. Last year Easter fell much later, so sales next week will be much stronger than last year. According to your promotion records, Easter sales last year generated an increase of $1,480 over an average week. Given these factors, what should you forecast for next week s sales? 2. To write your schedule, you need to figure out how many hours to schedule on each day next week. Your projected total hours for the department next week are 192. Using the breakdown of percent of sales by day, calculate how many hours you should schedule each day. Sunday 12% Monday 10% Tuesday 11% Wednesday 12% Thursday 14% Friday 20% Saturday 21% International Dairy Deli Bakery Association

19 Course 5: Managing Direct Expenses 3. The hourly sales history on page 15 is quite interesting, especially Saturday night. The sales and customer counts (cc) show the following: 9 10 p.m. $83/cc p.m. $55/cc 13 Looking at the department Daily Assignment Schedule, will you have enough help to take care of customer service needs through 11 p.m.? The Daily Assignment Schedule on page 13 shows a major clean up at the end of every assigned job in the department. Why do you think the manager scheduled that way? Answer Key page International Dairy Deli Bakery Association 17

20 Successful Service Department Management E X A M P L E Contribution to Overhead Total sales = $20,000 Total gross profit = $9,500 Direct expenses = $7,680 (including labor) Contribution to overhead = Gross profit Direct expenses $9,500 $7,680 = $1,820 Contribution to overhead is $1,820 E X A M P L E Net profit after Contribution to Overhead and Indirect Expenses Total sales = $20,000 Indirect expenses are 5% of sales $20,000 5% = $1,000 indirect expenses Total gross profit = $9,500 Direct expenses = $7,680 $9,500 $7,680 = $1,820 contribution to overhead Net profit = Contribution to overhead Indirect expenses $1,820 $1,000 = $820 Net profit = $820 Supply and Packaging Cost Another area of direct expense that must be monitored is supply and packaging cost. Overordering on supplies is not only unnecessary, it is expensive. Every cup, box, bag, tray and lid that you order is charged to the department and subtracted from gross profit. Although supplies may not seem like much, they can be quite costly. Here are some tips to help control supply expenses: Keep all supplies in one place. Keeping supplies organized and in one location lets you see what you have and what you need to order. When supplies are scattered, it is easy to over order. Put one person in charge of supplies. That person can monitor ordering needs and alert you when you are running low. Keep supplies conveniently located at the counter. Keeping supplies available and convenient minimizes the chances of adding extra expense by using the wrong-sized containers. To make sure you don t run out, re-stock supplies in the morning and the afternoon. Transportation Cost One kind of direct expense that most managers don t think about is transportation. Sometimes when a truck delivers product to your department the cost of that service is charged to your department. These charges can be included in cost of goods or as a direct charge to your department. To minimize this expense, many companies are limiting the numbers of deliveries and/or are taking advantage of special prices or allowance programs that reduce the impact of transportation expenses. Many times, you will not have a choice as to the method of delivery. However, potential transportation cost is something to consider International Dairy Deli Bakery Association

21 Course 5: Managing Direct Expenses Contribution to Overhead Contribution to overhead is the term used to describe the final profit figure that the department manager is accountable for. It is the amount of gross profit remaining after all direct expenses have been deducted. Although contribution to overhead is the number that managers are held accountable for, it is not the final amount of profit for the department. To arrive at net profit, we first have to subtract indirect expenses. Every department in the store is charged for its share of indirect expenses meaning expenses incurred by the store as a whole that must be portioned out to each department. Indirect expenses include costs like rent and utilities, advertising costs, employee benefits, and payroll taxes. And they can be substantial anywhere from four to eight percent of sales. Out of $20,000 in sales, our net profit after all expenses were deducted was only $820. Now you truly understand why it is so important to build sales and profit. We have to make enough to have some profit left after all the expenses are paid. CURRENT PERIOD (THIS YEAR) 12/30/ TO 3/30/ 13 WEEKS PRIOR PERIOD 10/01/ TO 12/30/ 13 WEEKS CURRENT PERIOD (LAST YEAR) 12/29/ TO 3/29/ 13 WEEKS AMT % AMT % AMT % TOTAL STORE SALES 7,328, ,229, ,217,262 TOTAL BAKERY SALES 198, , , COST OF GOODS SOLD 95, , , GROSS PROFIT 102, ,554 86, DIRECT VARIABLE WAGES 28,483 40,377 39,012 BENEFITS 13,681 14,738 13,969 SUPPLIES 2,745 3,115 3,035 REPAIRS/MAINTENANCE 1,225 1,325 1,581 PROMOTIONS 1, TOTAL DIRECT VARIABLE 57, , , EXPENSES DIRECT FIXED TOTAL OCCUPANCY COSTS 17,754 17,754 17,754 ADVERTISING TRANSPORTATION INSURANCE 3,105 3,105 2,964 TOTAL DIRECT FIXED EXPENSES 22, , , CONTRIBUTION TO OVERHEAD 23, , , TOTAL INDIRECT EXPENSES 6, , , TOTAL OPERATING EXPENSES 85, , , NET OPERATING PROFIT 16, , International Dairy Deli Bakery Association 19

22 Successful Service Department Management Review of Course 5 Directions: Answer the following questions to check your knowledge of contribution to overhead and net profit. 1. Using the following figures, determine your contribution to overhead. $16,895 Gross profit $8,475 Direct expenses $6,212 Contribution to overhead 2. Using the example above, your indirect expenses are 5 percent of sales. What is your net profit for the week? 3. Over the last quarter, you have been focusing on managing your labor expense. Through better scheduling, you ve been quite successful. Your labor has come down from 20.52% of sales to 18.9% of sales. Assuming that quarterly sales were $219,635, calculate the dollar amount of your labor savings. (Use the same quarterly sales figures from both quarters.) 4. It is now one year since you started working on improving the profitability of your department. Each quarter you have made substantial improvements in your gross profit. The first quarter, you learned about factors that influence gross profit. As a result, in the second quarter, you were able to improve your merchandising to build your sales. The third quarter you were able to improve your profit margin on your sales. The fourth quarter, you were able to reduce your shrink. And this quarter, the first quarter of the next year, you have been able to reduce your direct labor expense. To see the overall result of your efforts, compare your contribution to overhead for this quarter to your contribution to overhead during the same quarter a year ago. (See page 19.) How much larger is your contribution to overhead now than it was a year ago? By how much has your gross margin improved? page International Dairy Deli Bakery Association

23 Course 5: Managing Direct Expenses Exercise 1: Scheduling 1. You are writing your sales forecast for next week. According to your records, last year s sales for the same week were $5,270. This year, department sales have increased 3% over last year. In addition, next week is Easter week. Last year Easter fell much later, so sales next week will be much stronger than last year. According to your promotion records, Easter sales last year generated an increase of $1,480 over an average week. Given these factors, what should you forecast for next week s sales? Last year s sales were $5,270. Forecasting a 3% increase: $5, = $ $5,270 + $ = $5, A 3% increase in last year s Easter week sales is $1, So, next week s sales forecast is $5, $1, = $6, To write your schedule, you need to figure out how many hours to schedule on each day next week. Your projected total hours for the department next week are 192. Using the breakdown of percent of sales by day, calculate how many hours you should schedule each day. Sunday 12% = 23.0 Monday 10% = 19.2 Tuesday 11% = 21.1 Wednesday 12% = 23.0 Thursday 14% = 26.9 Friday 20% = 38.4 Saturday 21% = International Dairy Deli Bakery Association 21

24 Successful Service Department Management 3. The hourly sales history on page 15 is quite interesting, especially Saturday night. The sales and customer counts (cc) show the following: 9 10 p.m. $83/cc p.m. $55/cc 13 Looking at the department Daily Assignment Schedule, will you have enough help to take care of customer service needs through 11 p.m.? This department is apparently located in an area with a lot of late night traffic on Saturday night. There are two people scheduled until closing the cake decorator and the closing person. Given the customer counts, the last two hours are likely to be quite busy. While there is enough help to wait on the customers until 10 p.m., neither person is likely to get much other work done. From p.m. there is only one person scheduled. It may be wise to schedule another person at this time, or to see if some help would be available elsewhere in the store at this time, to avoid the possibility of overtime or poor customer service. The Daily Assignment Schedule on page 13 shows a major clean up at the end of every assigned job in the department. Why do you think the manager scheduled that way? Probably to schedule work more evenly throughout the day and to prevent service problems in the evening. If all clean up is scheduled for the closing shift, this person may be too busy to provide good service International Dairy Deli Bakery Association

25 Course 5: Managing Direct Expenses Review of Course 5 1. Using the following figures, determine your contribution to overhead. $16,895 Gross profit $8,475 Direct expenses $6,212 Contribution to overhead $2,263 Contribution to overhead = Gross profit Direct expenses Contribution to overhead = $8,475 $6,212 = $2, Using the example above, your indirect expenses are 5 percent of sales. What is your net profit for the week? Indirect expenses = $16,895 5% = $ Net profit = Contribution to overhead Indirect expenses Net profit = $2, $ = $1, Over the last quarter, you have been focusing on managing your labor expense. Through better scheduling, you ve been quite successful. Your labor has come down from 20.52% of sales to 18.9% of sales. Assuming that quarterly sales were $219,635, calculate the dollar amount of your labor savings. (Use the same quarterly sales figures from both quarters.) $219, % = $45, $219, % = $41, $45, $41, = $3, It is now one year since you started working on improving the profitability of your department. Each quarter you have made substantial improvements in your gross profit. The first quarter, you learned about factors that influence gross profit. As a result, in the second quarter, you were able to improve your merchandising to build your sales. The third quarter you were able to improve your profit margin on your sales. The fourth quarter, you were able to reduce your shrink. And this quarter, the first quarter of the next year, you have been able to reduce your direct labor expense. To see the overall result of your efforts, compare your contribution to overhead for this quarter to your contribution to overhead during the same quarter a year ago. (See page 19.) Contribution to overhead this year = $23,595 Contribution to overhead last year = $6,605 $23,595 $6,605 = $16,990 more contribution to overhead this year than last year How much larger is your percent of contribution to overhead now than in the first quarter? This year s percent contribution to overhead = 11.90% Last year s percent contribution to overhead = 3.52% 11.90% 3.52% = 8.38 point increase 2011 International Dairy Deli Bakery Association 23

26 Successful Service Department Management Skills Enrichment Activity A: Tracking and Creating an Hourly History Note: The following activities will help collect sales patterns and customer flow data to determine employee scheduling. You will need this information for the scheduling activities later in the course. Part I: Tracking Hourly Data Directions: Record the sales and customer counts for each hour the department is open. Use one chart per day over a four week period. (One chart for Mondays, one for Tuesdays, etc.) Day: Week 1 Week 2 Week 3 Week 4 Total Average Customers 7 8 A.M P.M Special *Note any special promotions, occasions, or holidays on that date International Dairy Deli Bakery Association

27 Course 5: Managing Direct Expenses Skills Enrichment Activity A: Tracking and Creating an Hourly History Part II: Creating and Hourly History Directions: Combine the hourly sales data collected in Part I using the Total Hourly History chart to develop a comprehensive idea for scheduling needs in your department. Hourly History Hours Sunday Monday Tuesday Wednesday Thursday Friday Saturday a 7 8 # Cust. % b c d # Cust % # Cust % # Cust % # Cust % # Cust % # Cust % e Total f % /Day g Total Cust. Total Weekly = $ 2011 International Dairy Deli Bakery Association 25

28 Successful Service Department Management Skills Enrichment Activity B: Creating a Task List Directions: Develop a list of tasks that need to be done in your department on a daily/weekly basis. Indicate the best time to complete those tasks. Use this information in the next activity to help plan an effective schedule. 1. Tasks needing to be done every day: (Include production, cleaning, maintenance, customer service, setting cases, stocking, packaging, pricing, break out, closing down.) Also list the best time to complete these tasks. Daily Tasks Best Time Daily Tasks Best Time 2. List the activities that need to be completed only on certain days. List these tasks by the day they need to be done and the best time to do them. Task Best Time to Complete Sunday Monday Tuesday Wednesday Thursday Friday Saturday International Dairy Deli Bakery Association

29 Course 5: Managing Direct Expenses Skills Enrichment Activity C: Creating a Daily Assignment Schedule Directions: Develop a schedule that includes all of the tasks on your Task List with the appropriate number of labor hours as determined by your Hourly History. Refer to Course 5, page 14, for effective scheduling tips. Refer to How to Fill Out the Daily Assignment Schedule on page International Dairy Deli Bakery Association 27

30 Successful Service Department Management Daily Assignment Schedule Day Date Labor Hrs. for Week Today s % of Today s Labor Hrs. Special Shift 1 AM PM Emp. Needed 13 Name 9 7 Department Tasks: a. b. c. d. e. f. g. h. i. j. k. l. 11 Total Hours 10 Hrs International Dairy Deli Bakery Association