4.7% Margin Increase for a Bakery Chain
Analysis of the production cost of each loaf showed that 3 types of bread were sold below energy and flour costs. We changed the price list based on hard data.
In June 2024, the Piekarnia Tradycja i Nowoczesność from near Radom hit a wall. Despite queues in stores and high turnover, operating profit was melting month by month. Our task was to find the hole where the money was leaking.
The challenge
The main problem was the lack of knowledge about the real cost of producing a single loaf with current gas prices. The owner used a spreadsheet from 2 years ago that did not account for the 114% jump in energy prices and the 23% fluctuations in rye flour prices in one quarter. The bakery produced 127 different items, of which 14 types of bread generated a loss on every kilogram sold, which no one had calculated before. Losses on these products averaged 1.14 zł per unit.
Our approach
Dariusz Mazur along with an analyst spent 9 business days directly on the production floor. We measured the exact energy consumption of Miwe brand ovens during various baking cycles and the working time of the 16-person team at specific lines. We analyzed invoices from 14 raw material suppliers from the last 17 months to catch hidden transport and production waste costs. Numbers don't lie – we had to move from intuition to hard mathematics.
The solution
We implemented a dynamic cost calculation model that reacts to every change in gas and flour prices over 2.4%. We identified 3 key products – including the flagship country bread – which required an immediate price correction of 85 groszy to stop generating losses. We completely withdrew from the production of the 5 least profitable rolls, which allowed for shortening oven operating time by 2.2 hours per day. We trained the shift manager in simple dough loss reporting, which limited raw material waste by 12.3%.
Results
Thanks to eliminating unprofitable products and optimizing oven work time, the company regained financial liquidity. This much stays in the owner's pocket after just 3 months of implementing changes.
Timeline
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June 2024Energy meter audit and verification of 487 purchase invoices.
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July 2024Detection of 14 loss-making products and price list rebuild.
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August 2024Implementation of new baking schedule and reporting system.
"I was skeptical about analysts because I thought I knew everything about bread. Dariusz showed me on a graph that every roll sold was an 86 groszy loss. Now the numbers finally add up."