Purchasing: Cost Plus

La Madeleine automated purchasing to lower food cost, but it benefits more than the bottom line.

By Mary Boltz Chapman, Editor-in-Chief -- Chain Leader, 12/1/2007

The driver was controlling food costs. La Madeleine Bakery, Cafe and Bistro integrated three vendors—one with a back-office food-cost system, another that automates product codes, routing and confirmation, and the chain’s mainline distributor—to streamline purchasing and receiving.

The system did lower food cost, according to George Popson, senior director of information technology for the 61-unit, Dallas-based chain. But it also helps unit managers save time and be more accurate, and it helps ensure product quality and consistency.

How it Works

La Madeleine store managers use the food-cost system to create a purchase order. The order moves electronically through a program that translates the items into a consistent coding system for the distributor, which sources about 80 percent of products for the restaurants. The distributor checks supplies and pricing and returns a confirmation report to the manager within 20 or 30 minutes from the time the manager placed the order.

If the manager approves it, that document is the same one used when the order is received. If everything is correct, the manager can approve the shipment in one step. If something is off, the manager simply reports the exceptions.

The translation of codes is key. The manufacturers, distributors and chain all might have different code numbers for any given item. "Unfortunately our industry isn’t standardized yet on those codes," Popson says. "So we’ve got a series of interpretations to do to get to the number that we’re inventorying and ordering, in relationship to what they actually put on the truck."

Even goods produced in La Madeleine’s bakeries flow through the system. The bakeries send product to the distributor, which ships to the units. Prior to about five years ago, La Madeleine had bakeries in every market the chain operated in. The company changed the approach to save the costs of transportation and manpower and make bread distribution more efficient.

Payback Time

Popson says the food-cost system is more challenging for many managers, who would rather be with their guests and employees than at a computer. "Unfortunately there’s no other way to manage food at the ingredient level without putting a food-cost system in," he says, adding that while the food cost and inventory requires more time, the ordering and receiving take less time.

"The real payback on the work managers have to do is the reduction in food cost you get," Popson says.

La Madeleine won’t disclose food cost as a percent of sales. Popson will only say that the company was trying to get 2 percent out of food cost, but the system actually reduced it by about 3 percent or 4 percent. "We track that, and we continue to get that," he adds.

The chain is testing the program with its produce vendor. Popson is optimistic that all of the restaurants will be online with that supplier soon. He says that would account for another 10 percent of product that the units order.

But Popson doesn’t see the system working with any other vendors. "The volume has to be there, the cost for them to participate," he says.