Data-Driven Decision-making for Bakeries
Why is it important for a bakery to analyse its inventory and sales data?
Effective inventory management is crucial for bakeries. With the use of data, the following goals can be reached.
Minimize Waste: Bakeries often deal with perishable goods that have a short shelf life. Using data to track inventory levels and sales patterns helps to predict demand more accurately, thus reducing overproduction and minimizing waste.
Cost Efficiency: By managing inventory effectively, bakeries can reduce the costs associated with overstocking or understocking ingredients. Data can help identify purchasing trends and optimize the supply chain, ensuring that the bakery only buys what it needs.
Improve Cash Flow: Less items with excess stock mean less cash tied up in inventory unnecessarily. This improves cash flow, allowing bakeries to invest in other areas of the business.
Enhance Customer Satisfaction: Data-driven inventory management helps maintain consistent product availability. By predicting demand more accurately, bakeries can ensure they always have the right amount of product on hand to meet customer needs, improving overall satisfaction and loyalty.
Optimize Operations: Data can reveal insights into which products are selling well and which are not, allowing bakeries to adjust their production schedules and focus on the most profitable items. This can also help in planning promotions and introducing new products.
Compliance and Quality Control: Accurate inventory data helps in maintaining compliance with health and safety regulations by ensuring that ingredients are fresh and properly stored. This also contributes to the overall quality of the bakery’s offerings.
Accurate profit margins: Accurate inventory costs ensures that prices can be set and adjusted to ensure the company’s desired profit level is maintained. If you sell through multiple channels and offer different pricing across channels. a profit margin analysis needs to be executed for each channel.
By leveraging data for inventory management, bakeries can operate more efficiently, reduce costs, improve customer satisfaction, and ultimately enhance their profitability.
What else can bakeries learn from their data?
Being able to maximize profit begins with knowing the profitability of each product sold. We need to know the following two numbers accurately:
What can we charge a customer for each product?
What are the costs that go into creating each product?
Let’s begin with how much you can charge. On the lower end, we know we need to charge enough for each of the products such that the sale price exceeds all of our costs. On the upper end, we want to charge as much as possible to maximize our profit but we don’t want to go beyond what the customer is willing to pay. The customer always has the choice of walking past your bakery and going to your competitor’s.
To determine the cost of each bakery item, we begin with the ingredients and recipes. Based on past sales receipts for ingredients, we can determine the underlying cost of each product. While this information and the price that the customer is willing to pay gives us an initial view of profit, we must remember that this item level profit must also cover allocated expenses such as electricity, salaries, taxes, insurance and inventory waste. Inventory waste comes in the form of expiring ingredients, prepared items that didn’t sell that day… and knocking over the occasional bag of flour.
Knowing how each of your products stacks up on profitability gives you the ability to make good decisions about what to offer and more importantly, what not to offer. These costs should be periodically reviewed to ensure that all items remain profitable. Ingredient prices change over time, so make sure you’re set up for ongoing calculations. It is not unusual to discover a few items with negative profit.
How can bakeries tell when customer preferences are changing?
Most bakeries open with a set list of products. Suppose you’re a bakery which has been open for five years and you’ve never updated your product list. Customer preferences change over time but if your product list doesn’t adapt to those changes, you may see reduced sales. For this reason, it is important to monitor the sales popularity of each bakery item in addition to the ongoing material costs.
With the implementation of sales and ordering technology, this data can often be retrieved easily. Once the data has been obtained, the trends of both product popularity and profitability can be calculated and monitored.
Tracking Customer Satisfaction
In the past, customers would stroll up to your bakery window, look in the window and decide whether to enter. Today, it’s all about the ratings online and comments on social media. How many of us now google a bakery prior to going in to ensure the overall rating score from the general public is above our accepted value?
Tracking data on social media followers and reviewing rating values is only part of what you need to know about your customer base.
How many order online for pickup?
How many would order online and have items shipped to them?
How long are they waiting before being served or receiving their order for pick-up?
While the answer to these questions does not directly impact profitability, it will impact it indirectly as any negative reviews such as mentions of long wait times will deter some customers from choosing your bakery. The analysis of these items speaks to customer satisfaction and capacity planning.
If you know where the bottlenecks are in the entire customer experience, the elimination of them can help to increase revenue.
Knowing the profitability of what you sell, tracking changes in customer preferences and maintaining high levels of customer satisfaction will increase any business’ chance of long-term success.