50c saving per lunch cost additional $167,900 per year

How a 50c saving per lunch cost $167,900 more per year

Whoops – Good intention but …  A provider switched to another external cook chill provider without testing the market.  Dissatisfaction with the current provider was not supported by formal documentation of shortcomings and complaints.  There was anecdotal evidence of problems but no shared understanding of the value stream or how the provider and supplier could address problems.

One reason given for switching suppliers was that the lunch per person was allegedly 50 cents cheaper and represented savings of $18,250 per year.  Reality meant savings became over-expenditure.  The new catering contract ended up costing the provider an extra $167,900 per year.  How? do you ask.

1. Under the old contract, only items ordered were paid for. Portion size was generous, so orders were placed for 85% of bed numbers which adequately achieved the nutritional requirements of 100% of residents.  Under the new contract, which allowed up to 10% occupancy variance, the provider was penalised for ordering less than 90% of bed numbers, irrespective of occupancy.

2. While the cost of the lunch appeared less from the old contractor, the pricing mechanism ensured that was not the case.  The new contractor charged a flat daily fee, irrespective of meals served and the higher number charged by the lower rate meant greater cost.

3. The new contract did not cover a number of fresh food items that the provider still needed to purchase, including bread, cereals, drinks, condiments, supplements, etc.

The dining experience, reputation and occupancy: The meals service makes up a small portion of an aged care facility budget but a large portion of the reputation.

Reducing non-value adding activity and waste to reinvest in improving the dining experience can enhance that reputation and improve occupancy.

Hidden gold mines: It is not always about more money or savings.  A recent audit of variations in hospital stays found Victoria could run a whole new hospital the size of the Royal Children’s at no extra cost if every hospital worked as efficiently as the best.

Dining Experience Specialists believe similar ‘gold mines’ exist in aged care meal services.

Potential and reality:  The current focus on the dining experience in residential aged care highlights challenges faced by many kitchens where untrained staff make the most of their domestic experience, implementing processes that are changed incrementally over time.  We ask WHY. The response is often illuminating.

Like most industries, there have been leaps and bounds in meal production equipment, software and training. Benefits to residents should mean more nutritious, tasty and enjoyable meals served with greater variety and flexibility.  Benefits to aged care providers should include increased resident satisfaction, improved labour management, best value purchasing and a streamlined transparent value stream using integrated systems and producing accurate and timely reporting.

Undertake ongoing internal benchmarking with market testing at regular intervals to identify industry best practice and innovative solutions that deliver outcomes your residents will appreciate.  Outcomes which will also delight your CFO.


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