Waste Management

If you’re experiencing high sales record, but at the end of the day, your margin is much less than estimated, this subject is definitely for you.

It happens all the time, especially for new entrepreneurs. You have the euphoria because your business gains sudden popularity and breaks new sales record. However, after calculation, at the end of the month the profit that you have is way below expectation. Chef Rahmat Kusnedi (CRK), owner of Physalis’s also President of Indonesia Pastry Alliance (IPA) understand this common mistake. This time, CRK discusses about waste management, from the definition, how to prevent, also gives some real cases he experienced in the past.

What’s the definition of waste management?

The point is, waste management is a management to minimize the waste of ingredients. Owner doesn’t always understand it, as he’s just sitting on the top level. They know the number of the order, let say 2.000 pcs, and it’s true that the staffs produce 2.000 pcs, but owner may not know that down there, they produce 2.500, it means they have 500 pcs waste.

If the price per pcs is Rp 10.000, of course he’s happy to have Rp 20 million, it’s quite something for daily omzet, but he missed to count the loss from waste. Let say the total cost of the 500 pcs waste is Rp 5 million, what you have to calculate is the food cost. If the food cost is 35%, the total loss he suffers would be Rp 1.750.000, it should be substracted from the total Rp 20 million. That’s one day, in a month he has the potential of losing over Rp 50 million. It’s no wonder the estimated margin is way beyond expectation.

What’s the safe range percentage of waste?

Ideally, under 5%, if you’re good, you can reach 3%, that’s an excellent job. If it’s over 5%, you need to be cautious. If your product costs Rp 10.000 and you produce 1.000 pcs/day, your total omzet would be Rp 10 million. 5% of it would be Rp 500.000, in a month the loss will be Rp 15 million, it’s not small amount.

Is this waste management should be included in costing?

It depends on the company’s policy. If it’s me, I put 3-5% waste into the costing. Once I had order of 3.000 pcs donut, but the waste reached 700. That’s crazy! 700 out of 3.000 pcs would be over 20% loss, there’s no margin left for me. In other words, at that day, I have no profit at all, I only have money to pay for the ingredient and the labor. If you’re not careful, the waste will make you lose profit, and in the end, you can’t pay the tax or interest rate.

What sort of things causes waste?

Many things, but generally you can put it into 2 categories. The first, waste production, it happens because of the damage or the failure in production process. For example, the product’s color and size don’t meet the production standard, and it will put customer to disadvantage. The QC (Quality Control) staffs are responsible to monitor the products. The mistake can also come from forgetting to put salt and sugar into the dough. For ridiculous mistake like this, there will be reward and punishment. We have to know where the mistakes happen, we should have traceability.

Second, after the order was sent to customer, they will do another examination. The returned products will be categorized as waste reject, it happens because the products don’t meet the standard and specification of the customers. After you add the waste production to the waste reject, you’ll have the total waste.

Are there ways to prevent it?

Actually, you can always minimize the waste with some policies, but to remove it completely to get zero waste is impossible. Some ways to prevent it is by assigning the same people for a repeated task. So, when you have someone to weigh the dough, don’t let him do other things. With this system, it is easier to monitor mistakes. If the system is multitasking such as often happens in hotels, the monitoring would be more challenging.

Second, monitor the logistic flow. In some cases, the damage of the ingredients happen when you put ingredients that should be stored in chiller, such as cream, in room temperature, it will definitely spoil it. Third, observe the production methods. It’s why we need SOP (Standard Operating Procedure). For example, when you make mistake in the mixing process so you have undermix dough, you can’t expect the dough to rise in the proofer, there’s domino effect here.

You also need record-keeping. It’s crucial because the production number should match the amount of the ingredients. The one in charge would be the PPIC (Planning Production Inventory Control) department. When you have an order of 3.000 donut, the PPIC department should calculate the required ingredients such as flour, sugar, egg, etc. When the production department finishes, they can only produce 2.500. Because you have to send the order tomorrow, the production department requests more ingredients to PPIC. The record-keeping of these PPIC and production should be accurate.

The last one, is a factor outside human error, such as theft. It’s a bit difficult when it happens, because in the beginning, we had trust. There are many cases of kitchen staffs who bring home some eggs or pieces of chocolate every day.

I had this theft case conducted by many staffs. Imagine, on the way to outlet, from 10 cartons (1 carton= 20 kg) of butter, they dropped 2 cartons. It involved many departments, form security, warehouse staffs, driver.

I could tell because I always take notes. As part of production department, I don’t want to be blamed for my inability keeping track of the products. At the time, we investigate everything, how many was loaded, how many arrived, after discovering some irregularities, we decided to tail the delivery. When we saw some ingredients were dropped along the way, we took documentation. After it happened for 2-3 times, we coordinated with the police, and we caught almost 30 involved staffs. It appeared that the buyer was an ex-employee who was working for competitor.