Food Services Organization and Operations Food Services Organization and Operations Improvement Improvement ..

by by

Food Services Organization and Operations Food Services Organization and Operations Improvement Improvement ..

by by

Prof. S. O. Duffuaa on behalf of Prof. S. O. Duffuaa on behalf of

The committee on Food ServicesThe committee on Food Services

Presentation OutlinePresentation OutlinePresentation OutlinePresentation Outline

• Committee charges.Committee charges.• ApproachApproach• Overview of current food services operations Overview of current food services operations

and organization.and organization.• Diagnosis of the situationDiagnosis of the situation• Meal Cost Meal Cost • Profitability of snack bars and faculty Profitability of snack bars and faculty

restaurantrestaurant

Presentation OutlinePresentation OutlinePresentation OutlinePresentation Outline

• Internal controlInternal control• OutsourcingOutsourcing• Options: Advantages and disadvantagesOptions: Advantages and disadvantages• RecommendationsRecommendations

Committee MembersCommittee MembersCommittee MembersCommittee Members

• Prof. Salih O. Duffuaa (Chairman) Prof. Salih O. Duffuaa (Chairman)

• Mr. Saeed Samer.Mr. Saeed Samer.

• Mr. Abdul Shaheed Salem.Mr. Abdul Shaheed Salem.

• Mr. Abdullah Al-Oufi.Mr. Abdullah Al-Oufi.

• Mr. Salem Ba-Tarfi.Mr. Salem Ba-Tarfi.

• Mr. Iftikhar Nadeem. Mr. Iftikhar Nadeem.

• Mr. Mohammed Elhassan Seliaman.Mr. Mohammed Elhassan Seliaman.

• Review document and improve current processes to Review document and improve current processes to facilitate efficiency effectiveness and improve facilitate efficiency effectiveness and improve quality.quality.

• Improve Food services internal control on material Improve Food services internal control on material and cash flow.and cash flow.

• Review current organization structure to improve Review current organization structure to improve control.control.

• Assess the profitability of the snack bars and faculty Assess the profitability of the snack bars and faculty restaurant.restaurant.

• Evaluate the alternatives of outsourcing part or all of Evaluate the alternatives of outsourcing part or all of the Food Services activities.the Food Services activities.

ChargesChargesChargesCharges

• The committee has met eighteen (18) times The committee has met eighteen (18) times and visited four (4) organizations that are and visited four (4) organizations that are outsourcing food services in its efforts to outsourcing food services in its efforts to come with concrete recommendations. The come with concrete recommendations. The organizations visited are:organizations visited are:• Institute of Public AffairsInstitute of Public Affairs• Technical College at DammamTechnical College at Dammam• University of BahrainUniversity of Bahrain• Saudi AramcoSaudi Aramco

ApproachApproachApproachApproach

• Review and evaluate current processes.Review and evaluate current processes.

• Collect as much as possible reliable data.Collect as much as possible reliable data.

• Tap on experience of organization in food Tap on experience of organization in food services business.services business.

• Perform cost benefit analysis . Perform cost benefit analysis .

ApproachApproach ApproachApproach

Food Service ResponsibilitiesFood Service ResponsibilitiesFood Service ResponsibilitiesFood Service Responsibilities

• Providing three meals (breakfast, lunch and dinner) Providing three meals (breakfast, lunch and dinner) to students in three dining halls. They provide to students in three dining halls. They provide approximately between 1500-1800 meals per day.approximately between 1500-1800 meals per day.

• Providing lunch meal at the faculty restaurant.Providing lunch meal at the faculty restaurant.• Operating 15 snack bars on campus.Operating 15 snack bars on campus.• Operating a bakery to supply the restaurant and snack Operating a bakery to supply the restaurant and snack

bars by needed items.bars by needed items.• Preparing meals for university guests, public parties Preparing meals for university guests, public parties

and workshops and conferences.and workshops and conferences.• Providing services (parties etc) to community on Providing services (parties etc) to community on

campus at charge.campus at charge.

Food Services ManpowerFood Services ManpowerFood Services ManpowerFood Services Manpower

• No. Job Saudi Non-Saudi Total 1. Administration 24 3 27 2. Technician 2 1 3 3. Salesperson 32 1 33 4. Cook 71 20 91 5. Baker 14 1 15 6. Butcher 3 0 3 7. Waiter 5 3 8 8. Halawani 4 2 6 9. Driver 6 0 6 10. Total 161 31 192

Source: Financial and Administrative Affairs Strategic Plan.

Current OrganizationCurrent OrganizationCurrent OrganizationCurrent Organization

•

العام المدير

السكرتارية وحدةالمراقبة

القسم اإلداري

القسم الصحي

قسم الحسابات

قسم التحصيل

قسم ةالتغذي

قسم التموين

Diagnosis of the Current SituationDiagnosis of the Current SituationDiagnosis of the Current SituationDiagnosis of the Current Situation

• Data on material consumed and number of meals sold are not Data on material consumed and number of meals sold are not recorded properly.recorded properly.

• The food services department is serving between 1500-2000 The food services department is serving between 1500-2000 meals per day at the students dining halls. Now may be less.meals per day at the students dining halls. Now may be less.

• Almost all data recording is handled manually.Almost all data recording is handled manually.

• Department organization structure needs improvement to Department organization structure needs improvement to enhance efficiency and control.enhance efficiency and control.

• Internal control needs improvement to control flow of material Internal control needs improvement to control flow of material and cash flow in order to match income with cost.and cash flow in order to match income with cost.

Diagnosis of the Current SituationDiagnosis of the Current SituationDiagnosis of the Current SituationDiagnosis of the Current Situation

• The Food Services is focusing on quality of food The Food Services is focusing on quality of food

through the emphasis on fresh material and through the emphasis on fresh material and workers health. workers health. • The department is not cost conscious.The department is not cost conscious.• The average cost of the meal runs between 25-30 The average cost of the meal runs between 25-30

SR. This is a rough estimate it could be more.SR. This is a rough estimate it could be more.• The faculty resultant is operating at 50% losses.The faculty resultant is operating at 50% losses.• The total monetary losses per year for the faculty The total monetary losses per year for the faculty

restaurant and the snack bars range between restaurant and the snack bars range between 1,375,000 1,375,000 andand 1.750,000 SR 1.750,000 SR..

Estimation of Meal Cost Estimation of Meal Cost Estimation of Meal Cost Estimation of Meal Cost

Table 2: Cost breakdown for the meal average cost including depreciation No. Item Cost in Saudi Riyal (SR). Percentage

(%) 1 Manpower 10.69 36.62 2 Material ( Meet, Vegetables, etc) 9.45 32.38 3. Cars, Spare parts, gas etc 1.74 5.96 4. Electricity, Maintenance 2.97 10.18 5. Building & Equipment Depreciation 4.34 14.86 6 Total 29.19 100

Estimation of Meal CostEstimation of Meal CostEstimation of Meal CostEstimation of Meal Cost

Table 3: Cost breakdown for the meal average cost without depreciation No. Item Cost in Saudi Riyal (SR). Percentage (%) 1 Manpower 10.69 43.02 2 Material ( Meet, Vegetables, etc) 9.45 38.03 3. Cars, Spare parts, gas etc 1.74 7.00 4. Electricity, Maintenance 2.97 11.95 6 Total 24.85 100

Profitability of Bakery and Snack BarsProfitability of Bakery and Snack BarsProfitability of Bakery and Snack BarsProfitability of Bakery and Snack Bars

Data collected for the study:Data collected for the study:• Items produced at the bakery and sold at snack bars.Items produced at the bakery and sold at snack bars.• Typical quantities produced of each itemTypical quantities produced of each item• Sale price of each itemSale price of each item• Amount of raw material used for each itemAmount of raw material used for each item• Manpower at the bakery and their monthly salariesManpower at the bakery and their monthly salaries• Sales personnel at the snack bars and their monthly salaries.Sales personnel at the snack bars and their monthly salaries.• Maintenance and gas costs at the bakeryMaintenance and gas costs at the bakery• Estimated electricity cost at the bakeryEstimated electricity cost at the bakery• Estimated water costEstimated water cost• Estimate administration over head costEstimate administration over head cost• Transportation and cleaning costs.Transportation and cleaning costs.

Profitability of Bakery and Snack BarsProfitability of Bakery and Snack BarsProfitability of Bakery and Snack BarsProfitability of Bakery and Snack Bars

• The daily revenue for the snack bars and the bakery The daily revenue for the snack bars and the bakery is estimated to be on the average is estimated to be on the average 9081 9081 SR..SR..

• The cost of the operation including the costs items The cost of the operation including the costs items mentioned above is estimated to be mentioned above is estimated to be 11500 SR11500 SR if all if all the elements of the costs are included. the elements of the costs are included.

• The loss from snack bars is around The loss from snack bars is around 25%25%. The details . The details of the calculations are attached in appendix C.of the calculations are attached in appendix C.

Profitability of Bakery and Snack BarsProfitability of Bakery and Snack BarsProfitability of Bakery and Snack BarsProfitability of Bakery and Snack Bars

• We note that in our calculation in appendix C other We note that in our calculation in appendix C other costs such medical, higher administration overhead; costs such medical, higher administration overhead; other support services were not included. other support services were not included.

• The daily monetary loss at the snack bars ranges The daily monetary loss at the snack bars ranges between 2500-3000 SR. This totals to between 2500-3000 SR. This totals to 625,000 – 625,000 – 750,000750,000 SR per year based on 250 working days. SR per year based on 250 working days.

Profitability of Faculty RestaurantProfitability of Faculty RestaurantProfitability of Faculty RestaurantProfitability of Faculty Restaurant

• A one week data for number of meal sold and income A one week data for number of meal sold and income was obtained from the faculty restaurant.was obtained from the faculty restaurant.

• The number of meals sold per day at the Faculty The number of meals sold per day at the Faculty Restaurant range between192 - 250 with an average Restaurant range between192 - 250 with an average of 220. of 220.

• The number of meals includes prepaid meals and the The number of meals includes prepaid meals and the income of those meals is not reflected in the daily income of those meals is not reflected in the daily cash collected.cash collected.

• The average income per meal is 10.46 SR The average income per meal is 10.46 SR

New Organization StructureNew Organization StructureNew Organization StructureNew Organization Structure

العام المدير

السكرتارية وحدةالمراقبةوالجودة

القسمالصحي والفني

قسمالمخابز والمقاصف

قسمالتموين والحسابات

قسمالتغذية

OutsourcingOutsourcingOutsourcingOutsourcing

The following vendors contacted:The following vendors contacted:

• Algosaibi Services CompanyAlgosaibi Services Company• Arabian Food Supplies CompanyArabian Food Supplies Company• Saudi Catering Services CompanySaudi Catering Services Company• Nesma Contracting CompanyNesma Contracting Company

The following two vendors submitted their proposals:The following two vendors submitted their proposals:• Arabian Food Supplies Company (AFS)Arabian Food Supplies Company (AFS)• Nesma Contracting Company (Nesma)Nesma Contracting Company (Nesma)

OutsourcingOutsourcingOutsourcingOutsourcing

• Comparison of Prices Quoted by Vendors

Meal Prices by AFS (SR) Prices by Nesma (SR) Breakfast 9 6 Lunch 18 12 Dinner 18 12 Economy Meal 11* 10 * Price is estimated based on prices quoted for items forming an economy meal

Scenarios for SubsidiesScenarios for SubsidiesScenarios for SubsidiesScenarios for Subsidies

• Table 7 Scenarios of Subsidy for Nesma Prices Meal Subsidy per

student (SR) Subsidy for 500 students (SR)

Subsidy for 1,000 students (SR)

Subsidy for 1,500 students (SR)

Breakfast* 4 1,000 2,000 3,000 Lunch 8 4,000 8,000 12,000 Dinner 8 4,000 8,000 12,000 Total/day 20 10,000 20,000 30,000 Total/year** 6,000 3,000,000 6,000,000 9,000,000 *It is assumed that half the number of students will take breakfast but same number of students eat lunch and dinner ** one year means 300 days of operation due to vacations.

Scenarios for SubsidiesScenarios for SubsidiesScenarios for SubsidiesScenarios for Subsidies

Table 8 Scenarios of Subsidy for AFS Prices Meal Subsidy per

student (SR) Subsidy for 500 students (SR)

Subsidy for 1,000 students (SR)

Subsidy for 1,500 students (SR)

Breakfast* 7 1,750 3,500 5,250 Lunch 14 7,000 14,000 21,000 Dinner 14 7,000 14,000 21,000 Total/day 35 15,750 31,500 47,250 Total/year** 10,500 4,725,000 9,450,000 14,175,000 *It is assumed that half the number of students will take breakfast but same number of students eat lunch and dinner ** one year means 300 days of operation due to vacations.

OptionsOptionsOptionsOptions

• Option 1Option 1: Keep the in house food services and improve its : Keep the in house food services and improve its operations, processes, manpower, capabilities, internal control, operations, processes, manpower, capabilities, internal control, management skills and develop a culture management skills and develop a culture that seeks that seeks efficiency and effectiveness. This will be accomplished efficiency and effectiveness. This will be accomplished throughthrough

professional help from an established company in the area of professional help from an established company in the area of food services.food services.

• Option IIOption II: Keep the in house food services and improve its : Keep the in house food services and improve its operations, processes, manpower, capabilities, internal control, operations, processes, manpower, capabilities, internal control, management skills and develop a culture that seeks efficiency management skills and develop a culture that seeks efficiency and effectiveness. This will be accomplished by the food and effectiveness. This will be accomplished by the food services department with some help from KFUPM expertise. services department with some help from KFUPM expertise.

OptionsOptionsOptionsOptions

• Option IIIOption III: Internal outsourcing: Converting : Internal outsourcing: Converting food services to a company owned by the food services to a company owned by the

current current food services employees and operated by food services employees and operated by them.them.

• Option IVOption IV: External outsourcing: Requesting : External outsourcing: Requesting outside companies to provide food services for outside companies to provide food services for KFUPM.KFUPM.

• (a) Outsourcing all food services (a) Outsourcing all food services • (b) Outsourcing bakery and snack bars.(b) Outsourcing bakery and snack bars.• (c) Outsourcing faculty restaurant.(c) Outsourcing faculty restaurant.

Options EvaluationOptions EvaluationAdvantages and disadvantages of each optionAdvantages and disadvantages of each option

Options EvaluationOptions EvaluationAdvantages and disadvantages of each optionAdvantages and disadvantages of each option

• No. Option Advantage Disadvantage 1. Option 1: Keep Food

Services as it is and improve operations by seeking professional help from expertise in food industry

1. High quality and good hygiene. 2. Flexibility in serving university 3. Establishment of standards similar to industry standards. 4. Establishing a new culture 5. Improving human resources substantially. 6. Employing many Saudis.

1. Lack of variety to students taste. 2. More cost at the beginning which is expected to pay off.

2 Option II: Keep Food Services as it is and improve operations using KFUPM resources.

1. High quality and good hygiene. 2. Flexibility in serving university 3. Employing many Saudis.

1. Cost is high 2. Lack of variety to students taste. 3. Unlikely to succeed in changing current situation.

3. Option III: Internal outsourcing

1. Keep current food services standard. 2. Employee many Saudis

1. Remove cost burden from the University 2. Not easy to form the organization structure. 3. Not clear how to handle legal issues.

Options EvaluationOptions EvaluationOptions EvaluationOptions Evaluation

• 4. Option IV (a) : Outsourcing all food services

1. Reduce food services costs of the university in the long run. 2. More variety of food to students taste.

1. Loss of Saudi Employment 2. Quality may be compromised 3. Control over company activities more difficult.

5. Option IV (b): Outsource Bakery and snack bars and faculty restaurant only

1. Remove some of the financial burden from the university.

The expected costs savings ranges between 1,375,000- 1,750,000 SR.

2. More variety of items in faculty restaurants and snack bars.

1. Loss of Saudi employment approximately a loss of 40 Saudi employee. 2. Prices may go up for the students at the snack bars by 30-50%..

6. Option IV (c): Outsource faculty restaurant

Not feasible, no company will opt for faculty restaurant alone.

Not feasible

RecommendationsRecommendationsRecommendationsRecommendations

• Keep the in house food services and improve its operations, Keep the in house food services and improve its operations, processes, manpower, and internal control and management processes, manpower, and internal control and management capabilities through professional help from a company in this capabilities through professional help from a company in this field.field.

• Improve food services internally by using Improve food services internally by using university/department existing expertise in the following university/department existing expertise in the following manner:manner:• Restructure organization.Restructure organization.• Appoint one person to be responsible for material and Appoint one person to be responsible for material and

income generated on daily basis .income generated on daily basis .• Revisit the menuRevisit the menu• Increase income from selling products outside ( better Increase income from selling products outside ( better

marketing)marketing)

RecommendationsRecommendationsRecommendationsRecommendations

• Rent one of the students dinning halls.Rent one of the students dinning halls.• Down size manpower and improve Down size manpower and improve

processes.processes.

• Outsource the food services department, if Outsource the food services department, if recommendations 1 and 2 did not achieve the desired recommendations 1 and 2 did not achieve the desired results within a year.results within a year.

Questions & CommentsQuestions & CommentsQuestions & CommentsQuestions & Comments