food purchasing control

Food Purchasing and Receiving Control

Wednesday, April 17, 2013BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control

Slide 1 /40

Recap of the Previous session

• What is the Cost/Volume/ Profit equation?• How is Variable Rate defined?• What Contribution Rate?• What Contribution Rate?• When is the business considered in the

state of Break Even.• How is Contribution Margin defines?



Slide 2 /40

KCM of the session1. Outline the purchasing process in the

operations of foodservice establishments.2. Describe how quality standards for food

purchases are established.purchases are established.3. Reasons that standard purchase

specifications are important4. Describe the process used to determine

the quantity of perishable food purchased.

Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing ControlBAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 3 /40

Scope of the session

• Purchasing Objectives and Procedures.• Purchasing responsibilities.• Selecting suppliers.• Purchasing Proper quantities.• Purchasing Proper quantities.• The Purchase order system.• Security Concerns and Reducing costs in

the Purchasing function.• Purchasing in Multi Unit Organizations.

Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 4 /40

Introduction

• The beginning of it all begins with the menu.

• The common situation shared by Bars and • The common situation shared by Bars and Restaurants.

• Improper purchase practices lead to serious problems.

• The system implementation begins with


Slide 5 /40

Purchasing Objectives

• Purchasing:• Defined as a series of activities designed

to obtain products:1. Of the standardized quality and Packing.1. Of the standardized quality and Packing.2. Of the standardized quantity.3. Of the negotiated and approved price.4. At the right time.5. From the right source.


Purchasing Procedures

Receiving

1

2

3

6

6

5Food and

Beverage

Dept

Store

RoomPurchasing

DeptAccounting

Supplier

1 3 4

4

7

5

1. Issue Requisition

2. Issues required Products.

3. Purchase Requisition.

4. Purchase Order Record.

5. Supplies Products with delivery Invoice.

6. Stores Products

7. Payment.

Purchasing Responsibilities

• Ultimate responsibility with the Food and Beverage Manager.

• Smaller establishments have the Chefs or the Steward in charge of the Purchases.the Steward in charge of the Purchases.

• Slightly bigger properties need a Purchasing agent member of the staff on rotation.

• In large hotels the Purchase department headed by Manager Purchase and staff.


Selecting Suppliers….1

• Essentially supplier evaluations should be based on the consistency of:

• Correct quality products.• Correct quality products.• Reasonable prices.• Prompt delivery.• Service including product information


Selecting Suppliers….2

• Location• Quality of the suppliers operation.• Technical ability of the suppliers staff.• Value.• Value.• Compatibility.• Honesty and fairness.• Delivery Personnel


Purchasing Proper Quality…1

• Quality in the purchasing function refers to the suitability of the product for its intended use.

• First estimate the value in terms of • First estimate the value in terms of adequacy…which means whether the product is giving value for its price.

• Accurately describe the minimum quality requirements.

Purchasing Proper Quality…2

• Realistically define needs, yet not limit the number of acceptable suppliers.

• Make specification for most used or high volume items.volume items.


Purchase Specification

Purchase Specification

Dish Sirloin Steak Sandwich

Ingredient Sirloin Steak

Country of Origin United Kingdom

Weight 170g +/- 10gWeight 170g +/- 10g

Trim Min 8mm of fat to remain

Packed Individual vacuum / packed in 10’s

Specific Requirements Aged 21 days minimum

Delivery Temperature Below 5ºc

Minimum Order 10 individual

Maximum Order ex autho 30 individual


Purchasing Proper Quantities..1

• Problems arising out of improper purchase:• Cash Flow problems resulting from excessive

money tied up in inventory.• Increased storage costs for Interest, • Increased storage costs for Interest,

Insurance and sometimes rented storage space.

• Deterioration of product quality or damaged products.

• Increase potential for theft and pilferage.


Purchasing Proper Quantities..2

• On the other hand purchasing insufficient quantities may lead to:

• Dissatisfied guests.• Lost guests.• Lost guests.• Stock outs.• Emergency purchases.• Disappointed staff.• System breakdown.


Factors affecting Purchase of proper quantities

• Popularity of menu items.• Product cost concerns and use of

speculative purchasing.• Available storage space.• Available storage space.• Safety level(Minimum quantity in

inventory)• Supplier constraints.(Definite quantity

supplied which is even without breaking cases)


Concept in Purchasing Perishable Products

• Quantity Needed- Quantity available= Quantity to Purchase for Immediate use.

• Normal Usage rates.• Assess the amount of each item in the

current inventory.current inventory.• Calculate the Qty to purchase by subtracting

from the above formula.• Adjust routine quantities as necessary taking

into account special functions, holidays etc…


Concept in Purchasing Non Perishable Products…1

• Minimum/Maximum ordering system.• Minimum level is also known as safety level.• Maximum level is also known as Apex level.• Usage rate normal usage for a period.• Usage rate normal usage for a period.• Lead time quantity is the number of

purchase units withdrawn from inventory between the time the order is placed and when it is delivered.


Concept in Purchasing Non Perishable Products…2

• Order Point is the number of purchase units in stock when an order is placed.

• The order point is reached when the number of purchase units in Inventory number of purchase units in Inventory equals the lead time quantity plus the safety level.

• Purchase units at Order point = Purchase units in lead time + Purchase units in safety level.


Numerical Example using Minimum/Maximum order system…1• Purchase unit= Case (6 # 10)• Usage Rate = 2 cases per day • Order Period = monthly(30 days)• Monthly usage rate = 2 cases/day x 30 days

= 60 cases.= 60 cases.• Lead time = 4 days.• Lead time usage rate = 4 days @ 2

cases/day = 8 cases.• Safety level = 4 days @ 2 cases/day = 8

cases


Numerical Example using Minimum/Maximum order system..2• Order Point = Lead Time + Safety level • 68 Cases = 60 Cases + 8 Cases.• When ordering at the order point, the quantity

to order is the monthly usage rate:to order is the monthly usage rate:• Order Point = 16 cases• Monthly Usage rate = 60 cases• Total available = 76 cases• Less lead time usage rate = 8• Maximum Level = 68 cases


Numerical Example using Minimum/Maximum order system..2• Amount in storage = 25 cases• Less Order Point = 16 cases• Excess over order Point = 09 cases• The amount to order is the usage rate • The amount to order is the usage rate

minus the number of cases in excess of the order point.

• 51 cases = 60 cases – 9 cases


Numerical Example using Minimum/Maximum order system..2• The decision to order 51 cases can be

proved.• Cases ordered = 51 • Amount available = 25• Amount available = 25• Total = 76 cases• Less lead Time usage rate = 8• Maximum level = 68 cases.


Using Technology in Purchasing Systems

• Electronic Price quotations.• Electronic Bid acceptance.• Supplier Notification(Purchase Order).• Computer generated shopping lists.• Computer generated shopping lists.• Software which has Ingredient files, Menu

Item files, Inventory files.• Auto requisition generation.• Electronic data Interchange.


Class Assignment

• As an Operations Manager of a large Multi Unit Chain operation of restaurant.

• Your first priority is to automate the supply line and implement modern methods of line and implement modern methods of procurement using computerized systems.

• How are you going to go about it explain diagrammatically and use flow plans.


Security Concerns in Purchasing

• Kickbacks.• Fictitious companies.• Reprocessing Invoices.• Delivery Invoice errors.• Delivery Invoice errors.• Credit Memo Problems.• Quality Substitutions.• Purchaser theft.


Cost reduction in the Purchasing Function…1

• Negotiate Prices.• Review quality standards.• Evaluate the need to purchase convenience

products.products.• Discontinue unnecessary supplier services.• Combine orders.• Purchase in larger quantities.• Pay Cash


Cost reduction in the Purchasing Function…2

• Change Purchase unit size.• Consider cooperative purchasing.• Consider promotional discounts.


Receiving Controls

• Receiving Personnel

• Receiving Procedures.

• Security concerns in Receiving.

• Use of Technology in receiving systems.


Receiving Personnel

• Training to be provided identification, procedures, complete internal receiving records.

• Nomination of right and pivotal personnel.• Follow clean business and personal • Follow clean business and personal

practices.• Able to manage physical tasks and get

manpower at a given notice.• Committed to protecting establishment

interest.


Receiving Procedures…1

• Check incoming products against purchase orders or purchase records.

• Check incoming products against purchase specifications.purchase specifications.

• Check incoming products against delivery invoices.

• Accept incoming products.• Move accepted products to storage

immediately.


Receiving Procedures…2

• Complete necessary receiving documentation, by segregation and preparing daily receiving report.

• Issuing credit notes or credit memos.• Issuing credit notes or credit memos.• Using approved marking procedures.


Security Concerns in Receiving…1

• Delivery of sub standard or products of questionable quality.

• Short weight or short count products.• Thawed products represented as fresh.• Thawed products represented as fresh.• Using adulterants like ice, soya products

or non fat dry milk extenders.• Ice used in increasing weight.



• Expensive steaks and inexpensive meat combined in one container.

• Use different people to receive in order to minimize collusion.

• Train employees to receive properly.• Scheduling deliveries.• Accurate weighing equipment.• After receiving move immediately top

storage.



• Do not permit sales persons to access the back area of operation.

• Lock the back door as a policy.• Install an audio signal so delivery people • Install an audio signal so delivery people

can ring when they arrive.


Direct reference

• Planning and Control for Food and Beverage Operations 7th Edition, 2009 American Hotel and Lodging Association 2113 N High street, Lansing Michigan 2113 N High street, Lansing Michigan 48906-4221.

• Jack. D. Ninemeir• ISBN: 978-0-86612-339-6

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