Food Purchasing and
Receiving Control
Wednesday, April 17, 2013 Slide 1 /40
BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control

Recap of the Previous session
• What is the Cost/Volume/ Profit equation?
• How is Variable Rate defined?
• What Contribution Rate?
• When is the business considered in the
state of Break Even.
• How is Contribution Margin defines?
Wednesday, April 17, 2013 Slide 2 /40
BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control

KCM of the session
1. Outline the purchasing process in the
operations of foodservice establishments.
2. Describe how quality standards for food
purchases are established.
3. Reasons that standard purchase
specifications are important
4. 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 Control Slide 3 /40

Scope of the session
• Purchasing Objectives and Procedures.
• Purchasing responsibilities.
• Selecting suppliers.
• 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
Restaurants.
• Improper purchase practices lead to
serious problems.
• The system implementation begins with
Wednesday, April 17, 2013 Slide 5 /40
BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control

Purchasing Objectives
• Purchasing:
• Defined as a series of activities designed
to obtain products:
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.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 6 /40

Purchasing Procedures
6
2
Receiving
6
Food and 1 3 4 5
Store Purchasing Accounting
Beverage
Room Dept
Dept
1. Issue Requisition 7
2. Issues required Products. 4
3. Purchase Requisition.
4. Purchase Order Record. Supplier
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.
• 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.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 8 /40

Selecting Suppliers….1
• Essentially supplier evaluations should be
based on the consistency of:
• Correct quality products.
• Reasonable prices.
• Prompt delivery.
• Service including product information
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 9 /40

Selecting Suppliers….2
• Location
• Quality of the suppliers operation.
• Technical ability of the suppliers staff.
• Value.
• Compatibility.
• Honesty and fairness.
• Delivery Personnel
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 10 /40

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
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.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 12 /40

Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 13 /40

Purchase Specification
Purchase Specification
Dish Sirloin Steak Sandwich
Ingredient Sirloin Steak
Country of Origin United Kingdom
Weight 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
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 14 /40

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,
Insurance and sometimes rented storage
space.
• Deterioration of product quality or damaged
products.
• Increase potential for theft and pilferage.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 15 /40

Purchasing Proper Quantities..2
• On the other hand purchasing insufficient
quantities may lead to:
• Dissatisfied guests.
• Lost guests.
• Stock outs.
• Emergency purchases.
• Disappointed staff.
• System breakdown.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 16 /40

Factors affecting Purchase of
proper quantities
• Popularity of menu items.
• Product cost concerns and use of
speculative purchasing.
• Available storage space.
• Safety level(Minimum quantity in
inventory)
• Supplier constraints.(Definite quantity
supplied which is even without breaking
cases)
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 17 /40

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.
• Calculate the Qty to purchase by subtracting
from the above formula.
• Adjust routine quantities as necessary taking
into account special functions, holidays etc…
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 18 /40

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.
• Lead time quantity is the number of
purchase units withdrawn from inventory
between the time the order is placed and
when it is delivered.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 19 /40

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
equals the lead time quantity plus the
safety level.
• Purchase units at Order point = Purchase
units in lead time + Purchase units in
safety level.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 20 /40

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.
• Lead time = 4 days.
• Lead time usage rate = 4 days @ 2
cases/day = 8 cases.
• Safety level = 4 days @ 2 cases/day = 8
cases
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 21 /40

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:
• Order Point = 16 cases
• Monthly Usage rate = 60 cases
• Total available = 76 cases
• Less lead time usage rate =8
• Maximum Level = 68 cases
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 22 /40

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
minus the number of cases in excess of
the order point.
• 51 cases = 60 cases – 9 cases
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 23 /40

Numerical Example using
Minimum/Maximum order system..2
• The decision to order 51 cases can be
proved.
• Cases ordered = 51
• Amount available = 25
• Total = 76 cases
• Less lead Time usage rate = 8
• Maximum level = 68 cases.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 24 /40

Using Technology in Purchasing
Systems
• Electronic Price quotations.
• Electronic Bid acceptance.
• Supplier Notification(Purchase Order).
• Computer generated shopping lists.
• Software which has Ingredient files, Menu
Item files, Inventory files.
• Auto requisition generation.
• Electronic data Interchange.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 25 /40

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
procurement using computerized systems.
• How are you going to go about it explain
diagrammatically and use flow plans.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 26 /40

Security Concerns in Purchasing
• Kickbacks.
• Fictitious companies.
• Reprocessing Invoices.
• Delivery Invoice errors.
• Credit Memo Problems.
• Quality Substitutions.
• Purchaser theft.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 27 /40

Cost reduction in the Purchasing
Function…1
• Negotiate Prices.
• Review quality standards.
• Evaluate the need to purchase convenience
products.
• Discontinue unnecessary supplier services.
• Combine orders.
• Purchase in larger quantities.
• Pay Cash
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 28 /40

Cost reduction in the Purchasing
Function…2
• Change Purchase unit size.
• Consider cooperative purchasing.
• Consider promotional discounts.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 29 /40

Receiving Controls
• Receiving Personnel
• Receiving Procedures.
• Security concerns in Receiving.
• Use of Technology in receiving systems.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 30 /40

Receiving Personnel
• Training to be provided identification,
procedures, complete internal receiving
records.
• Nomination of right and pivotal personnel.
• Follow clean business and personal
practices.
• Able to manage physical tasks and get
manpower at a given notice.
• Committed to protecting establishment
interest.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 31 /40

Receiving Procedures…1
• Check incoming products against
purchase orders or purchase records.
• Check incoming products against
purchase specifications.
• Check incoming products against delivery
invoices.
• Accept incoming products.
• Move accepted products to storage
immediately.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 32 /40

Receiving Procedures…2
• Complete necessary receiving
documentation, by segregation and
preparing daily receiving report.
• Issuing credit notes or credit memos.
• Using approved marking procedures.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 33 /40

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.
• Using adulterants like ice, soya products
or non fat dry milk extenders.
• Ice used in increasing weight.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 36 /40

Security Concerns in Receiving…2
• 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.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 37 /40

Security Concerns in Receiving…3
• 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
can ring when they arrive.
Wednesday, April 17, 2013 BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control Slide 38 /40

Direct reference
• Planning and Control for Food and
Beverage Operations 7th Edition, 2009
American Hotel and Lodging Association
2113 N High street, Lansing Michigan
48906-4221.
• Jack. D. Ninemeir
• ISBN: 978-0-86612-339-6
Wednesday, April 17, 2013 BAC-5132 Food and Beverage Management-III Menu Engineering Slide 39 /19

Questions
Comments
Wednesday, April 17, 2013 Slide 40 / 30
BAC-4131 Food and Beverage Management Cost Control: :Food Purchasing Control