Food Purchasing Control

1. Food Purchasing Control HRT 276 – Chapter 4 Part II: Food Control

2. Thanks to… The information in this presentation comes from Chapter 4: Principles of Food, Beverage, and Labor Cost Controls By Paul R. Dittmer 7th Edition. 2003. New York: John Wiley & Sons

3. Introduction to Part II • Purchase • Receive • Store • Issue • Produce • Sell & Serve

4. Introduction • Purchasing decisions are driven by these key components: • Menu • Product specifications • Purchase method • Product forecasting • Other factors • Budgeted food cost goal • Labor and type of service • Equipment, storage space, and layout of facilities

5. Purchasing: The key factors • Menu—determines needs • Product specifications—determines quality • Purchase method—determines price and supplier • Product forecasting—determines quantity

6. Responsibility for Purchasing • Manager, Chef, Steward • The book uses the steward • The primary issue in this step is to limit purchasing to one person if possible

7. The Control Process (from Ch. 2) • Establish standards and procedures • Train • Monitor performance • Take appropriate action • With people • With products

8. Definitions • Perishables • Comparatively short shelf life or useful life • Think “fresh” – purchased for immediate use • It’s a “quality thing” in most cases • Can be more costly and more wasteful • Non-perishables • Comparatively longer shelf life • Do no deteriorate as rapidly if stored closed and at proper temperatures

9. Standards: Developing Standards • The primary purpose of establishing control over purchasing is to ensure a continuing supply of products: • In sufficient quantities • At the appropriate quality for its intended use • Purchased at the most favorable price • Standards dictate: • Quality • Quantity • Price

10. Standards: Establishing Quality • Before the first purchase, one must determine: • Type of food (menu-based decision) • Quality of food (market-based decision) • Brand • Size • Packaging • Grade • Degree of freshness • Other

11. Standards: Establishing Quality • To produce meals of desired and consistent quality, then the raw products must be of desired and consistent quality • STANDARD PURCHASING SPECIFICATION • Commonly abbreviated “SPS” • These specifications dictate quality

12. Standards: Establishing Quality • SPS • Establishes exact requirements in advance • Useful in menu preparation and development • Help eliminate misunderstandings between steward and purveyors (vendors) • When distributed to more than one purveyor, competitive bidding is possible • Limit or eliminate verbal descriptions each order • Aid in proper receiving

13. Standards: Establishing Quantity • Principles are based primarily on useful life of the product • Perishable • Non-perishable • Other considerations • Projected business volume • Storage • Financial desires (cash-on-hand vs. on-shelf) • Purveyor minimums (quantity or value)

14. Standards: Terms and considerations • Storage locations • Permanent locations / Limited Locations • Shelf tags and labels • FIFO • Bin Cards • Computerized assistance

15. Standards: Establishing Quantity • Perishables • Par or Par Stock • Minimum vs. maximum vs. always on-hand • Defined – for our use – as the quantity of any item required to meet anticipated demand in some specific upcoming period of time • The par level is established using historical information (remember the assumptions!) • Volume projections may dictate that more than normal is needed.

16. Standards: Establishing Quantity • Ordering Perishables • The par (standard for quantity) is established and used in calculating the needed purchase amount • Steward conducts a daily physical inventory (or at least a physical observation) • Par is sometimes called a “build-to” value • So, par is what we need • Inventory is what we actually have • Order is the difference between par and actual • More may be ordered as par can be considered a minimum

17. Standards: Establishing Quantity • Ordering Perishables (continued) • Steward’s Market Quotation List (figure 4.2) • For all purveyors holding the SPS for perishables, daily quoting is possible (price issue)

18. Standards: Establishing Quantity • Non-Perishables • Par methods can be used • The par level is established using historical information • Storage is a greater issue as the time period between orders may be longer • Issues: • Storage / Permanent Location • Theft • Waste & FIFO • Labor for maintenance

19. Standards: Establishing Quantity • Ordering Non-Perishables • Periodic Order Method Amount required for upcoming period 40 - Amount presently on hand - 12 + Amount wanted on hand at the end of the +15 period to cover needs until the next delivery = Amount to order = 43 • Ideally, physical inventory is used to determine on-hand amounts

20. Standards: Establishing Quantity • Ordering Non-Perishables • Perpetual Order Method • It is like a check book (In, Out, Balance) • Requires some type of tracking • Perpetual Inventory Cards (not bin cards) • Paper or Computer • Reorder Point - the amount at which a new order is placed • Reorder Quantity – the amount ordered regularly once stock reaches the reorder point

21. Standards: Establishing Quantity • Ordering Non-Perishables (continued) • Perpetual Order Method Par stock 32 - Reorder Point - 15 = Subtotal 17 + Normal usage until delivery +10 = Reorder quantity (minimum needed) 27 • Note that the standardized Reorder Quantity is 24, so a determination of number of cases is needed (case may be 6, 12, 24 of each item)

22. Standards: Establishing Price • Quality – what to buy • Quantity – how much to buy • Price – how much to spend • Factors: • Quality / Market segment • Quantity / Economies of Scale • Seasonality of product • Location • Availability of more than one purveyor

23. Standards: Establishing Price • Price Quote • Daily • Longer (bulk buying, commitments, etc.) • Methods • Phone • Fax • Email / Web / Direct On-line Links with Purveyor • Salesperson • Mail

24. Standards: Establishing Price • Perishable • Daily • Weekly • More than one purveyor is likely • Non-Perishable • More likely one primary purveyor and one back-up • Individual items may vary between purveyors, but keep the big picture in mind

25. Training for Purchasing • Training of the Purchaser • Formal education • On-the-job training • Owner / Manager • Purveyors / Food Shows / Specialized training • Use of SPS and other Standards • Use of general policies and procedures regarding the operation that relate to purchasing • Knowing the other steps in the flow of food

26. Monitoring Purchasing • Purchasing • Standard Purchase Specifications (SPS) • Monitor purveyor performance • Monitor purchaser performance • Who does what? • Owner / Manager works with purchaser (steward) • Both Owner or Manager and Steward monitor SPS and purveyors • Steward must have two-way communication with the receiver

27. Taking Corrective Action • With Purchaser • Further training and development • Re-training • Discipline • By Purchaser • Contact with salesperson • Contact with purveyor directly • Any variation from standards must be investigated: people or product

28. Purchasing: Centralized Purchasing • Needs of individual operations (“units”) are consolidated to a central location • Total needs are purchased • Purchased items be distributed to individual operations by the purveyor or by the company (central location)

29. Purchasing: Centralized Purchasing • Advantages • Volume pricing • More choice of purveyors may lead to better quality • SPS more likely to be met • Larger inventories can lead to more reliable supply • The possibilities for dishonest purchasing in individual units are reduced

30. Purchasing: Centralized Purchasing • Disadvantages • Restricts individual unit operator’s freedom • Selection (variety) • Needs (timing) • Individual unit operators can not take advantage of local specials • Limits individual menu variations

31. Purchasing: Standing Orders • Delivery without order • Specific quantity on a set day • Building an item up to a specified level • Convenient • Possible waste or excessive cost

32. Purchasing: Computer Applications • Simple • Excel • Database • HOH only • More complex • HOH and FOH communication • May include • Recipes • Labor