Chapter 5 Purchasing and Inventory

Purchasing Overview The purchasing process is everything involved in buying products and services for an operation: Determine what an operation wants and needs to buy. Identify quality standards. Order products and services. Receive deliveries. Store and issue products. PURCHASING GOALS 5.1 Chapter 5 | Purchasing and Inventory

Maintaining Supplies and Quality Standards Tools to help purchasers buy the right amount of product: Customer-count histories Popularity index of items sold Vendor delivery schedules Availability of items from vendors outside influences that might affect an operation (weather, etc.) Every item an operation produces must meet that operation’s standards for quality: Consistency is the key to drawing repeat customers. An operation must have established quality standards for each item or service. Specifications are set by the chef, manager, and/or owner, and are easy to follow when purchasing brand-name items. 5.1 Chapter 5 | Purchasing and Inventory

Minimizing Expenditures and Staying Competitive . When ordering, the restaurant’s cash position (amt. of funds available to it at any given time) must be considered Ex. if a large amount of food inventory sits in storage for a while, the restaurant may need that money to pay other bills To minimize spending, an operation needs to consider: Customer-count forecasts Available storage capacity for new product For any operation, all costs must be controlled and the restaurant must be able to attract customers. 5.1 Chapter 5 | Purchasing and Inventory

Staying competitive For an operation to stay competitive, it must: Shop around for vendors who will provide the best combination of price and service for the operation’s needs. Try to get the lowest possible edible-portion (EP) price or as-served (AS) price.

Channels of Distribution Flow A channel of distribution includes the particular businesses that buy and sell a product as it makes its way from its original source to a retailer. There are three main layers in any channel of distribution: Primary sources include the farmers and ranchers who raise produce and livestock. Intermediary sources include wholesalers, distributors, and suppliers. Retailers sell their products directly to the public. All restaurants are considered retailers. 5.1 Chapter 5 | Purchasing and Inventory

Goods and Services: What’s Being Purchased Food and Beverages: quality and consistency are key to delivering a desirable product that will attract repeat customers Nonfood Items: linens, bar supplies, paper goods, cleaning supplies Smallwares and Equipment: require replacement fairly often; china and glassware, blenders, food processors Technology: computers, POS, security systems Furniture, Fixtures, and Equipment (FFE): This category is also known as capital expenditures; tables and chairs, lighting fixtures, etc. 5.1 Chapter 5 | Purchasing and Inventory

More Goods and Services Business Supplies and Services: before using an outside marketing service, the amount of capital (assets) has to be considered Support Services: linen and uniform rental; garbage removal, flower services, pest control Maintenance Services: help keep the facility in good shape; plumbing repair, painting and carpentry Utilities: gas, heat, electricity, telephone, Internet 5.1 Chapter 5 | Purchasing and Inventory

Buyers: Who’s Doing the Purchasing In independent or single-unit operations, the buyer of an operation’s product might be the owner or manager. Some restaurants use the formal-purchasing method to order goods and services (written specifications sent to suppliers) Suppliers then send restaurant bids (specialized, written price lists) Smaller operations may use informal purchasing methods (verbal price quote) from suppliers. Suppliers then give quotes, a notice of price charged for food products A buyer must have integrity to prevent kickbacks (money received in exchange for purchasing from a specific vendor) 5.1 Chapter 5 | Purchasing and Inventory

Determining Quality Standards Quality: the value or worth that customers place on a product Factors to be addressed when defining an operation’s quality standards include: The Item’s Intended Use: Knowing how an item will be prepared and served (determines what grade to buy) The Menu: The buyer must specify in the quality standard exactly how the item is described on the menu. Employee Skill Level: if a menu offers items that require extensive preparation, the operation will need highly skilled employees. Seasonal Availability: The seasonal nature of produce and other items affects price and availability. Storage Capacity: An operation’s storage space limits the amount of product it can purchase, which may then affect the quality of some menu items. 5.2 Chapter 5 | Purchasing and Inventory

Writing Product Specifications Product specifications, or specs, describe the requirements for a particular product or service that an operation wants to buy; for example: Form value: shredded vs. whole cheese Acceptable trim Place of origin (only LA seafood) Buyers should always work with approved, reputable suppliers. Buyers must be very familiar with the operation’s quality standards and product specifications and communicate these standards and specifications to both staff and vendors. 5.2 Chapter 5 | Purchasing and Inventory

Ordering Buyers conduct make-or-buy analyses to decide if an operation should make an item from scratch or buy a ready-made version. Buyers and managers use production records to forecast their buying needs. A production sheet lists all menu items that the chefs will prepare on a given day. Buyers use production sheets to spot signs of stockouts and overproduction. 5.2 Chapter 5 | Purchasing and Inventory

Figuring Out What to Order One of the most important ways managers try to limit food waste is by keeping accurate daily food cost sheets. Determine the daily food cost %: Requisitions from the storeroom + daily purchases daily sales figure Most managers try to stay at 33% or below on daily food cost Managers keep sales mix records that track each item sold from the menu. This record shows which items sell well, called leaders, and ones that don’t sell well, called losers. Par stock levels are the ideal amounts of inventory items that an operation should have at all times: Par stock – Amount in stock = Amount to be ordered 5.2 Chapter 5 | Purchasing and Inventory

Figuring out what to order cont. Another way to ensure that an operation always has the proper level of stock on hand is to establish a reorder point, or ROP, for each item. A reorder point is like a warning bell; it alerts an operation to make orders immediately. Used when suppliers do not deliver regularly

Ordering Forms A purchase order is a legally binding, written document that details exactly what the buyer is ordering from the vendor. P. 317 Buyers can place purchase orders by phone, fax, or the Internet. When a chef believes that a piece of expensive equipment should be purchase or replaced, the chef must first fill out a requisition and send it to company headquarters. Once headquarters approves the purchase and notifies the buyer, the buyer can place the order. 5.2 Chapter 5 | Purchasing and Inventory

Knowing Food Prices A buyer must understand and keep track of the factors that affect food prices. Factors that affect a product’s value: Time value: The price retailers pay for the convenience of selecting the time of delivery from suppliers. Form value: The price savings created when a buyer purchases bulk quantities of food instead of individually portioned servings. Place value: The differences in price of a product depending on where it needs to be shipped. Transportation value: The cost of choosing a quick but expensive form of transport to get goods delivered. Service value: Additional convenience services that a vendor provides to its customers (24 hour, toll-free number) 5.2 Chapter 5 | Purchasing and Inventory

Receiving Orders Receiving means inspecting, accepting, and, in some cases, rejecting deliveries of goods and services. A written invoice must accompany all deliveries Guidelines for efficient receiving procedures include: Plan ahead for shipments. Inspect and store each delivery before receiving another one. Record items on a receiving sheet. Correct mistakes immediately. Put products away as quickly as possible. Maintain the receiving area. Receivers have the right to refuse any delivery that doesn’t meet the operation’s standards. A credit memo is written to ensure the vendor will credit the restaurant for rejected item. 5.3 Chapter 5 | Purchasing and Inventory

Storing Orders Perishable products are food products sold or distributed in a form that will spoil or decay within a limited period of time. Nonperishable products are items that, generally due to packaging or processing, do not readily support the growth of pathogens. When storing items in refrigerated storage: Monitor food temperature regularly. Don’t overload coolers. Use open shelving. Keep cooler doors closed as much as possible. Wrap or cover all food properly. Store meat and produce in proper humidity levels (closer to blower, higher humidity level) 5.3 Chapter 5 | Purchasing and Inventory

Frozen and Dry Storage When storing items in frozen storage: Check freezer temperatures regularly. Place frozen food deliveries in freezers once inspected. Ensure good airflow inside freezers. Clearly label food prepared on-site that is intended for frozen storage. When storing items in dry storage: Keep storerooms clean and dry. Store dry food away from walls and at least 6″ off of the floor. Storeroom should be between 50-70 degrees Store staples (items with high demand) in airtight containers 5.3 Chapter 5 | Purchasing and Inventory

Taking Inventory An inventory is a record of all products an operation has in storage and in the kitchen. In the physical inventory method, the entire stock is physically reviewed on a regular basis. In the perpetual inventory method, employees record items when they are received and then when they are used up. A physical inventory is an actual count of all items in stock, while a perpetual inventory is an estimate of stock on hand based on data entry. Issuing refers to the official procedures employees use when taking an item out of the storeroom and putting it into production (used to prevent pilfering) 5.3 Chapter 5 | Purchasing and Inventory

Calculate Usage, Food Costs, and Loss Tracking the amount of a product used during a period of time helps the buyer calculate how much needs to be ordered. If sales of food for the period are less than the cost of food sold, then the operation is operating at a loss. P. 336 5.3 Chapter 5 | Purchasing and Inventory