BSHM - 3

Food & Beverage Control | Manikant Sah

UNIT - 2 FOOD CONTROL CYCLE

 Food Control Cycle

Unit – 2 Class – BSHM – 3rd

Contents :

 Purchasing
 Purchasing Procedure
 Methods
 Level of Techniques
 Perpetual Inventory
 Monthly Inventory
 Pricing of Commodities
 Comparison of Physical Inventory

Educational Objective Addressed:-

 Purchasing Control – To make them understand about Purchasing, What is

Purchasing control? Why a Purchasing control to be done?
 What are the main points to be considered while purchasing? Aim of Purchasing and
a brief overview of duties and responsibilities of Purchasing Manager
 Different types of food purchase? What is Quality Purchase? Points to be considered
during purchase.
 Food quality factor for different commodities.
 What is yield? and test to arrive at standard yield.
 What is standard purchase specification? Advantage of standard yield and Standard
purchase specification.
 Purchasing procedure and Different method of food purchasing
 What is the source of supply / Purchasing by contract, Periodic Purchasing, open
Market Purchasing Standard Order Purchasing,Centralised Purchasing,
 What are the Methods of purchasing in Hotels , Different Purchase order forms
 Ordering Cost, Carrying Cost, Economic order quantity, Practical problems..

_____________________________________________________________________________________

Pre – Requisite :

 Knowledge of F&B Operations

 Knowledge of Food and Beverage Costs.

 Calculation of Food Cost.

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Purchasing can be defined as a function concerned with the search ,selection ,purchase
receipt. Storage and final use of a commodity in accordance with the catering policy of the
establishment . This suggest that the person employed to purchase food and beverages for an
establishment will be responsible for not only purchasing but also for the receiving , storage and issuing
of all commodities as well as being involved with the purpose for which items are purchase and the final
use of them.

Policies - Determining which market segment is aimed at.

Determine price to be paid for purchase and price that items are to
be sold at
Determines the quality to be purchased

Menu - Determine the choice of items available to customers

Volume Forecasting - Determine thw quantity to be purchased

Requisition - Indicate the particular requirement of each outlet

Purchasing - select suppliers ,contracts quantities to be

purchased,specification for in individual items ,Ensure
continuity of supply.

Receiving - Inspects for quantity and quality

Storing - Current storage for each item,maintain of stock

record,Security of items, t
Current stock levels, Correct issuing.

Production - Preparation of itms purchased

Selling - Provision of satisfactory products at the correct selling cost

Control - The measurement of performance of all oulets involved

Feedback of information to mangaement

Purchasing Control:--

The primary objective in the purchasing of food is to obtain the best quality of merchandise
based on specification established for each hotel at the lowest possible price. Below are
some requisites for effective purchasing:

 A qualified and honest purchase agent

 A sound set of standard purchase specification
 Effective buying method and procedure
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  Centralized purchasing – only one person buys all the food ,beverage and supplies of
any kind
 The executive chef should be consulted in all purchase pertaining to his department
 All major purchase – such as direct importations – have to be authorized by the
management
 A perpetual record of purchase unit price will be instituted.
 The purchasing agent will develop and establish a record of standard purchase
specification
 The purchasing agent should use a “ daily price quotation ‘sheet in order to maintain
competitive buying.

Aims of the Purchasing policy:

Purchasing policies for any establishment plays a vital role to ensure the proper purchase
of the required commodity.

Aims of the purchasing policies are as follows:

 It helps in selection of right supplier/purveyor from the market (By inviting tender
notices/quotations for the supply of required items in the daily newspapers to
select the best supplier from the markets.)
 To ensure the purchase of right kind of commodity that is demanded by the user
department. For this Purchase specification is made in which all the relevant details
of that particular commodity are mentioned.
 To ensure the delivery of required stuff on time. For this user departments need to
send the requisition to the purchase department well on time. Also the purchase
department should inform in advance about the time required for the delivery of
individual stuff to the user department well in advance so that they can send their
requisition at right time\
 It also helps in formulating the parameters for the proper receiving, storage and
issuing of items.
 It ensures a proper control over theft, spoilage etc. in the purchase department.

Job Description of the Purchasing Manager

 Responsibility for the management of the purchasing office,the receiving ,storage

and cellar area
 The Purchasing of all commodities.
 Conducting Market surveys.
 Purchase specification, Requisition and purchase order.
 Inviting quotation
 Sample testing
 Knowledge of lead time for supply of goods.
 Ensure continuity of supply of all items to user departments.
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  Efficient items.
 Purchase of imported goods.
 Finding Cheaperand more efficient source of supply .( but for the same quality )
 Keeping up to date with all the markets being dealt with and evaluating new
products.
 Research in to products, markets, price, trends, etc.
 Co- - ordinating with productive departments to santardize commodities and
themselves reduce stock levels.
 Co-ordinate with kitchen.
 Liaison with production, control, account and marketing departments.
 Petty Cash for spot purchase
 Reporting to senior management.

Yield Testing
Yield testing is very essential before buying any food stuff .Yield testing is an indispensable
preliminary for purchasing of food stuff and for choosing the most appropriate cooking
methods.These lists are carried out to establish actual yields.It help in identifying the
gastronomical properties of foods.A restaurant may obtain several different kind of soups
base , a panel will create each soup base with regard to taste ,flavor,texture and other
properties finally test are undertaken to establish the moist economical method of
preparation.
Method of calculating yield
Calculatie the total cost of the item and divide the same by yield percentage to find out the
cost of the items. The next step is to cost the recipe fully and to continue to do so at regular
interval to see how cost are changing.Usually additional cost @ 5 percent of preparation
cost is added to cover the cost of following items in order to find out the dish cost :-
 Normal waste in kitchen
 The provision of rolls and butter and other free items, such as amuse queule.
 The cost of staff meals.
Standard Yield
The term yield mean the net weight or values of a food items after it has been processed
from raw or as purchased weight or value and made.
It is the usable part of a particular food product after its initial preparation and cooking. In
large food and beverage outlets as large quantities of food per weeks are purchased,
therefore standard yield may be available for items such as meat, fish, vegetables etc.
The main objectives of standard yields are to establish:-
 A standard for the quantity and number of portions obtainable from specific items
of food.
 A standard for comparison with operating result and measuring the efficiency of the
production departments.
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  An objective method of evaluating standard purchase specification.
 A standard cost factor for the items of food.
It also assists in :-
 Menu, Costing and pricing.
 In converting forecast requirements in to raw material requirements.
The various tests to arrive at standard yields are:-
- Raw food test: to determine the best cost and weight for fruits and vegetables for
specific use.
- Caused food Test: to determine the yield on actual cost after considering weight,
quality, uniformity.
- Butchering test: to determine actual portion costs of meat, poultry, fish and sea food
after waste, trim and by products have been considered.
- Cooking test: to determine the final portion cost after cooking, slicing and service
less have been considered.
Developing Standards and standard procedures for purchasing
The primary purpose for establishing control over purchasing is to ensure a continuing
supply of sufficient quantities of the necessary foods, each of the quality appropriate to its
intended use, purchase at the most favorable price.
Standards must be developed for the: - quantity, Quality and price at which food is
purchased.

Establishing Quality Standards

Before any intelligent purchasing can be done someone in management must determine
which foods, both perishable and nonperishable will be required for day-to-day operations.
The basis for creating a list of these foods is the menu
It is important that the food controller in cooperation with the other members of the
management team, draw up the list of all food items to be purchased, including those
specific and distinctive characterstics that best describe the desired quality of each, these
carefull written descriptions are known as standard purchase specification.
Standard Purchase specification
For proper and effective control, purchase specification should be used in all purchasing. It
will bring uniformity and consistency in buying, which ultimately keep maintaining the
required cost of the product. Each qualification would be determined by the purchase
officer,executive chef and food and beverage manager as per the catering policy ,the menu
requirement and its price range.The copies of the specification should be kept by the
purchase department.Food production department and food and beverage department
,receiving department,the storeman ,the receiving clerk , all senior catering staff and send
to all the approve suppliers.
A purchase specification may be within in a standard form. It must contain:-
 Definition of each item.

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  Grade on brand name of the items.
 Weight ,size or count
 Unit against which price
 Special note for the commodity.

Objectives of Purchase Specification:

 To force owners or manager to determine exact requirements in advance for any
products.
 To establish a suitable buying standard for a particular commodity for the hotel.
 To furnish to the suppliers in writing in specific terms the requirement of the hotel.
 To help in settling the price of a commodity.
 To obtain a standard product//material for the food and beverage department.
 To obtain a standard product so that measurement of performance of departments
can be more accurate.
 To eliminate the need for detailed verbal description of a product each time it is
ordered.

Preparation of standard specification has following advantages:

 Establishing a buying standard of a commodity so that a standard product is

available for the customer
 Inform the supplier in writing by drawing or photograph or description precisely
what is required.
 Provide detailed information to receiving department and store as to the standard
of food to accept.
 Makes staff, chef, food and beverage manager, and other staff, aware of the
differences that can occur on the size ,weight ,quality and quantity of the product.
 The specification act as an aide memoire to all concerned of what was agreed

Purchasing Procedure

The purchase procedure will depend upon the nature ,size ,standard ,location of the
establishment,the forecast of the future requirements indicates the purchase procedure
.However the full purchase procedure could be broken down in to the following steps :-
 Purchase requisition form
 Selection of the source of supply
 Entering into a contract with the supplier.
 Acceptance of food and beverage raw material.
 Transfer of commodities to ordering department or to stores or cellar.
Selection of a Supplier:

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In case a new supplier is to be selected a great deal of exercise and detailed enquiries be
made as regards to –
 Details about the firm reputation.
 Information of other customers of their products.
 Recent price list.
 Trade term and conditions such as cash discount, trade discount, group or company
discount.
 Details about other customers.
 Sample of products for living purpose /quality of the product.
 A visit to n new firm
 Minimum order level
 Delivery procedure.
 Order procedures.
 Part deliveries or standing orders.
On selection the suppliers are put on an approved (Suppliers List”
Periodically the evaluation of their performance could be done using a rating system based
on :-
 Price performance
 Quality performance
 Delivery performance

Purchasing method
There are variations in purchasing methods. Basically because of location and availability
of merchandise ,however some of the methods practice in most of the food and beverage
establishments are describe below :-
Contract Purchasing
A contract is entered with a supplier for the commodities to be supplied at regular intervals
usually at advantageous price.A contract is a legal document and the condition of the
contract should be carefully prepared preferably by the solicitors of the firms. There are
two common types of contracts:-
 The Specific period contract: It aims at determining the source of supply and the
prices of goods for a slated period say three or six months. This type of contract is
suitable for items which have fairly stable price such as bread, butter, milk, cream
etc.
 The quantity contract : It aims is to secure continuity of supply of a given quantity of
an essential item at an agreed price over a particular trading period .This type of
contract is most suitable for fruits, vegetables etc.
Clauses of a purchse contract
 The period
 Estimated quantities
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  Reservation of the establishment to decide a contract between suppliers.
 Purchase specification.
 Removal of rejected food by supplier
 Containers chargeable.
 Power to purchase to default
 In case of dispute – an agreed party.
 Indemnity against damage
 Prevention of corruption
 the place of delivery
 invoices
 payment of invoice
 Service of notice to break a contract.
- Periodical Purchasing
The requirements of the establishment are periodically estimated and regular orders are
placed on a weekly/fortnightly basis to ensure that this met /monthly basis. This method
ensure that stocks are being kept at regular level.A master quotation list is prepared and on
the basis of periodical requirements the price quoted and the storage space available, the
orders are placed .This form of buying is mostly used in grocery type commodities.
- Daily market List ?daily market quotation by requirement
Thia method is usually used for purchasing perishable goods on a daily basis. A list of
approved supplier is prepared ,A daily market list is prepared by the executive chef on
the basis of quick stock taking of the food.On receipt of Daily Market List the purchase
office contracts on telephone ,each approved suppliers and ask to quote price for each
of the items required. The quoted prices are entered on the daily market list and a
decision is takenby the purchase officer as to where o place order of each item.
Market Purchasing - The requirements of the establishment are estimated.Quotation
are aasked from the various suppliers of commodities.The quantity and prices are
compared and orders are placed to the firm keeping in mind the price and quantity of
provisions.
- Cash and Carry Nethod
This is the most suitable method for small and medium sized establishments. There is a
complex freedom for purchasing from the market at competitive price and the buyer
can personally check the quantity and taste of the items. However the caterer has to pay
cash for all items purchased and has to provide his own staff and transport to collect the
items from the place of purchase.
- Paid Reserve Method
This method is used when it is necessary to ensure the quantiy of supply pf an item for
the menu which is of particular importance for a specialty restaurant/establishment,
such as jumbo size prawns,frozen fillet of beef etc
- Cost plus method
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 This method is more suitable for welfare catering institution such as hospital, boarding
houses etc. The approved supplier is paid exactly the same price that he paid for the
commodities plus an agreed percentage to include the cost of handling, delivery charges
and margin of profit.
- Totally Supply method
There are some suppliers who are able to offer a full supply service of all commodities.
A food and beverage establishment may agree for such supplier .This system has the
advantage of only having to negotiate with one supplier as reduced volume of paper
work and fewer deliveries.
Centralized purchasing System
This system is very popular in chain operation. In this system the requirements of each
individual unit are relayed to a central office. The central office determines total
requirements of all units and then makes total purchase either for delivery to the
individuals unit by the dealer or for centralized delivery. The decision as to centralize
purchasing is taken by the top management. The main advantage of central purchasing
are –
 Volume purchasing which lead to lower price.
 Opportunity to obtain desired quality because of greater choice of markets.
 Purchase as per specifications.
 Maintaining a large inventory which ensures constant supply to individual units.
 Check and control over individual unit’s food purchaser.
There are some disadvantages of the system which are:-
 Each unit must accept the standard items in stock
 Units have little freedom to purchase for its own particular needs.
 Unit cannot take advantages of local” special “st reduced prices.
 Since menu arestandardised there is a limited freedom to individuals unit to change
the menu.
Once a supplier is choosen the following points must also be considered before order are
placed : -
 Classification of products
 Purchase order must be confirmed in writng.
 Responsibility of purchasing
 Stock life of products.
 Money available to market purchasers – cash flow
The quantity regarde will depend upon :-
 Existing stock level
 Expected volume of business
 Current market price and trends
 Ta riffs
 Storage space available
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Periodic order Method
Non perishable items have longer shelf life than perishables. These items require in –
frequent ordering and leave the steward free to attend to perishables. The steward
establishes with the advice of management periods for ordering purpose – once every
week , or every two weeks or once in each month.The steward review the entire stock of
non – perishables items and determines how much of each to order :-
Items required for the upcoming period --- items presently on hand +items wanted on hand
at the end of the period to last until the next delivery = items to be ordered.
The items to be ordered as calculated may be round up to the next highest in view of the
standard purchase unit.

Economic order quantity is the level of inventory that minimizes the total inventory
holding costs and ordering costs. The framework used to determine this order quantity is
also known as Wilson EOQ Model. The model was developed by F. W. Harris in 1913. But
still R. H. Wilson is given credit for his early in-depth analysis of the model

Underlying assumptions

1. The ordering cost is constant.

2. The rate of demand is constant

3. The lead time is fixed

4. The purchase price of the item is constant i.e no discount is available

5. The replenishment is made instantaneously; the whole batch is delivered at once.

EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. (A
common misunderstanding is that formula tries to find when these are equal.)

Variables

 Q = order quantity
 Q * = optimal order quantity

 D = annual demand quantity of the product

 P = purchase cost per unit

 C = fixed cost per order (not per unit, in addition to unit cost)

 H = annual holding cost per unit (also known as carrying cost) (warehouse space,
refrigeration, insurance, etc. usually not related to the unit cost)

The Total Cost function

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The single-item EOQ formula finds the minimum point of the following cost function:

Total Cost = purchase cost + ordering cost + holding cost

- Purchase cost: This is the variable cost of goods: purchase unit price × annual demand
quantity. This is P×D

- Ordering cost: This is the cost of placing orders: each order has a fixed cost C, and we need
to order D/Q times per year. This is C × D/Q

- Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2,
so this cost is H × Q/2

To determine the minimum point of the total cost curve, set its derivative equal to zero:

The result of this derivation is:

Solving for Q gives Q* (the optimal order quantity):

Therefore: .

Note that interestingly, Q* is independent of P, it is a function of only C, D, H.

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Carrying cost

In marketing, carrying cost refers to the total cost of holding inventory. This includes
warehousing costs such as rent, utilities and salaries, financial costs such as opportunity
cost, and inventory costs related to permissibility, shrinkage and insurance. [1]

When there are no transaction costs for shipment, carrying costs are minimized when no
excess inventory is held at all, as in a Just In Time production system.[1]

Excess inventory can be held for one of three reasons. Cycle stock is held based on the re-
order point, and defines the inventory that must be held for production, sale or
consumption during the time between re-order and delivery. Safety stock is held to account
for variability, either upstream in supplier lead time, or downstream in customer demand.
Psychic stock is held by consumer retailers to provide consumers with a perception of
plenty.

Frequently asked Questions :

Q.1 : Define Purchasing ?

Q.2 :Explain Purchasing Controls ?

Q.3. What are the basic aims and objectives of purchasing Controls?

Q.4 What is Yield Testing ?

Q.5 What is Standard Yield ? Explain Standard Purchase Specifications.

References:
 Management & Cost Control –by- Jagmohan Negi ( Page no : 54 – 101)
 Supported Notes – Self made notes and material collected from the industry

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