Chapter 5 Purchasing and Inventory

1. Chapter 5 Purchasing and Inventory

2. Purchasing Overview • The purchasing process is everything involved in buying products and services for an operation: • __________________________________ • __________________________________ • __________________________________ • __________________________________ • ___________________________________. PURCHASING GOALS 5.1 Chapter 5 | Purchasing and Inventory

3. Maintaining Suppliesand 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 • Recognizing outside influences that might affect an operation • 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. • _____________________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

4. Minimizing Expendituresand Staying Competitive . • To minimize spending, an operation needs to consider: • Customer-count forecasts • Available storage capacity for new product • Forecasts of future costs of particular products • For any operation, all costs must be controlled and the restaurant must be able to attract customers. • For an operation to stay competitive, it must: • _____________________________________________ • Try to get the __________________________________ • Try to get the maximum ___________, or the total utilization, from products purchased. 5.1 Chapter 5 | Purchasing and Inventory

5. 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

6. Goods and Services: What’s Being Purchased • _______________________These are items that operations actually prepare and sell. • ________________________: These items are directly tied to the sale of food and beverages. • ___________________________: These are items that an individual can generally move from location to location easily and that require replacement fairly often. • __________________________: Management and employees use technology throughout the modern operation. • ___________________________________: This category is also known as capital expenditures. An operation might purchase or lease some of the items in this category, such as big-ticket appliances. 5.1 Chapter 5 | Purchasing and Inventory

7. More Goods and Services • ______________________: These supplies and services support the management or marketing of an operation. • ______________________: These support services are tied to the operational aspect of the business. • ______________________: These services help keep the facility in good shape. Many of these services are essential to the efficient functioning of an operation. • ___________________: In many areas of the country, operations can choose among competing utility suppliers. Careful negotiation of the various utilities in a given area will end up saving an operation money. 5.1 Chapter 5 | Purchasing and Inventory

8. Buyers: Who’s Doingthe Purchasing • In independent or single-unit operations, the buyer of an operation’s product might be the owner or manager. • The purchasing structure in chain operations might include an individual to perform or review all purchasing activities. • Hotels, large restaurants, and chains use the _____________________to order goods and services. • A buyer must know everything about the operation—from the items on the menu and their current prices to the expected volume of business. • For an operation to run effectively, buyers must have a full understanding of the purchasing process. • A buyer must have integrity. 5.1 Chapter 5 | Purchasing and Inventory

9. Section 5.1 Summary • There are five basic steps to the procurement process: determine what an operation wants and needs to buy; identify quality standards; order products and services; receive deliveries; and store and issue products. • There are four major goals of purchasing: maintain the right supply of products and services, maintain the quality standards of the operation, minimize the amount of money the operation spends, and stay competitive with similar operations. • There are three main layers in any channel of distribution: Primary sources are the producers; intermediary sources include wholesalers, distributors, and suppliers; and retailers sell their products directly to the public. 5.1 Chapter 5 | Purchasing and Inventory

10. Section 5.1 Summary (Cont.) • There are nine major categories of goods and services: food and beverage; nonfood items; smallwares and equipment; technology; furniture, fixtures, and equipment; business supplies and services; support services; maintenance services; and utilities. • A buyer must know everything about an operation—from the items on the menu and their current prices to the expected volume of business. • Buyers must have integrity to avoid forming relationships with vendors that could either compromise the relationship with that vendor or compromise the best interests of the operation. 5.1 Chapter 5 | Purchasing and Inventory

11. Determining Quality Standards • _____________refers to the value or worth that customers place on a product or service. • Establishing solid quality standard specifications helps an operation create the consistency that customers expect. • Factors to be addressed when defining an operation’s quality standards include: • ____________________: Knowing how an item will be prepared and served is the most-influential factor in determining quality standards. • __________________________: The overall concept and goals of the operation guides all decisions. • ___________ The buyer must specify in the quality standard exactly how the item is described on the menu. 5.2 Chapter 5 | Purchasing and Inventory

12. Quality Standards (Cont.) • _____________________If an operation offers items that require extensive preparation, the operation will need highly skilled employees. • ____________ Constraints: Operations in highly competitive markets may need to include cost limits in their quality standards. • _______________________: It’s very important to look closely at what customers want and why they choose to eat at an operation. • __________________________: The seasonal nature of produce and other items affects price and availability. • _______________________: 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

13. Writing Product Specifications • ____________________________describe the requirements for a particular product or service that an operation wants to buy. • Specifications include the details that help a product or service meet the operation’s quality standards. • Operations should always document product specifications. • 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

14. Ordering • Buyers conduct ________________________to decide if an operation should make an item from scratch or buy a ready-made version. • Knowing exactly what and when to order is at the center of purchasing. • Buyers and managers use _____________________to forecast their buying needs. • A __________________________ lists all menu items that the chefs will prepare on a given day. • Buyers use production sheets to spot signs of __________________________________________ 5.2 Chapter 5 | Purchasing and Inventory

15. Figuring Out Whatto Order • One of the most important ways managers try to limit food waste is by keeping accurate ________________________. • Managers keep _______________that track each item sold from the menu. This record shows which items sell well, called _________, and ones that don’t sell well, called _____. • _____________ 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 • Another way to ensure that an operation always has the proper level of stock on hand is to establish a ____________, for each item. A reorder point is like a warning bell; it alerts an operation to make orders immediately. 5.2 Chapter 5 | Purchasing and Inventory

16. Ordering Forms A _______________________ is a legally binding, written document that details exactly what the buyer is ordering from the vendor. • Buyers can place purchase orders by phone, fax, or the Internet. • Keeping track of the information on the purchase order helps the buyer control products and services. • 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

17. 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. 5.2 Chapter 5 | Purchasing and Inventory

18. Section 5.2 Summary • Quality standards refer to the value or worth that customers place on a product or service. • Product specifications describe the requirements for a particular product or service that an operation wants to buy. • Buyers conduct a make-or-buy analysis to decide if an operation should make an item from scratch or buy a ready-made version. • Buyers use production sheets, daily food cost sheets, and sales mix records to help with purchasing decisions. • There are many economic factors that influence the price of an item. 5.2 Chapter 5 | Purchasing and Inventory

19. Receiving Orders ________________________means inspecting, accepting, and, in some cases, rejecting deliveries of goods and services. • Guidelines for efficient receiving procedures include: • Plan ahead for shipments. • ___________and store each delivery before receiving another one. • ____________deliveries __________________. • 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 ______________any delivery that doesn’t meet the operation’s standards. 5.3 Chapter 5 | Purchasing and Inventory

20. Storing Orders • ____________________are food products sold or distributed in a form that will spoil or decay within a limited period of time. • _______________ are items that, generally due to packaging or processing, do not readily support the growth of pathogens. • When storing items in refrigerated storage: • Set refrigerators to the correct temperature. • Monitor food temperature regularly. • Schedule regular maintenance of coolers. • Don’t overload coolers. • Use open shelving. • Keep cooler doors closed as much as possible. • Wrap or cover all food properly. 5.3 Chapter 5 | Purchasing and Inventory

21. Frozen and Dry Storage • When storing items in frozen storage: • Set freezers to the correct temperature. • Check freezer temperatures regularly. • Place frozen food deliveries in freezers once inspected. • Ensure good airflow inside freezers. • Defrost freezers on a regular basis if necessary. • Clearly label food prepared on-site that is intended for frozen storage. • When storing items in dry storage: • Keep storerooms _________________ • Make sure storerooms are well ventilated. • Store dry food away from walls and _____________ off of the floor. • Keep food out of direct sunlight. 5.3 Chapter 5 | Purchasing and Inventory

22. Taking Inventory An ________________ is a record of all products an operation has in storage and in the kitchen. • In the _____________________ inventory method, the entire stock is physically reviewed on a regular basis. • In the _________________ 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. • __________________refers to the official procedures employees use when taking an item out of the storeroom and putting it into production. 5.3 Chapter 5 | Purchasing and Inventory

23. Calculate Usage,Food Costs, and Loss • Using an inventory system helps a buyer calculate product usage, food cost, and losses. • Tracking the amount of a product used during a period of time helps the buyer calculate how much needs to be ordered. • Buyers calculate the total cost of food the same way they calculate item usage, except that they use the figures for total restaurant food inventory value. • If sales of food for the period are less than the cost of food sold, then the operation is operating at a loss. • Another type of loss is inventory shrinkage, or the difference between the total cost of food and the cost of goods issued during the period. 5.3 Chapter 5 | Purchasing and Inventory

24. Section 5.3 Summary • Receiving means inspecting, accepting, and, in some cases, rejecting deliveries of goods and services. • Perishable products are food products sold or distributed in a form that will spoil or decay within a limited period of time. • Nonperishable food is generally purchased in large quantities and less often than perishable food. • Food should be stored according to whether it’s perishable or nonperishable. • There are three types of storage available in most foodservice establishments: refrigeration, freezer, and dry storage. • An inventory is a record of all products an operation has in storage and in the kitchen. 5.3 Chapter 5 | Purchasing and Inventory