Controlling Food Costs in Purchasing and Receiving

1. Controlling Food Costs in Purchasing and Receiving • Controlling Foodservice Costs 5 OH 5-1

2. Chapter Learning Objectives • Explain how a specification becomes a control in the purchasing function. • Explain the parts of a purchase specification and a purchase order. • Explain various purchasing methods and their effect on the price of goods. • Calculate a yield test that identifies the difference between as purchased (AP) price and edible portion (EP) cost. • Identify factors that affect the purchase price of goods.

3. Chapter Learning Objectives continued • Distinguish between perishable and nonperishable goods and their relationship to the purchasing cycle. • Calculate the par stock amount of an item to order. • Calculate the amount to purchase, using EP amount and yield percent. • Calculate the amount of goods to purchase for catered events. • Calculate a butcher test, or meat yield test. • Describe proper procedures for receiving goods.

4. Who Purchases? • Purchasing agent • Manager • Chef • Head cook • Trusted staff member • The buyer maintains quality standards!

5. Who Purchases? continued The buyer is responsible for ensuring that quality standards are met during the purchasing and delivery process.

6. Is a control device Lists the product’s name Lists its intended use Identifies the desired brand and grade Identifies the desired size Identifies the desired variety Identifies packing requirements Details delivery requirements Explains payment terms The Food Specification

7. The Food Specification continued • Specifications should describe exactly what buyers want to buy.

8. Purchase Orders • The official written record of the items the buyer wants to purchase

9. A unique identification number The name and address of the restaurant Date of the order Signature of the buyer The supplier’s contact information Date of delivery The name, quantity, and delivery unit of each item ordered Total (extended) cost of the order Purchase Order Information

10. Competitive quotes Standing order One-stop shop Cost-plus Sealed bids Commissary Purchase Methods

11. What to Buy • Avoid buying the “cheapest.” • Use purchase specifications. • Buy at the best cost from sellers who meet or exceed the purchase specifications. • Consider both AP price and EP cost.

12. Two Kinds of Costs • As purchased (AP)—the cost of food as delivered to the restaurant • Edible portion (EP)—the cost of food as served to the guest

13. AP vs. EP Form Items, such as fresh whole fish, will weigh much less in their EP form than in their AP form.

14. Calculating EP Cost • Two steps • Step 1 –Calculate product’s yield percentage.

15. Calculating EP Cost continued • Step 2 –Calculate EP cost. • Example—the EP cost of one pound of onions

16. Management complacency Payment history Gift acceptance policies Other Factors Affecting Purchasing

17. When to Buy • Purchase perishable items daily or every few days. • Purchase nonperishable items weekly or monthly.

18. Perishable Product Purchases • Determine the amount of product that will be used between deliveries. • Count what is on hand. • Subtract the amount on hand from the amount that will be used. • The result is the amount to purchase. (Note: Some managers purchase a small “extra” or “cushion” amount in case sales levels exceed forecasts.)

19. Nonperishable Quantity to Purchase • Most common method is par stock method. • Steps • Determine quantity (par stock) that must be on hand between orders for each item. • Before ordering, take inventory. • Subtract on hand quantity from par stock quantity. • Difference is quantity to order

20. Calculating How Much to Buy • Need ten pounds of onions. • Yield percentage of onions is 84.2%. • How many pounds will you buy?

21. Catering Purchases • Step 1 – Determine the servings per purchasing unit (SPU).

22. Catering Purchases continued • Step 2 – Determine the purchase factor. • Recall the formula for EP percentage.

23. Catering Purchases continued • Step 3 – Determine the amount to purchase.

24. Also known as “yield test” Used to determine EP meat costs Results vary, based upon the AP quality of meat purchased Measures losses from Fat removal Bone removal Trim and packaging removal Portioning Butcher Test

25. Steps for Receiving • Step 1 – Delivery person brings products to receiving area. • Step 2 – Check products against the purchase order. • Step 3 – Check products against purchase specifications. • Step 4 – Check delivery quantity against the invoice and the purchase order.

26. Steps for Receiving continued • Step 5 – Match invoice prices to purchase order prices. • Step 6 – If everything matches correctly, sign the invoice. • Step 7 – Put delivered products in proper storage areas. • Step 8 – Process paperwork in keeping with the operation’s standard operating policies and procedures.

27. How Would You Answer the Following Questions? • A purchase order is best prepared by the (buyer/ seller) of the items to be purchased. • With effective purchasing techniques in place, a restaurant's EP costs can often be lower than its AP costs. (True/False) • EP weight divided by AP weight results in • AP percentage • AP cost • EP cost • EP percentage • A butcher’s test is a test of (yield/quality).

28. As served (AS) Butcher test Buyer Commissary Competitive quotes Cost plus Invoice Key Term Review

29. Market quotation sheet Nonperishable goods One-stop shop Par stock Perishable goods Purchase order Quotes Key Term Review continued

30. Sealed bid Specification Standing order Yield chart Yield percentage Yield test Key Term Review continued

31. Chapter Learning Objectives—What Did You Learn? • Explain how a specification becomes a control in the purchasing function. • Explain the parts of a purchase specification and of a purchase order. • Explain various purchasing methods and their effect on the price of goods. • Calculate a yield test that identifies the difference between AP price and EP cost.

32. Chapter Learning Objectives—What Did You Learn? continued • Identify factors that affect the purchase price of goods. • Distinguish between perishable and nonperishable goods and their relationship to the purchasing cycle. • Calculate the par stock amount of an item to order. • Calculate the amount to purchase, using EP amount and yield percent.

33. Chapter Learning Objectives—What Did You Learn? continued • Calculate the amount of goods to purchase for catered events. • Calculate a butcher test, or meat yield test. • Describe the proper procedures for receiving goods.