Controlling Food Costs in Purchasing and Receiving

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Controlling Food Costs in Purchasing and Receiving
5

• Controlling Foodservice Costs

OH 5-1
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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.

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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.

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Who Purchases?

• Purchasing agent
• Manager
• Chef
• Head cook
• Trusted staff member
• The buyer maintains quality standards!

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Who Purchases? continued

• The buyer is responsible for ensuring that
  quality standards are met during the purchasing
  and delivery process.

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The Food Specification

• Is a control device
• Lists the products 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

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The Food Specification continued

• Specifications should describe exactly what
  buyers want to buy.

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Purchase Orders

• The official written record of the items the
  buyer wants to purchase

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Purchase Order Information

• A unique identification number
• The name and address of the restaurant
• Date of the order
• Signature of the buyer

• The suppliers contact information
• Date of delivery
• The name, quantity, and delivery unit of each
  item ordered
• Total (extended) cost of the order

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Purchase Methods

• Competitive quotes
• Standing order
• One-stop shop

• Cost-plus
• Sealed bids
• Commissary

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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.

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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

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AP vs. EP Form

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

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Calculating EP Cost

• Two steps
• Step 1 Calculate products yield percentage.

Edible portion (EP) weight As purchased (AP) weight EP percentage
8.00 9.5 8.00 9.5 8.00 9.5 0.842 or 84.2
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Calculating EP Cost continued

• Step 2 Calculate EP cost.
• Examplethe EP cost of one pound of onions

As purchased (AP) price Edible portion (EP) percentage Edible portion (EP) cost
0.39/lb AP 0.842 0.39/lb AP 0.842 0.39/lb AP 0.842 0.46/lb EP
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Other Factors Affecting Purchasing

• Management complacency
• Payment history
• Gift acceptance policies

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When to Buy

• Purchase perishable items daily or every few
  days.
• Purchase nonperishable items weekly or monthly.

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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.)

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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

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Calculating How Much to Buy

• Need ten pounds of onions.
• Yield percentage of onions is 84.2.
• How many pounds will you buy?

EP amount needed Yield percentage AP amount to purchase
10 0.842 10 0.842 10 0.842 11.87, or 11.9
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Catering Purchases

• Step 1 Determine the servings per purchasing
  unit (SPU).

Purchasing unit Portion size Servings per purchasing unit (SPU)
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Catering Purchases continued

• Step 2 Determine the purchase factor.
• Recall the formula for EP percentage.

SPU x EP percentage Purchase factor (PF)
Edible portion (EP) weight As purchased (AP) weight EP percentage
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Catering Purchases continued

• Step 3 Determine the amount to purchase.

Number of guests to serve Purchase factor (PF) Amount to purchase
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Butcher Test

• 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

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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.

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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
  operations standard operating policies and
  procedures.

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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 butchers test is a test of (yield/quality).

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Key Term Review

• As served (AS)
• Butcher test
• Buyer
• Commissary

• Competitive quotes
• Cost plus
• Invoice

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Key Term Review continued

• Market quotation sheet
• Nonperishable goods
• One-stop shop
• Par stock

• Perishable goods
• Purchase order
• Quotes

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Key Term Review continued

• Sealed bid
• Specification
• Standing order

• Yield chart
• Yield percentage
• Yield test

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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.

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Chapter Learning ObjectivesWhat 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.

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Chapter Learning ObjectivesWhat 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.