2. Purchasing
Introduction
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
11/22/2022 2
3. Purchasing
The purchasing function is vitally important in the
control cycle should it be managed in efficiently
it creates problems which often result in an
unsatisfactory level of both costs and profit for
the establishment and dissatisfied customers.
With no purchase specification for commodities
there would be neither quality standards nor
quantity standards resulting in over-ordering or
under-ordering as yields for items would be in
determinable.
11/22/2022 3
4. PURCHASING
The receiving department would only be able to
check on quantity and not on quality.
The work in the stores and preparation
department would be difficult with the quality of
produce vary greatly.
Finally, it would be difficult to measure
satisfactorily the performance of departments if
they were continually being provided with non
standardized commodity items.
11/22/2022 4
5. PURCHASING
The purchasing department’s role is to make sure that
supplies, equipment and services are available to the
operation in quantities appropriate to predetermined
standards, at the right price and at a minimum cost to meet
desired standards.
Generally, those responsible for purchasing have the
authority to commit the establishment’s funds to buying
required goods or services.
By following established purchasing procedures, an
operation can avoid many purchasing pitfall such as panic
buying, over or short purchasing, buying by price rather than
by a combination of quality and price, pressure buying or
what is probably quite common, satisfied buying.
11/22/2022 5
6. Purchasing
The Purchasing procedure
There are five steps in the purchasing procedure
1. A requisition form from an authorized
member of staff, like head chef, restaurant
manager or storekeeper informing the
purchasing manager
of low stock levels of items.
2. The selection of the source of supply.
11/22/2022 6
7. Purchasing
3. Entering into a contract with the suppliers
by phone or in writing and negotiating the
price to be paid and a satisfactory delivery
performance with particular reference to the
time, date, and the place of delivery.
4. The acceptance of goods ordered and the
adjustment of any discrepancies in quality or
quantity of goods delivery.
5. The transfer of commodities to the
ordering department or to the stores or
cellar.
11/22/2022 7
8. Purchasing
The Selection of a Supplier
After selecting "approved suppliers"
and after having purchased from them
it is necessary to periodically evaluate
their performance using the following
3 main rating systems.
Which are:
1. Price 2. Quality
3. Delivery performance.
11/22/2022 8
9. Typical ordering procedures
Ordering Goods
Store requisition /Stock requisition/
A stock requisition is a formal request
made by a user for the items needed to carry
out necessary tasks.
The primary purposes of the stock
requisition are to control who gets the items
and to record how much of an item is issued
and when it is issued.
11/22/2022 9
10. Purchase Requisition
At times, before any orders are placed by the buyer,
the department heads prepare purchase
requisitions.
These are forms that list those items or services
needed by the particular department heads
If an item is ordered regularly by the buyer then a
purchase requisition is unnecessary.
11/22/2022 10
11. The purchase order contains the date of the order,
the quantity desired, the item type the unit size,
weight, and the unit price and extended price. All
these entries are clear instructions to the supplier.
On the other hand the receiving clerk should have
a copy so that he/she knows what deliveries to
expect.
The accounted department should also receive one
copy of the purchase order.
11/22/2022 11
The Purchase Order
12. Purchase Requisition
The decision on how many copies to use is
important.
The objective is to control the cost and
quality of all merchandise items as it
travels through out the operation from one
operating activity to another.
To control these activities a great deal of
record keeping may be essential.
11/22/2022 12
13. Ordering Procedures
Prior to placing an order, the buyer must determine
the appropriate order size; and must note what is on
hand in the main storeroom.
The buyer then must prepare appropriate purchase
orders and send them to the suppliers or call them
in, keeping copies for records.
Once the various order sizes are determined a buyer
can place the order by telephone to the supplier.
11/22/2022 13
14. Ordering Procedures
The ordering procedure should be similarly formalized with the use
of purchase orders.
Three copies of the purchase order are required:
i. For the supplier,
ii. For the person responsible for receiving ,
iii. For the accounting office, to be attached to the invoice when it is
received for payment.
One question that does arise in the ordering process is the
quantity to order.
This is often left to the discretion of the department head
involved, either because he has authority to order directly what is
needed, or because he is in the best position to advise the
purchasing department of required quantities.
The quality required is not to difficult to determine from past
experience.
11/22/2022 14
15. Purchase Specification for food
A purchase specification is concise descriptions of the
quality, size and weight (or count) required for a particular
item.
Each specification would be particular to an establishment
and would have been determined by members of the
management team (such as head chef, and the food and
beverage manager) by reference to the catering policy, the
menu requirements and its price range
11/22/2022 15
16. The reasons for preparing standard specifications
i. To establish a buying standard for a particular commodity for
an establishment.
ii. To inform the supplier, in writing, precisely what the
purchaser requires.
iii. To establish a common denominator between the
purchasing officer and
the approved suppliers for settling the price of a commodity.
iv. To inform the receiving clerks and the store-man what to
accept.
v. To obtain a standard product for the production and selling
departments can be more accurate.
11/22/2022 16
17. ADVANTAGE OF USING P SPECIFICATIONS
It establishes a buying standard of commodity for an
establishment so that a standard product is available
for the kitchen
It informs the supplier in writing precisely what is
required,
It provides details information to the goods received
clerk and the store man as to the standard of the foods
to accept.
It makes staff aware of the difference that can occur in
produce, for example size, weight, quality, quantity etc.
11/22/2022 17
18. ADVANTAGE OF USING P, SPECIFICATIONS
Required those who prepare them to think carefully and
document exactly what their product requirements are,
Leave no doubt in suppliers’ minds about what they are
quoting on thus reducing or eliminating misunderstanding
between supplier and establishment
Eliminate, for frequently purchased items, the time that over
the telephone or directly to sales persons each time the
product is needed, Permit competitive bidding,
Allow the person responsible for receiving to check the
quantity of delivered goods against a written description of
the quality desired.
11/22/2022 18
19. specifications should include
The name or description of the item required
Where it is important, the size, weight, amount or number of the items required.
Where it is important, the form that the items should take (for example,
whether an item of food should be fresh, frozen or canned)
Grade : USDA choice Upper half E.g.: Prime rib Bone in Oven ready
Weight range: 18lb min – 22lb max Average 20 lb (9kg)
State of refrigeration: Chilled when delivered not previously frozen
Fat limitation: 0.25 – 0.75 inch (average 0.5) on Outside moderate marbling
Color: Light red to slightly dark
The specific quantity required, The frequency with which the item is required
For ex: approximately 300 lb per week
11/22/2022 19
20. METHODS OF FOOD PURCHASING
There are seven main buying methods that can be used for purchasing
food items.
Purchasing by contract
Purchasing by daily market list
Purchasing by weekly quotation list
Purchasing by 'Cash and Carry'
Purchasing by paid reserve
Total Supply
Cost Plus
The particular method chosen often depends on the location of the
establishment, the type and size of the business its purchasing power
and type of food items to be purchased.
11/22/2022 20
21. Security concerns in purchasing
In small operations where owners purchase control
procedures are less concerned with theft.
In large operations, other personnel take on purchasing
tasks, security becomes an important concern
The control must guard against several types of theft that
are possible during the purchasing process
11/22/2022 21
22. Security concerns in purchasing
In several common types of kickbacks the buyer woks
in collusion with someone from the supplier's
company.
The Kickback can be money or gifts, other way the
operation is the loser.
In one kickback scheme, products are purchased at
prices higher than necessary
The two thieves then split the difference between the
real and inflated prices.
11/22/2022 22
23. Security concerns in purchasing
In another kickback procedure, the invoice in
padded by adding items that were not received, or
it is increased by adding unreasonable charges for
handling or some other services
Purchaser theft
Purchasers might practice a variety of other thefts
purchasing for their own use, reciprocal
purchasing products wholesale with the intention
of reselling them to selected employees or to
others
11/22/2022 23
24. Security concerns in purchasing
Factious Companies
Purchasing personnel can steal by setting
up a non-existent company that then
submits invoices for products never
received
11/22/2022 24
25. Some one once said, " Receiving is the proof of
purchasing." it's at receiving that you determine what it
is you actually got-not what you order but what you
received.
And there could be a lot of difference between the order
you placed and the delivery you received.
That's why receiving is so important to the proper
control of purchasing.
RECEVING : definition
11/22/2022 25
26. Receiving defined as an activity for ensuring
that products delivered by suppliers are those
were ordered in the purchasing activity.
Receiving is the act of inspecting and either
accepting or rejecting deliveries. It is an activity
with many facts.
It is important to realize that all goods being
received into an establishment have a monetary
value and that it is essential to ensure that
exactly this value in goods is properly accounted
for and received.
Receiving: definition
11/22/2022 26
27. Receiving: objectives
The objectives of receiving resembles the
objectives of the purchasing function it self.
i.e. obtaining the correct amount and correct
quality at the correct time with the correct
supplier services
The main objects of receiving are to check
and see that the delivered item meets these
criteria.
11/22/2022 27
28. Receiving: objectives
The objective of this department is to receive only
goods that are ordered according to the
specification. Anything that does not meet the
standards must be rejected.
Receiving Control procedures adopted by food
and beverage operations include the following:
Check incoming products against purchase
orders or purchase Records Obviously, the
property does not want to accept items it did not
order, receive partial or no deliveries of required
products, receive items of un-acceptable quality,
or pay a price higher than that agreed upon.
11/22/2022 28
29. Receiving
There are 2 types of receiving which are:-
i. Invoice receiving
A paper that list shipping information. It has its own number and
gives the name of the company, quantity, quality, price, total price
per type item shipped and total for the invoice.
Other information may be on the invoice.
The invoice verifies the order. The quantity, quality of the products
delivered should be checked against the purchase order or other
receiving documents.
ii. Blind check receiving
The method involved giving the clerk a blank invoice/purchase
order listing the incoming merchandise but omitting the quantity,
quality, weights and prices.
The receiving clerk must insert these numbers into the order on
the basis of a check of the delivery.
This invoice is checked against the one from the receiving clerk
and the figures in both are verified.
11/22/2022 29
30. Receiving
In order to carry out all the tasks of a receipt of a delivery , the
receiver requires the following equipment to be available on
the “receiving area” or “loading bay”:
Scales
Trolleys
Thermometer and thermo pin
Sink
Calculator
Scissors and box cutters
11/22/2022 30
31. Receiving: Procedures
Check incoming products against standard purchase
specifications
This requires knowledgeable and skilled receiving
personnel.
They should not allow themselves to be rushed by
delivery persons. Sometimes the suppliers will agree
to deliver products at their risk, allowing the buyer to
sign and mail invoices after inspecting deliveries.
11/22/2022 31
32. Receiving: Procedures
Check incoming products Against Delivery Invoices:
A definite policy must be developed, implemented, and
enforced for measuring weighing, or counting all
incoming products to ensure that the proper quantity
of products is delivered and billed.
Like wise, price information or the invoice should be
verified by reviewing the purchase order or purchase
record.
A request-for-credit memo should handle any
discrepancies should be handled by a request-for
credit memo.
11/22/2022 32
33. Receiving: Procedures
Accept Incoming products:
Signing the delivery invoice normally does this.
At this point ownership of the products is transferred
to the property, and the products become the
responsibility of the food and beverage operation.
Move Accepted products to storage immediately:
Security to minimize employee theft is a concern
here like wise, the quality of products needing low
temperature storage will deteriorate if they are left at
room temperature.
11/22/2022 33
34. Receiving: Procedures
The quantity of goods delivered matches the
quantity, which has been ordered.
The quality of goods delivered is in accordance with
the specification stated on the purchase form:
The price stated on the delivery note are in
accordance with the price on the purchase order
form
When the quantity or quality or both of the food
items delivered is not in accordance with the
purchase order or an item is omitted from the order a
request for credit memo is raised by the receiving
clerk.
11/22/2022 34
35. Receiving: Procedures
The perishable items go straight to the kitchens,
where they would be stored in either
refrigerators or cold rooms depending on the
item. Perishable foods going direct to the
kitchen are often referred to as being on direct
charge in that they will usually be used with in
one to three days of delivery by the kitchen.
The non-perishable items such as canned foods,
sugar, flour etc go to a food store where they are
unpacked checked for any damage and placed on
racking
11/22/2022 35
36. Receiving: Procedures
After goods are checked-in, stock is transferred into the
correct storage facilities and records updated
The accurate record made in the goods received book by
recording details of the delivery.
A typical receiving document is a daily receiving report,
which is used for several purposes:
To separate beverage costs from food costs
To add up the value of 'directs' in a daily food cost
assessment system.
To transfer responsibility for product control from
receiving to storeroom personnel.
11/22/2022 36
37. Meat tag
In the majority of Catering establishments such food items as
meat specially processed meats such as hams, and fish such
as smoked salmon constitute the most expensive of the
purchased foods due to this high cost it is common for
operators to maintain a detailed control system set up a form
of special control of these items.
Tagging expensive food serves many purposes
It aids the control of expensive foods
It requires the receiving clerk to weigh and record each item
and to check against the specific purchase specification
weight rouge.
It assists in obtaining a more accurate daily food cost
percentage figures
It assists in controlling the stock levels of these items.
11/22/2022 37
38. Receiving procedures Summary
On the receipt of delivery of Products the following checks should
be carried out by the receiver
The delivery note matches the purchase order
The products match any food specifications
Checks the weight of items against delivery note
Counts items purchased by unit against delivery note
Checks prices against purchase order
Checks expiry dates of items
Checks temperatures of meats and fresh foods
Checks for any breakages or damaged items
Opens any boxes or containers to check inside
11/22/2022 38
39. Security Concerns In Receiving
There are many ways in which an unscrupulous person can
successfully defraud an operation. Here are some of the tricks,
i. Packing merchandise in excessive moisture or wrapping in ice
to make weighting more difficult and add more weight.
ii. Placing satisfactory merchandise on the top level that is
visible, but inserting merchandise of in-proper quality
underneath.
iii. Repairing produce and putting a lighter in the new crate while
keeping the price the same as for the heavier original crates ( it
is wise to spot check the weight of crates and cartons ).
iv. Sending incomplete shipments with the full bill and
neglecting to send the remainder.
v. Supplying short weights.
11/22/2022 39
40. Security Concerns In Receiving
Examples of supplier theft possibilities when
products are received include the following:
The supplier may deliver lesser quality items,
such as inexpensive domestic wines instead of
higher quality wines,
or 30% fat content ground beef instead of 20%,
and the operation pays the price for the higher
quality
11/22/2022 40
41. Security Concerns In Receiving
Short weight or short count products may be
delivered so the food service operation
pays for more products than it receives.
One empty liquor bottle may be included in
a case of 12 bottles
Thawed products may be represented as
fresh, while the operation pays the higher
price for fresh.
11/22/2022 41
42. Security Concerns In Receiving
Ice may be ground in to ground meat products,
fillers such as soy products or non-fat dry milk
extenders may be added, and meat may be sold
with excess trim.
Weight ice and/or packaging buy be included in
the product weight on which price is based.
"Slacked out" seafood-frozen fish, thawed and
packed in ice may be sold as fresh.
Expensive steaks and inexpensive meat may be
combined in one container and when the entire
container is weighed, the operation may be billed
for more expensive steaks than are actually in the
container
11/22/2022 42
44. Storage defined as holding of goods under proper conditions to
ensure quality until time of use. For example, using the FIFO
system-time consuming
The main objective of a food store is to ensure that an adequate
supply of foods for the immediate needs of the establishment are
available at all times.
Foods when accepted at the receiving department are categorized
as perishable and non-perishable items.
DIRECTS/STORES
The perishable items go straight to the kitchens, where they would
be stored in either refrigerators or cold rooms depending on the
item.
The non-perishable items such as canned foods, sugar, flour etc go
to a food store where they are unpacked checked for any damage
and placed on racking.
STORING
11/22/2022 44
45. Storing of food
Shelves should be made of materials approved by local public health
agencies and should be placed at proper distances from the floor, walls and
ceilings.
The arrangement of the items on the shelves should be well organized to
facilitate air circulation.
Foods normally stored in dry storage areas include canned goods, flour,
sugar, shortening, spices, cereals, certain fruits like bananas and certain
vegetables like onions and potatoes.
Due to lack of space, many operations locate dry storage areas in the
basement or utility room of the operation or in areas close to heating,
cooling or ventilation equipment.
Proper utilization of space is also necessary. Any space lost due to
improper utilization may be costly and may cause recurring problems since the
quality of food will be affected.
11/22/2022 45
46. STORING OF FOOD
The food items stored can present a great deal of money, it is
imperative to see that all items purchased are properly stored
and are issued in a definite sequence.
Loss or waste of food or non-food items may occur due
improper storage, theft, insert infestation and non-
accessibility.
It is advisable to set limits on the number of persons who
have access to storage areas.
11/22/2022 46
47. STORING OF FOOD
Major concerns in storing INCLUDES,
Defining storage Areas
Sanitation Practice
Proper Storage
Product Rotation
Properly Controlled Environment
Suspicion behavior
Security concerns
What location is considered storage areas?
What items are to be tightly controlled?
What specific procedures will be employed for keeping items
secure maintaining proper quality, taking inventory, and other
accounting activities?
11/22/2022 47
48. Maintaining Quality during Storage
In short the following practices are vitally important to keep stored
items quality
A daily ,weekly and monthly cleaning schedule
Ensure all heavy goods are lifted correctly
Avoid storing items to high
Clean any spills as they occur
Do not store anything on the floor that may cause an obstruction
Cover dustbins to prevent infestation
Enforce a pest control schedule
Store goods in clear well –ventilated containers
All products should have a label and an expiry date
All fresh meats stored on lower shelves
Refrigerate perishable ingredients promptly
Ensure labels are clear and visible
11/22/2022 48
49. Maintaining Quality during Storage
The fewer people that go in and out of the storage areas, the
more secure and efficient the foodservice operation will be.
Storage areas should have easy access from the receiving area
and from the preparation and production areas. Storage areas
should be clean and neatly arranged.
They should have capability to store all goods ordered,
conversely, quantities ordered should be based on the
amount of storage space available.
The temperatures and humidity in storage areas have to be
controlled and should be kept at the optimum level so that
losses are prevented.
11/22/2022 49
50. Maintaining Quality during Storage
Proper labeling of the shelves helps in organizing as well as in proper
Storage
Temperatures in dry storage areas should range from 5° C to 24°C. Some
perishable foods, such as potatoes and onions, should be stored at
slightly
lower temperatures (4.5°C to l3°C ) to prevent spoilage.
Circulation of air is necessary to maintain freshness of the perishable
goods. Air circulation also helps in the elimination of odors and the
removal of moisture.
Sufficient space should be allowed in the storage areas for free
movement of carts, pallets and motorized lifts, particularly in the
centers of all aisles.
Storage areas should be kept clean and a regular cleaning schedule
followed. Spills, leakage or breakage should be cleaned promptly.
To facilitate cleaning, large storage containers should have wheels.
11/22/2022 50
51. Suspicious Behavior
A variety of employee behaviors call for management
scrutiny. The owner- manager should be wary of
employees who
Seem un dully friendly with suppliers, sales persons, or
delivery agents:
Hang around storage areas needlessly
Needlessly handle keys or locks
Make too many trips to the garbage area, bathroom,
locker room or parking lot (perhaps to move stolen
merchandise)
Requisition abnormally large amounts of supplies
Make frequent trips to the storage areas for no apparent
good reason
11/22/2022 51
52. Suspicious Behavior
Have relatives working for your supplier
Stray from their assigned work stations too
frequently
Are seen passing packages to guests
Are seen stuffing boxes or packages under a
couch in public area, which may later be picked
up by a confederate
Permit delivery agents to loiter in unauthorized
areas and
Have visitors on the work site. The list could go
on, since many employees can not be restricted
to one work area, theft and pilferage
opportunities are always a part of the work place.
11/22/2022 52
53. Issuing
This should take place at set times during the day and only
against a requisition note signed by an authorized person for
example head chef head waiter or restaurant manager. When
the requisition is a large one it should be handed in several
hours before the items are required to allow the store keeper
plenty of time to collect all the food items together.
The pricing of issues is usually at the "as purchased price.
Ignoring any small discounts for non-perishable foods.
11/22/2022 53
54. Issuing
The stocks are requested by completing an internal
department requisition
The purpose of the requisition form is to:
Have a paper trail in stock movements
Force departments to plan stock requests
Accurately allocate cost expenditure and usage per
department
Document individual request and supply
Use as a back-up when discrepancies in stock occur
Act as backup when computer errors occur
Detail consumption of stock items
Be an internal accounting document between stores and the
department.
11/22/2022 54
55. Departmental employee identifies what stock is required.
1. Department employee completes a requisition from
detailing date, department, stock and units required
2. The requisition form is submitted to stores.
3. Store person gathers stock items in readiness for
collection
4. If items are not available ,unit adjustments have to be
made or substitutes are provided.
5. Department employee collects stock, and checks that all
items and quantities are fulfilled.
Steps in requisitioning
11/22/2022 55
56. Steps in requisitioning
6. Both parties sign to confirm the goods issued.
7. In most cases-one copy of the requisition form goes to
the department, one to
stores, one copy to the accounts department.
8. Store person updates stock records.
10. Department employee replenishes departmental stock
levels.
NB*** In busy organizations specific times are allocated to
different departments for collection of orders
11/22/2022 56
57. Economic Order Quantity
There are costs involved in carrying an inventory of supplies of
any kind. These costs include the cost of money that is either
borrowed to carry the inventory or that is tied up by the firm
and thus not available for the purpose .
There are also costs associated with having to store the
inventory, such as the necessity to include storage areas in
the building (thus increasing the building costs), inventory
insurance, labor costs (storekeepers and other personnel)
and the cost of control forms (for example, perpetual
inventory cards and requisitions).
These costs could generally vary from 10 to 30 percent of the
value of the inventory.
11/22/2022 57
58. ECONOMIC ORDER QUANTITY
The economic order quantity equation can be used, where
appropriate to minimize the costs associated with
purchasing and carrying inventories.
The equation is
Where EOQ = Economic order quantity
F = Fixed cost of placing an order
S = Annual sales or usage in units
C = Carrying costs (insurance, interest, storage) as Percent
of the dollar amount of the inventory
P = Purchase price per unit :
11/22/2022 58
60. ECONOMIC ORDER QUANTITY
E.g.:
Let us assume the head office purchases case-lots
of hamburger bags for all its drive-in restaurants
in the city. Normal sales of hamburgers would
required 1000 cases of bags per year. Carrying cost
of the inventory is 15 percent of inventory value.
The purchase cost per case or unit is $ 12.00 and
the fixed cost of placing an order is $ 8.00.
Substituting these values in the equation, we
obtain:
11/22/2022 60
62. SPECIAL BEVERAGE OPERATION
The Purchasing of beverages
With beverage purchasing the following points are generally
noticeable.
There are fewer and often restricted source of supply.
The high value of beverage purchases.
The wine and spirit trade gives that free advice and assistance with
purchasing.
That quality factors are difficult to evaluate and require special
training to identify them. This means setting up or attending
testing sessions several times a year.
There are for fewer standard-purchasing units than for food.
There is an established standard of product
11/22/2022 62
63. SPECIAL BEVERAGE Operation
Storing and Issuing of beverages
The main storage area for spirits and red wine held at a dry
and draught temperature of (30 -160C (550 -600F).
A refrigerated area of 100C (500F) for the storage of white
and sparkling wines.
A further refrigerated area of 60 -80C (430 -470F) kegs
An area held at a temperature of 130C (550F) for the
storage of bottle beers and soft drinks.
11/22/2022 63
64. SPECIAL BEVERAGE Operation
Bin Cards:
Cellar Records
Beverages perpetual inventory ledger
Ullages and Breakages:
Empties return book :
Hospitality book:
11/22/2022 64
65. Issuing
Security Concerns in Storage and issuing
Limited Access:
Lockable storage Areas:
Refrigerated/ freezer
Storeroom key Control:
11/22/2022 65
