CHAPTER 5

CHAPTER 5: PURCHASING AND RECEIVING CONTROL

PURCHASING OBJECTIVES AND PROCEDURES

      -          PURCHASING: It is the process of getting the right product into a facility of the right time and in a form that meets pre-established standards for quality, quantity and price.

PURCHASE SPECIFICATIONS

      

       -          A food service specification generally consist of:

1.      Product name/specification number (bacon,sliced)

2.      Pricing unit (kg,ml)

3.      Standard/grade (moderately thick slice)

4.      Weight range/size (14-16 slices per gram)

5.      Processing/packaging (2/10kg. Cryovac packed)

6.      Container size (<20kg)

7.      Intended use (bacon, lettuce & tomato slices)

8.      Product yield (60% yield)

MAXIMUM AND MINIMUM INVENTORY SYSTEM

        -          INVENTORY: A detailed & complete list of goods in stock

        -          The amount is depends on the usage & time required for ordering & delivery.

ECONOMIC ORDER QUANTITY  (EOQ)

        -          Minimizes the total holding costs & ordering costs.

          FORMULA:      EOQ = √2C_OD ÷ C_H

          C_O =  Ordering cost per unit

          D  =  Demand

          C_H = Holding Cost

·         Reorder when inventory reaches minimum stock level.

TERMINOLOGY:

     ·         Minimum stock – Amount of stock required to support testing operations until additional supplies are received.

     ·         Lead time – Time between placing an order and receiving it.

     ·         Maximum usage – Number of test devices used in a given time period

DETERMINE HOW MUCH TO RE-ORDER

       -          Never order more than your storage space can hold.

       -          Never order more supplies than you can use before they are expired.

       -          Consider shipping costs when placing orders.

Reorder level = Maximum usage x Maximum lead time

CALCULATING MINIMUM STOCK LEVEL

Minimum stock level = Reorder level – (Average usage x Average lead time)

PURCHASE ORDER / PURCHASE RECORD

      

-          PURCHASE ORDER: A detailed written sales contract between buyer and seller.

CHAPTER 4: THE MENU

THE MENU: THE FOUNDATION FOR CONTROL

THE MENU AS A CONTROL AND MARKETING TOOL

      -          Menu is the primary sales tool for any restaurant operation.

      -          Menu must satisfy guest expectation, achieve quality goal, cost effective and accurate.

MUST SATISFY GUEST EXPECTATION

      -          Reflect your guests’ tastes

      -          Reflect your guests’ food preferences

      -          Ascertain your guests’ needs

MUST ATTAIN MARKETING OBJECTIVES

      -          Locations

      -          Times

      -          Prices

      -          Quality

      -          Specific food item

MUST HELP TO ACHIEVE QUALITY OBJECTIVES

      -          Quality Standards:  flavour, texture, colour, shape, flair and consistency

      -          National concerns: low-fat, high-fiber diets and vegetarians.

MUST BE COST-EFFECTIVE

      -          Commercial: financial restraints profit objectives.

      -          Institutional: minimizing costs operational budget.

MUST BE ACCURATE

      -          Truth in menu laws exist in some localities, cannot mislabel

BASIC RULES OF MENU PLANNING

      1.       Know your guest

      2.       Know your operation

CHAPTER 3: OPERATING BUDGET AS A CONTROL TOOL

CHAPTER 3: OPERATING BUDGET AS A CONTROL TOOL

      

      -          A budget is simply a forecast or estimate of projected revenue, expenses and profit.

-          The budget is known as the plan, referring to the fact that the budgets details the operation’s                estimated or planned for, revenue and expense for given period.

THE OPERATING BUDGET, BUDGET STANDARDS

     -          An operating budget is a combination of known expenses, expected future cost and forecasted income over the course of a year.

      -          Operating budgets are completed in advance of the accounting period which is why they require estimated expenses and revenues.

      -          Normally prepared using historical information records.

      -          Can be prepared for any time of period a day, a week or full year.

FORECASTING SALES INCOME

      -          Sales is defined as revenue resulting from the exchange of products and services for value.

MONETARY TERMS

·         SALES PRICE = Amount charged each customer purchasing one unit of item.

·         AVERAGE SALE = Total Sale / Total number of covers (customer)

·         AVERAGE SALE PER SERVER = Total sale for Celina / Number of customer for Celina.

NON-MONETARY TERMS

·         Total number sold – Total number of steaks, shrimp cocktails or any item sold.

·         Cover – To describe one diner (quantitiy of food he / she consume)

·         Total covers – Total number of customers served in a given period

                COVERS PER HOUR = Total covers / Number of hours operation

                COVERS PER DAY = Total covers / Number of days of operation

                COVERS PER SERVER = Total covers / Number per servers

·   Seat turnover – number of seats occupied during a given period = number of customer served

·         REVENUE FORECAST = Sales last year + (Sales last year x % increase estimate)

·         INCREASE REVENUE = Revenue forecast – sales last year

TREATING PROFIT AS AN EXPENSE, ESTIMATING EXPENSES, VARIABLE AND FIXED EXPENSES

      

-          There are relationship between sales, cost of sales, cost of labour, cost of overhead and profit.

·         SALES = Cost of sales + cost of labour + cost of overhead + profit

OR

SALES = Variable cost + Fixed cost + profit

-          Because cost of sales is variable, cost of labour includes both fixed and variable elements and cost of overhead is fixed.

ALLOCATING COSTS AND PROFIT REQUIREMENTS

       -          Each dollar of sales then may be divided imaginatively into two portions:

·         That which must be used to cover variable costs associated with the item sold

·         That which remains to cover fixed costs and to provide profit.

CHAPTER 2: DETERMINUNG FOOD AND BEVERAGES

CHAPTER 2: DETERMINING  FOOD AND BEVERAGE STANDARDS

     -     It is crucial for us to understand all the elements of costs used in hospitality organization to perform an excellent cost control

STANDARD COST AND COST TOOLS

     -     COST: Expense to a foodservice establishment  for goods or services when the goods are consumed  or service are rendered.

             

          LABOUR COST:  Value per hour or value per week

      -        ANY ITEM COST (MEAT) : value per piece, per gram, or per individual portion.

      -        COSTS OF DRINKS (LIQUOR): value per bottle, per drink, or per ounce.

MATERIAL COST

      -     The cost of purchase and all costs incurred in getting  the raw materials to the restaurant

-          E.g. =rice ,vegetables and other food costs

MATERIAL COST = Opening Stock + Cost of purchase – Closing stock – Cost of staff meals

LABOR COSTS

       -       The cost of labour that can be traced directly to the manufactured goods.

     -    Wages and salaries paid to all employees plus any employer contribution to government taxes,  bonuses, meals and pension fund.

-          Eg: Wages paid to F&B employees and cooks.

OVERHEAD

       -   INDIRECT MATERIALS: Materials used to support the production process. Eg: lubricants and cleaning supplies used in the kitchen.

         -   INDIRECT LABOR: Wages paid to employees who are not directly involved in production work. Eg: Maintenance workers, janitors and security guards.

      -  COST REALTED TO THE MANUFACTURING FACILITY: Cost related to the production facility. Eg: Property taxes, utilities, depreciation, insurance and repairs.

*Fixed Costs: Unaffected by changes in sales volume. Eg: rent, rates, insurance, repair maintenance and occupancy costs.

*Semi-fixed cost: Contain a fixed and variable costs that not indirect proportion to sales volume. Eg: Charges for telephone service depend on the number phone calls made, fuel costs and laundry.

*Variable costs: Clearly rated to the business volume. Eg: Ingredients for food and beverage, labor cost.

TOTAL COST = Fixed costs + semi-fixed cost + Variable cost

ELEMENTS OF COSTS

Controllable Cost: Costs that can be changed (increased or decreased) in the short term. Eg: part time hiring

Non-controllable Cost: Cost that are usually fixed costs and managers do not have the ability to change it.

      ·         Cost / Sales = Cost%

      ·        Cost / Cost% = Sales

      ·         Sales x Cost% = Cost

STANDARD PURCHASE SPECIFICATIONS

      -       Objective: to establish a suitable buying standard for particular commodity for the hotel.

Chapter 1: Introduction to Food and Beverages Control

CHAPTER 1: INTRODUCTION TO FOOD AND BEVERAGES CONTROL

Who is a food & beverages manager ?

-        -   A person who forecasts, plans and controls the ordering of food and beverages for hospitality property.

-        -   Also manages finances related to the whole process of purchasing foods for hotel premises.

Management resources and objectives

-               

      - PLANNING: Setting objectives. Decision making and formulating policies.

       - ORGANIZING: Analysing tasks and assigning them to individuals.

       - MOTIVATING: Helping individuals to form into groups to develop ‘team spirit’. Encourage       staff management committee meetings.

       - CONTROLLING: By observing, analysing accounting records and reports.

Profit and cost centers

-          

     Cost center is a subunit of a company that responsible only for its costs. Eg: production department & service departments within a factory and administrative departments.

-       

          Profit center is a subunit of a company that responsible for revenues and costs.

Importance of Control

                                                    

1. Accomplishing organizational goals
2. Judging accuracy of standards
3. Making efficient use of resources
4. Improving employee motivation
5. Ensuring order and discipline
6. Facilitating coordination in action

Steps in the control process

1. Establishing standards

2. Establishing procedures

3. Training

4. Setting examples

5. Observing & correcting employee actions

6. Requiring  records & reports

7. Disciplining employees

8. Preparing & following budget

                          

Establishing Standards

Standards could be set on the basis of:

     1.    Profitability Standards

     2.    Market Position Standards

     3.    Productivity Standards

     4.    Social responsibility standards

     5.    Short range goal

Measurement of Performances and Comparing Performances    

-     

          Measurement of performances is important procedure of the control process, the deviations can be detected in advance.

Comparing measured performances to set standards

-      

          Standard is level of activities established to serve as a model for evaluating organizational performance.

-       Performance can be evaluated for organization as individual.

Taking Corrective Action

      -    Corrective action is needed if necessary.

      -    Corrective action is managerial activity aimed at bringing organizational mistakes.

      -    Managers should make sure that the standards are properly established and that their         measurements of performance are valid and reliable.