Title of Chapter - resource.mccneb.edu 2460/PowerPoints/13SP... · OH 5-16 Determining Product Usage 1. Determine the amount of product that will be used between deliveries. 2. Count

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OH 5-2

Controlling Food Costs in Purchasing

5 OH 5-2

OH 5-3

Learning Objectives

Explain the purchase process and determine who should make purchasing decisions.

Describe the importance of par levels and how to establish them.

Explain different types of purchasing methods and their uses.

Describe the parts of a purchase specification and of a purchase order.

Explain the importance of maintaining an ordering system.

OH 5-4

Who Purchases?

Purchasing agent

Manager

Chef

Head cook

Trusted staff member

The buyer maintains quality standards!

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OH 5-5

Who Purchases? continued

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

OH 5-6

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.

OH 5-7

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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OH 5-8

AP vs. EP Form

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

OH 5-9

Calculating EP Cost

Two steps

Step 1 – Calculate product’s yield percentage.

Edible portion (EPQ) weight

÷ As purchased (APQ) weight

= Yield percentage

8.00 ÷ 9.5

=

0.842 or 84.2%

OH 5-10

Calculating EP Cost continued

Step 2 – Calculate EP cost.

Example—the EP cost of one pound of onions

As purchased (AP) Cost

÷ Yield percentage

= Edible portion (EP) cost

$0.39/lb AP ÷ 0.842

=

$0.46/lb EP

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OH 5-11

Product Specifications

If you were the purchasing agent what questions might you have about this recipe?

Lemon Curd Trifle with Fresh Berries Recipe courtesy of Tyler Florence

6 egg yolks

1 cup sugar

4 lemons, zested and juiced

1/2 cup (1 stick) butter, cut in chunks

3 pints berries

2 cups whipped cream

1 prepared lemon pound cake, sliced

1/4 cup lemon or orange liqueur (optional)

Fresh mint leaves

OH 5-12

The Product Specification

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

OH 5-13

Example of a Product Specification

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OH 5-14

The Product Specification continued

Specifications should describe exactly what buyers want to buy.

Product substitutions identify what is “acceptable” to send if a vendor is out of or short on the product ordered.

OH 5-15

When to Buy

Purchase perishable items daily or every few days.

Purchase nonperishable items weekly or monthly.

OH 5-16

Determining Product Usage

1. Determine the amount of product that will be used between deliveries.

2. Count what is on hand.

3. Subtract the amount on hand from the amount that will be used.

4. The result is the amount to purchase.

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OH 5-17

Establishing Par Levels

Steps

1. Determine the amount of time between deliveries.

2. Determine the estimated amount used during this period.

3. Add a safety factor (cushion) to cover unexpected

changes in volume or availability

4. Add the estimated amount of product used and the

safety factor together to get the par stock.

5. Set par levels for all ingredients and supplies and adjust

by season.

6. Include the par level numbers on the order guide and

place labels on storeroom shelf

OH 5-18

Example Par Sheet

OH 5-19

Calculating How Much to Buy – Par Stock

Amount to Purchase

Determine your par stock (includes safety factor)

Consider Current Inventory and Usage before Delivery

Par stock - Inventory + Usage before Delivery

= Amount to Purchase

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OH 5-20

Calculating How Much to Buy – Yield %

Need ten pounds of green onions.

Yield percentage of green onions is 84.2%.

How many pounds will you buy?

EPQ (amount needed)

÷ Yield percentage

= APQ (amount to purchase)

10 ÷ 0.842

=

OH 5-22

Calculating How Much to Buy – Catering

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

Purchasing unit

÷ Portion size = Servings per purchasing unit (SPU)

OH 5-23

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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OH 5-24

Catering Purchases, continued

Step 3 – Determine the amount to purchase.

Number of guests to serve

÷ Purchase factor (PF)

= Amount to purchase

OH 5-25

Purchase Methods

Competitive quotes

Standing order

Prime Vendor or One-stop shop

Cost-plus

Sealed bids

Commissary

OH 5-26

Factors Affecting Purchasing

Level of service needs

Quality specification needs

Prime vendor relationship needs

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OH 5-27

Vendor Selection

Choosing a vendor

List potential suppliers

Review suppliers

quality, consistency,

variety, price and

service

Check references

Maintaining + relationships

Sales representative

Honor terms of contract

Pay on time

Alert when problems

occur

OH 5-28

Implementing the Ordering System

The Order Guide

OH 5-29

Record Keeping Basics

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OH 5-30

Purchase Orders

The official written record of the items the buyer

wants to purchase

Example of Sysco Purchase Order

OH 5-31

Purchase Order Information

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

OH 5-32

Sample Order Schedule

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OH 5-33

Potential Problems with Purchasing Process

OH 5-34

How Would You Answer the Following Questions?

1. A purchase order is best prepared by the (buyer/ seller) of the items to be purchased.

2. With effective purchasing techniques in place, a restaurant's EP costs can often be lower than its AP costs. (True/False)

3. EP weight divided by AP weight results in

A. AP percentage

B. AP cost

C. EP cost

D. EP percentage

4. A butcher’s test is a test of (yield/quality).

OH 5-35

Chapter 5 Controlling Food Costs in Purchasing

Key Terms:

Acceptable substitutions Substitutions previously agreed upon by both

buyer and vendor.

Blanket purchase order A purchase order that allows the buyer to

purchase a certain amount of goods, usually indicated by a dollar

amount, at the stated terms within a given time period.

Buyer The sole person responsible for purchasing particular goods.

Invoice A receipt for items delivered; it is a legal document that

reinforces the terms of a purchase order.

Nonperishable goods Products that have a relatively long shelf life.

Order guide A form used as a tool for counting and tracking all the

products an operation uses and must reorder.

Par level The amount of stock necessary to get the kitchen through until

the next order is delivered.

Perishable goods Products that have a relatively short shelf life—usually

one to three days.

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OH 5-36

Chapter 5 Controlling Food Costs in Purchasing

Key Terms continued:

Perpetual inventory A theoretical count based on goods received and

issued, which exists on paper only.

Prime vendor A purchasing method that involves purchasing most, if not

all, of an operation’s goods from one supplier; also called the one-stop

shop.

Purchase order (PO) A form issued by a buyer and sent to a vendor that

indicates the items and quantities to be purchased.

Sales representative A supplier’s salesperson who would be assigned to

an operation.

Quotes An offer made by a supplier.

Specification A description of the desired product’s name, intended

use, grade, size, and other product characteristics; it can include

general instructions regarding delivery, payment procedures, and other

pertinent data.

OH 5-37

Chapter 5 Controlling Food Costs in Purchasing

Key Terms continued:

Standing order The replenishment of stock by a vendor made on a

regular basis.

Supplier A company that provides products purchased for use in

restaurant and foodservice operations, also called a vendor.