Purchasing protocols and
Inventory Management
Objectives
Students will learned about
purchasing protocols and essentials
About food purchasing methods
inventory and inventory management system
Introduction
“ Purchasing comprises of a number of activities all directed towards the
procurement of food and related materials for the operation of an
organization.”
FOOD PURCHASING
Food purchasing
Purchasing good food materials is the basis for preparing and serving
meals that are acceptable to the customer.
Unlike purchasing for the home, the food service manager cannot always
go to the market and choose what he wants from the variety available.
Principles of Effective Purchasing
Every kitchen operation has different purchasing procedures.
But there is one rule that should always be followed:
Buy only as much as it is expected will be
needed until the next delivery.
This will ensure that foods stay fresh and will create a high
inventory turnover.
All foods deteriorate in time, some more quickly than others.
It is the job of the purchaser to ensure that only those quantities
that will be used immediately or in the near future are
purchased.
In catering, food constitutes the major variable cost and therefore
purchasing decisions must be carefully made in consultation with user
departments, sales and services to ensure efficiency.
Principles of Purchasing
Nine basic principles of purchasing have been counted as a guide
to making decisions
(i) Continuity of supply:
This is of critical importance for minimizing or eliminating
disruption in food production activities.
(ii) Minimum Investment in stocks:
Since food is not only variable in its perishability, but requires a large
variety of ingredients for its production into meals, snacks, desserts,
beverages and so on.
Costs of space which can be alternatively utilized for profitable
activities, along with storage and handling costs amount to a sizeable
blockage of capital.
Therefore quantities to be stocked need to be considered very carefully
while purchasing.
iii) Security of Stocks:
Security refers not only to guarding of stocks from pilferage or theft but
also preventing spoilage or deterioration of quality in storage.
One is often tempted to order quantities that may bring cash discounts
immediately, but in the long run may find that a large percentage of the
commodities have to be discarded because they are unfit to be served to
the customer.
(iv) Maintenance of Quality:
The objective of purchasing is to procure those goods which are most
suited to production requirements for end use, rather than those which
rank highest in absolute quality, in terms of standard quality marks,
grades or brands.
With perishable fresh foods like fruits, veg's, meats, eggs, bread etc.
the purchasing department should direct deliveries straight to the user
department or kitchen for production of quality meals.
(v) Procurement at low cost:
This does not mean getting cheap, non-standard materials, but reflects
the bringing down of procurement prices through negotiation or cutting
on packaging costs while still maintaining quality standards.
This is usually done through bulk package purchasing directly from
manufacturers, and using single suppliers who are conscious of the
quality and quantities that are required on a long term basis.
(vi) Avoidance of Duplication and waste:
Interaction between purchasing production and user departments is
important to achieve reduction of food waste and duplication of
procurement time and effort which can result from sudden menu changes or
production policy shifts.
vii) Maintenance of Competitive position:
Those in charge of purchasing need to have a thorough knowledge of
the market environment and the purchasing policies of those offering
similar goods and services to their customers. This requires experience
and a high degree of executive judgment.
A purchasing manager who can communicate these changes to
production and service departments in advance can maintain the
competitive position by drawing attention to costs, quality and prices
that the market will take.
viii) Image with supplier:
What a supplier thinks of you and your organization can be an asset or
liability in the procurement of foods and materials.
It is therefore important to set up a value based image through high
ethical standards that are then reflected in a suppliers response to the
purchasing manager, staff and then organization as a whole.
A supplier feels a sense of loyalty to the organization if he sees justice,
honesty of dealing and not a sense of exploitation through corruption and
bribery.
In the latter case the situation is a liability in the long run and the
organization cannot survive.
(ix) Harmonious Environment:
Development of relationships that lead to harmony and cooperation
both within the organization and outside it results in a sense of mutual
trust and respect among all associates.
Irrespective of which principles are used in the purchasing function of a
catering establishment, the basic principle towards which everyone is
working is the effective commitment of organizational funds and if the
whole team works towards it together, the organization is bound to
succeed.
Market Sourcing
Sources of supply vary considerably from location
to location.
Large cities have a greater number and variety of
suppliers than do small towns and isolated
communities.
Purchasers should establish contact with available
suppliers such as wholesalers, local producers and
packers, retailers, cooperative associations, and
food importers.
In most instances, the person in charge of buying
will contact several suppliers to obtain the
necessary foods.
Some wholesalers diversify their product lines in
order to meet all food-related kitchen needs.
Food products are obtained from various sources
of supply.
For example, a packing house supplies meat and
meat products, while a food wholesaler supplies
dry goods.
Once business is established with a supplier, all
transactions should be well documented and kept
readily available on file.
There are two major food categories:
Perishables and non-perishables.
Perishables
Perishable items include fruits, vegetables, fresh
fish and shellfish, fresh meats, poultry, and dairy
products.
As a rule, perishables are bought frequently to
ensure freshness.
Frozen foods, such as vegetables, fish and meat
products, have a longer lifespan and can be
ordered less frequently and stored in a freezer.
Non-perishables
Non-perishable items include dry goods, flour,
cereals, and miscellaneous items such as olives,
pickles, and other condiments. These can be
ordered on a weekly or monthly basis.
Keep in mind that just because something does
not go bad isn’t a reason to buy it in quantities
larger than you need. Every item in your inventory
is equal to a dollar amount that you could be
saving or spending on something else.
Factors That Impact Prices
Food products in particular fluctuate in price over
the year, due to many factors:
1. Seasonality:
When food is in season, there is more of it available
in the local food supply, bringing prices down.
Additionally, foods in season are usually of higher
quality and have longer shelf life than those that
are out of season and need to be transported long
distances to market
2. Weather:
Severe weather can have a huge impact on the
cost of food.
Drought, flooding, and unseasonable frost have
all affected major produce-supplying areas of the
world in recent years, causing a rise in prices for
many items.
3. Costs of transportation:
If the cost of fuel or transportation rises, so does
the cost of food that needs to travel to market.
4. Commodity prices:
A number of foods are traded on the commodity
market, such as meats and grains. These prices
fluctuate as buyers who trade in these products in
large volumes buy and sell, much like the stock
market.
Contract Buying
Some institutions will have contracts in place for
the purchasing of all products or for certain items.
This may mean that the property can only
purchase from a specific supplier, but in return it
will have negotiated set pricing for the duration of
the contract.
Advantages and disadvantages.
On the positive side, the contract price remains stable
and the job of managing food costs becomes more
consistent since there are no price fluctuations.
On the negative side, contract buying takes away the
opportunity to compare prices between suppliers and
take advantage of special reductions that may be offered.
Inventory Management
INVENTORY MANAGEMENT
Refers to the process of ordering, storing, using, and
selling a company's inventory.
This includes the management of raw materials,
components, and finished products, as well as
warehousing and processing of such items
INVENTORY MANAGEMENT
The purpose of carrying inventory is to try and make the
production process smooth so that sales to customers is
not interrupted with unnecessary delays due to materials
being unavailable when required.
INVENTORIES
INVENTORIES
In any organization stocks are identified in three
ways namely,
raw materials;
those comprising finished items such as meals, snacks;
ready-to-eat items,
those which are still in the process of production, for sale to
customers.
In catering there are some part prepared or treated foods that
at stored at low temperatures, which are drawn upon on
customer demand and freshly finished for service
Examples of foods in this category are marinated meats,
which may be roasted or grilled required for salads which are
simply dressed on demand, ready curries, boiled eggs for
biryanis, blanched and frozen vegetables and so on.
Other items stock:
Apart from food items at different stages of production, stocks of
detergents, crockery, cutlery, glassware, table ware like vases, cruets,
napkin holders, linen and stationery such as disposables have to be
maintained.
Since they all require investment funds to varying extents, the materials
all have to be included while calculating the value of the stock
Sample
Benefits of inventory
The benefits of holding stocks vary with every organization depending
on their specific goals.
Business motives can be placed under three basic
classes,transactionary, precautionary and speculative according to the
temperaments and policies of managers, heading a department or the
organization (Rustagi, 2000).
Transactionary Motive
This motivates managers to hold only enough inventory that will
permit smooth production and service of meals to customers and satisfy
any unprecedented demands on the spot.
The inventory held would be partly as raw materials, and partly as pre-
prepared or treated ingredients as well as finished items.
Managers with this motive would rather invest in cold temperature
storage to maintain quality of food and materials than to hold
unnecessarily high stock levels.
Food quality being of prime importance it is the practice in catering
organizations to order fresh foods for every alternate day delivery via
telephonic communications a day in advance.
Perishable foods like fresh milk and meats may even be delivered
daily depending on size of establishment and type of storage
available.
This makes it possible to use up earlier ingredients quickly especially
perishable ones and order the next lot on actual inspection of the
stock in the light of any change in customer demand. Working out
flexible purchasing arrangements with suppliers is the key to smooth
catering operations.
Precautionary Motive
Precautionary Motive As the term suggests
“the motive in this case is to make sufficient provision for supplies in
routine use in case of unexpected situations, as a precautionary
measure. “
A desire to hold cash in order to be able to deal effectively with
unexpected events that require cash expenditure.
Some such situations are:
A sudden influx of hungry customers on a particular day, week or season.
Transport problems disturbing regular supply.
Natural calamities bringing people out of their homes for eating.
Staff absenteeism.
Any of the above or other factors can affect production and service to
customers. Therefore inventories of both raw and finished items are
usually maintained.
Speculative Motive
Speculative Motive The organization might like to capitalize on
opportunities for profit making and therefore extra levels of inventory
are carried in stock.
Some examples are
sports or cultural events coming to town and bringing in huge crowds of
spectators, or commodity shortages expected due to political reasons
like curfew , riots, national celebrations, and mass migrations.
REFERENCES
BOOK
Institutional food management –Mohini Sethi
Learning outcomes
Students learned about purchasing protocols and essentials
Learned about food purchasing methods
Learned about inventory and inventory management system