MANAGE STOCK PURCHASES AND INVENTORY

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D1.HML.CL10.09

D2.HGE.CL7.06

D1.HGA.CL6.09

D1.HRM.CL9.12

D2.TGA.CL6.04

D2.TRM.CL9.08

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Manage stock purchases and inventory

This unit comprises six Elements:

1. Identify the need for stock control and management

2. Develop and operate a purchasing and/or supply system

3. Develop and implement stock receival procedures

4. Develop and implement stock storage systems

5. Develop and implement stock issuing systems

6. Develop and implement stock management systems

Element 1: Identify the need for stock control and management

1.1 Identify the internal requirements for the stock control and management system

1.2 Describe the stock items to be covered and controlled by the stock control and management system

1.3 Identify personnel with stock control and management duties

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Element 1: Identify the need for stock control and management

1.4 Describe the steps in the stock control cycle

1.5 Identify and describe the role of documentation within the stock control and management process

1.6 Develop product knowledge in relation to stock items that will be used

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1.1 Identify the internal requirements for the stock control and management system

What is a Stock Control System?

• How can it assist a business?

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1.1 Identify the internal requirements for the stock control and management system

Stock Control Systems are either computerised or manual

Computerised

• Larger properties or organisations with large stock turnover rates tend to use a computerised stock control system

• They may use an ‘off-the-shelf- commercially available software package or a complete package called a Property Management System

• Even where a computerised/electronic system is in use, paper-based documents will usually provide the raw data that is entered into the system

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1.1 Identify the internal requirements for the stock control and management system

Paper-based systems

Properties that operate a paper-based stock control system may use the following documents as the basis for their system:

Purchase orders, Bin cards, Requisition forms and Internal transfer sheets – covered in detail in section 1.5

Sales dockets and cash register audit rolls

Cheques – to prove payment for stock received

In addition to these internally-generated documents, the paper-based system also uses externally-generated documents such as Delivery dockets, Invoices, Statements and Credit notes

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1.1 Identify the internal requirements for the stock control and management system

Security systems

Internal controls

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1.1 Identify the internal requirements for the stock control and management system

The ordering process

Physical inventory

Volume and cost

Stock on hand

On hand quantities

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1.1 Identify the internal requirements for the stock control and management system

Periodic System

Perpetual System

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1.1 Identify the internal requirements for the stock control and management system

Stock rotation

In most businesses it is standard

practice to sell the oldest stock first

Stock valuation

For accounting and reporting purposes

it is necessary to value the stock on

hand at times during the course of the

year

Terms of trade

Represent the terms of the contract you

enter into when you buy from a supplier Slide 11

1.2 Describe the stock items to be covered and controlled by the stock control and

management system

Inventory

Fresh Food

Frozen Food

Drinks

Alcohol

Cleaning Agents and Chemicals

Stationery

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Linen and Uniforms

Merchandise

Fuel

Equipment

General Stores

1.3 Identify personnel with stock control and management duties

Identified personnel will have stock control as part of their management duties:

Purchasing Officer or Procurement Officer

Store person

Managers and owners

Department heads

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1.4 Describe the steps in the stock control cycle

The basic stock control concept

Stock control is used by properties for many reasons which include:

To identify theft

To determine the financial performance of departments and the venue overall

To limit the amount of money tied up in stock-on-hand (‘inventory’)

To make sure the property does not run out of stock

To track the cost price and selling process of items

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1.5 Identify and describe the role of documentation within the stock control and management process

Company Documentation

Purchase order

Purchase specification

Requisition form

Internal stock transfer sheets

Bin Card System

Issuing new for old

Receiving Reports

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External Documentation

Delivery docket

Invoice

Statement

Credit note

Ledgers

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1.5 Identify and describe the role of documentation within the stock control and management process

1.6 Develop product knowledge in relation to stock items that will be used

Knowledge about the products and services you offer and the facilities available is called 'product knowledge’

Internal sources

Taste products, read recipes, wrapping and packaging material, talk to experienced staff

External sources

Product suppliers, the media – trade magazines, newsletters, brochures, books, internet

Trade shows, exhibitions, conferences seminars, food and cooking demonstrations

Promotional activities, doing a tour or by visiting growers, suppliers and manufacturers

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Element 2: Develop and operate a purchasing and/or supply system

2.1 Identify and differentiate between potential suppliers

2.2 Select suppliers based on nominated internal requirements

2.3 Determine purchasing and supply requirements that will guide demand

2.4 Determine terms of purchase that may apply to the purchase of stock items

2.5 Implement ordering system using identified suppliers

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2.1 Identify and differentiate between potential suppliers

Suppliers

Most establishments are free to choose whatever distributors or suppliers they want however establishments who are part of a bigger group are often obliged, or contractually required, to buy their stock from designated suppliers with whom special arrangements have been made by head office

Suppliers can be divided into ‘wholesalers’ and ‘retailers’ and the hospitality industry may buy from either or both

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Suppliers

2.2 Select suppliers based on nominated internal requirements

Purchasing policy and guidelines

The nature, complexity and details contained in organisational guidelines can be expected to vary markedly between different establishments to reflect:

Individual need

Differences between properties

Types of stock purchased

Usage rates

Staffing

Ordering protocol

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PurchasingPolicy

2.2 Select suppliers based on nominated internal requirements

Purchasing policy and guidelines

Preferred suppliers

Range of products

Price

Supplier location

Continuity of supply

Delivery

Willingness to work with you

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2.2 Select suppliers based on nominated internal requirements

Vendor files

Purpose

Creating and maintaining

Contents

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2.3 Determine purchasing and supply requirements that will guide demand

Standard product specification information that already exists and which may be provided by suppliers can include:

Product name

Product category – convenience, frozen, fresh, refrigerated

Packing format – such as number of tins per carton; dimensions of cartons

Storage requirements

Substitute product

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Quality specifications such as:

• Colour

• Count

• Texture

• Unit size

• Unit cost

• Shape

• Weight and yield data

2.3 Determine purchasing and supply requirements that will guide demand

Establishment of enterprise-wide purchasing (and receiving) procedures are necessary to:

Enable management to apply influence and control over ordering and receival activities

Standardise purchasing and receiving activities in the workplace

Facilitate training of staff in purchasing and receiving protocols

Optimise procurement of the right items for the right job at the right time at the right price

Verify goods received are the items ordered

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2.3 Determine purchasing and supply requirements that will guide demand

Establishing economic order quantities

During the purchasing phase, there can be a need to establish economic order quantities for various products

How much to order?

Reordering points

Stock Levels

Maximum Stock Level

Just-in-time

Safety Stock Level

Minimum order quantities Slide 25

2.4 Determine terms of purchase that may apply to the purchase of stock items

Ensuring compliance with requirements

Need to ensure compliance

All the established purchasing procedures developed by the establishment must be complied with or the entire system collapses and is rendered ineffective

The failure on anyone’s part to follow just one established procedure, on just one occasion can totally compromise the integrity of the entire purchasing – and wider ‘stock control’ – system

In practice, this means all the protocols and parameters for the premises must be adhered to every time, without exception

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2.5 Implement ordering system using identified

Generally establishments will use more than one ordering system to place orders with suppliers.

Standing orders

Standing requisitions

Purchase orders

Telephone orders

On-line ordering

Face-to-face lodgement

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Element 3: Develop and implement stock receival procedures

3.1 Monitor in-coming deliveries and stock

3.2 Inspect incoming stock

3.3 Return unwanted or damaged stock

3.4 Reject unsuitable stock

3.5 Complete appropriate delivery documentation

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3.1 Monitor in-coming deliveries and stock

Checks need to be made to ensure that:

The goods delivered were intended for you and not some other establishment

All the goods ordered have in fact been delivered

The goods supplied are of the quality/standard ordered and/or required

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3.1 Monitor in-coming deliveries and stock

Once stock has been delivered, it must be checked:

Against the order that was put in

Against the documentation that accompanies the order

These are the first standard checks that must occur

Checking process:

Quantity

Good condition

Correct size

Quality

Correct price

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3.2 Inspect incoming stock

Quality Assurance (QA) tests

Where a genuine quality assurance system is in place, QA ‘tests’ can include:

Weighing pre-cut steaks to verify they fall within the specified range as stated on purchase specifications

Testing fat content (as above)

Physically testing a (new) product

Yield tests

Taste testing

Reconstituting tests

Checking ‘counts’

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3.2 Inspect incoming stock

Continued…

Ancillary checks

Your QA may require periodic checks of, for example:

The temperature of food delivery vehicles

The food handling practices of delivery drivers

Inspection of delivery vehicles for cleanliness

Laboratory tests for bacterial levels on nominated (usually ‘high risk’) foods

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3.3 Return unwanted or damaged stock

What is involved in this process?

Before signing for a delivery or taking receipt of stock, you must inspect the stock

Never accept a delivery without doing a visual inspection – unless you have signed for it and added ‘STC’ (subject to check)

The stock should be checked for damage, quality, use-by dates, breakages and discrepancies

You should also check to ensure the delivery does not bring in pests and rodents, such as cockroaches and mice

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3.3 Return unwanted or damaged stock

Continued….

What is involved in this process?

Such recording may involve noting the issue on the accompanying delivery documentation or there may be a designated ‘Goods In register’ that is used for this purpose

You should then also note the problem on the supplier’s invoice or delivery docket

In most establishments, this kind of incident must also be brought to the attention of a supervisor or a manager, for their follow-up

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3.4 Reject unsuitable stock

Rejecting unsuitable stock generally takes place due to the stock being damaged, quality supplied is sub-standard, use-by or best before dates are too close to expiry or have been exceeded or some other discrepancy that causes it not to meet establishment standards.

This topic has been discussed in 3.3 above

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3.5 Complete appropriate delivery documentation

Signing delivery dockets

Critical factors when recording received goods

Identify and record variations

Recording variations

What is a variation?

Who is the appropriate person?

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Element 4: Develop and implement stock storage systems

4.1 Create appropriate storage conditions for all stock that needs to be stored

4.2 Store stock according to required storage conditions

4.3 Enter stock data into the internal stock

system

4.4 Secure stock and protect it from damage, deterioration and unauthorised access

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Storage guidelines are designed to:

Prevent stock becoming damaged during storage – and thus becoming unable to be used, displayed or sold

Prevent it becoming out-of-date

Protect it against unauthorised use

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4.1 Create appropriate storage conditions for all stock that needs to be stored

4.1 Create appropriate storage conditions for all stock that needs to be stored

Generic storage requirements

Stock rotation

Food-specific storage conditions

Hygiene compliance

Security

Broken cartons

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4.2 Store stock according to required storage conditions

In any organisation, there is limited space in which stock is often stored. It is important that storage areas are designed and managed in a way that ensures that:

The greatest volume of stock can be stored

The area is not a health and safety risk

There is plenty of space to move between items

Items are kept in their correct condition

Chance of damage or spoilage is kept to a minimum

Items can easily be identified

Stock takes can take place in an efficient manner

Items can be moved with sufficient space as to reduce accidents and injury

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4.2 Store stock according to required storage conditions

Storage units

Storage units may include:

Shelves

Bins

Specially provided storage containers

Refrigerators and coolrooms

In addition:

Items may need to be stored in individual departments/working areas

Food and beverages require special treatment

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4.3 Enter stock data into the internal stock system

From a ‘receiving and storing’ point

of view, this may involve you in:

Creating files for new suppliers

Entering supplier and product details – such as names and addresses, prices, minimum order quantities

Deleting files – relating to individual suppliers and product lines

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Updating data – entering details of:

• Deliveries into the system - quantities and dates

• Stock that has been issued or transferred to departments

• Returns to suppliers

• Stock that has been damaged or has to be discarded

• Adjusting stock levels given on the computer on the basis of physical stocktakes

4.3 Enter stock data into the internal stock system

In the same way that every stock item has its own line on a stocktake sheet, so too does the same apply in a computer-based system

Every size for the one brand will have its own file, every different quality and/or variety of a product will have its own file

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4.3 Enter stock data into the internal stock system

In most cases:

On-screen prompts exist to guide your actions

Data can only be entered into ‘fields’ that are provided for within the system

Drop down screens provide options for extra data etc. to be entered

Links and short-cuts exist on-screen to move between individual files stock items

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4.4 Secure stock and protect it from damage, deterioration and unauthorised access

Hospitality venues have two things thieves find very attractive – cash and stock.

Securing stock

The keys to securing stock after it has been delivered include: Implementing an access system to storage areas

Securing high-cost items, e.g., fitting liquor cabinets with locks

Ensuring that door seals are intact

Ensuring the issuing of stock is authorised

Move all deliveries promptly from the goods receiving area to the appropriate storage area

Secure the delivery area to prevent unauthorised access. Close and lock doors, and shutters while you are absent from the area

Store food items under appropriate storage conditions Slide 45

Element 5: Develop and implement stock issuing systems

5.1 Identify the basis on which stock will be issued or distributed internally

5.2 Develop documentation to support the issuing of stock

5.3 Manage stock distribution within the premises

5.4 Track and record the movement of stock within the enterprise

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5.1 Identify the basis on which stock will be issued or distributed internally

Internal ordering

The distribution of stock can be seen as the processing of internal orders

This means that departments within the organisation put in orders to be filled. These goods are traditionally issued from some internal central store, which is, in turn restocked as required

Central to supplying stock to departments is the ‘Requisition’

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5.2 Develop documentation to support the issuing of stock

The Requisition

This is an internally generated document

A requisition – or requisition form – is filled in by a department requesting stock from the central stores

It may need to be authorised by a manager before it can be filled

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5.3 Manage stock distribution within the premises

Par Stock

Par Bar

Imprest System

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5.4 Track and record the movement of stock within the enterprise

Inventory tracking guidelines form the basis of implementation for inventory control

Once these guidelines have been developed they should be:

Communicated clearly to staff

Put in writing

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5.4 Track and record the movement of stock within the enterprise

Inventory tracking can be achieved using a computerised system or a paper-based system

There is a need to track inventory to ensure:

Excess money is not tied up in stock

You never run out of items/stock you need

Stock is used before it reaches its ‘Use By’ or ‘Best Before’ date

Fast- and slow-moving lines can be identified

The financial performance of departments/revenue centres and the establishment can be calculated.

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5.4 Track and record the movement of stock within the enterprise

Inventory sheets – also known as stock-take sheets or stock sheets – are part of the overall stock record system and are used to:

Monitor stock levels – of the stock-on-hand

Track the movement of stock within the premises and for actual physical stock-taking purposes

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Element 6: Develop and implement stock management systems

6.1 Create and implement stock taking systems

6.2 Create and implement stock valuation systems

6.3 Create and implement stock reporting systems

6.4 Make recommendations to improve the operation of the existing stock system

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6.1 Create and implement stock taking systems

Regardless of which inventory tracking – or stock control – system is used there is always a need to undertake physical stock-takes as part of the stock management process

Reasons for stock-takes

Frequency of stock-takes

Stock-take or stock count?

Stock-take options

Stock-takes and training staff

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6.1 Create and implement stock taking systems

Electronic stocktaking

Manual stocktaking

Naming conventions

Marking stock

Outside contractors

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6.2 Create and implement stock valuation systems

Identifying fast and slow-moving items

Ways to determine what is selling fast or slow include:

Talking to others – department heads, staff

Counting and monitoring stock-on-hand – in the stores and departments

Analysing documentation – requisition forms, bin cards, stock take sheets

Reporting fast and slow-moving items

Notification may be a simple verbal report or more formal written on a standard form

You may be required to notify:

Management

Department heads

Accounts department Slide 56

6.2 Create and implement stock valuation systems

LIFO

Last in first out

FIFO

First in first out

Average cost method

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6.3 Create and implement stock reporting systems

Waste management

In theory a well-developed and properly implemented stock control system should never result in losses from redundant, soiled, damaged or obsolete inventory but regardless of the system there always seems to be instances where such events occur

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6.3 Create and implement stock reporting systems

Waste management

Common causes of loss/problems

Failure to rotate stock as required

Lack of scheduled inspections

Failure by staff to record spillages or breakages

Failure by staff to document and follow-up on items returned to suppliers for credit

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6.4 Make recommendations to improve the operation of the existing stock system

Because the inventory of any property will never remain static – in terms of quantity or type/s of products – there is an on-going need to establish processes for updating and maintaining the stock control system that is in place

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6.4 Make recommendations to improve the operation of the existing stock system

Fine tune the system

It may be possible to fine-tune the present system (rather than replacing it) by:

Providing refresher training to staff in its use

A system which was working perfectly well can, almost overnight, be compromised and rendered ineffective if one ‘expert’ staff member leaves and is replaced by a less professional person

Modifying small sections of the system which have been identified as problematic

Allocating more resources to the system

Ensuring existing protocols are, in fact, being adhered to

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