ControllingFoodservice Costs

Controlling Food Costs in Receiving, Storing, and Issuing

Chapter 6

Learning ObjectivesAfter completing this chapter, you should be able to:

• Explain the process for managing vendor delivery schedules.

• Describe the proper procedures for receiving goods.

• Discuss food storage techniques and the FIFO method of stock rotation.

• Identify and describe the proper methods of taking inventory and the various methods of inventory pricing.

• Describe the issuing process, including issuing beverages.

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

THE RECEIVING PROCESS

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Required Tools

Employee Training

Managing Vendor Delivery Schedules

Managing PO–Delivery Discrepancies

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Credit Memo Form

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

STORAGE OF INVENTORYInventory Cost ControlInternal Security Threats

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

External Security Threats

Delivery Drivers

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Inventory Quality Control ProceduresStorage Temperatures

Stock Rotation

Sanitation Practices

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Physical Inventory Control

Perpetual Inventory

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Recording the Inventory

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Calculating Inventory Values

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Extending and Totaling

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Software Applications

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Calculating Inventory Turnover

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

ISSUING OF INVENTORYIssue Requisitions

Issuing Food

Issuing Beverages

Chapter 6 Controlling Food Costs in Receiving, Storing,and Issuing - Summary

1. Explain the process for managing vendor deliveries.

• When an operation selects a vendor, the manager needs to negotiate and establish delivery hours that fit restaurant and foodservice operations.

• Then, delivery dates and times need to be organized and posted internally within the establishment.

• The manager should note the time and date of a delivery, and identify any off-schedule deliveries and contact the vendor about late deliveries promptly.

• If necessary, the manager should ensure that a corrective course of action is taken by the vendor.

Chapter 6 Controlling Food Costs in Receiving, Storing,and Issuing - Summary

2. Describe the proper procedures for receiving goods.

• The receiving process has several steps that start with items being purchased and delivered.

• Then items are unloaded in the receiving area.

• The receiving person checks quantity and quality against specifications, invoice, PO, and the total invoice amount.

• If there are any missing, broken, spoiled, or returned items, a credit memo should be obtained.

• Last, goods should be put away promptly and the signed PO and invoices should be sent to accounting.

Chapter 6 Controlling Food Costs in Receiving, Storing,and Issuing - Summary

3. Discuss food storage techniques and the FIFO method of stock rotation.

• Storerooms need to be secured to prevent theft.

• Managers must decide on the control processes that will work best for their establishment, but all managers should control products during storage as they would control money in a bank vault.

• Storage areas must be physically secure, and a running inventory system that tracks the quantities of expensive and theft-prone items is important.

• After theft, spoilage is the second biggest cause of loss in the storeroom.

• To prevent spoilage, dry, refrigerated, and frozen storage areas must be maintained at the proper temperatures.

• Cleanliness is important, and several food safety practices must be implemented to help maintain product quality during storage.

Chapter 6 Controlling Food Costs in Receiving, Storing,and Issuing - Summary

3. Discuss food storage techniques and the FIFO method of stock rotation continued...

• The restaurant and foodservice industry generally uses the first in, first out (FIFO) method of rotating stock.

• In the FIFO method, an older product is used prior to a more recently purchased product.

Chapter 6 Controlling Food Costs in Receiving, Storing,and Issuing - Summary

4. Identify and describe the proper method of taking inventory and various methods of inventory pricing.

• When taking inventory, one person counts or weighs the items and the other person records it on the inventory sheet.

• Start in one place and progress through the establishment in a logical manner.

• Some operations count everything in the kitchen, while others estimate the amount for a few items, such as spices.

• When the physical inventory is complete, the counts are turned over to the manager.

• Because restaurant and foodservice operations are dynamic in nature, the physical inventory and perpetual inventory will most likely not match completely.

• The manager will request a recount of any areas with large discrepancies.

Chapter 6 Controlling Food Costs in Receiving, Storing,and Issuing - Summary

4. Identify and describe the proper method of taking inventory and various methods of inventory pricing continued...

• FIFO calculates the value of inventory using the latest price paid for the item.

• LIFO calculates the value of inventory using the oldest price paid for the item.

• Averaged price is a composite of all prices paid averaged and the average price used to calculate the value of the inventory.

• Actual price calculates the value of the inventory based on the actual price listed on the inventory of all items.

Chapter 6 Controlling Food Costs in Receiving, Storing,and Issuing - Summary

5. Describe the issuing process, including issuing beverages.• Direct issue items are placed directly into product and are charged

to food cost as they are received by the operations.

• Items that are placed in stores are considered part of the inventory until issued for use.

• The process starts with filling out a requisition, a form which lists the items and quantities needed from the stores area.

• Each requisition should be reviewed and approved by a manager.

• The requisition is then given to the storeroom and filled.

• Bartenders also log every product emptied (aka “breakage”) on the requisition form and normally issue a replacement bottle based on the bar par.

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Key Terms:Actual price method A method that uses a product’s cost that is listed on the closing inventory sheet.

Averaged price method A method that uses a composite of all prices paid for an item during the inventory period to evaluate the inventory.Credit memo A document used to adjust information about product quantities or costs recorded on a delivery invoice; it specifies items to be deducted from the amount owed and explains the reason why the credit is being granted.

Daily food cost An estimate of cost based on requisitions, transfers, and sales. To determine daily food cost, the daily requisitions for that unit are totaled. Transfers from that unit to another unit are subtracted and transfers into the unit are added to the requisition total to determine the daily food cost for that unit. This total number is divided by the unit’s sales to determine a daily food cost percentage.

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Key Terms continued:

Directs Items that are charged to food cost as they are received by the operation, on the assumption that these perishable items will be used immediately.

Extending Multiplying the number of units of each item by the item’s unit price.

Inventory An itemized list of goods and products, their on-hand quantity, and their dollar value.

First in, first out (FIFO) A method commonly used to ensure that refrigerated, frozen, and dry products are properly rotated during storage.

Inventory breakdown A method of categorizing the operation’s food and supplies.

Inventory turnover A measure of how quickly an item in storage is used.

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Key Terms continued:

Issuing Taking food or beverage products from storage.

Key drop delivery Delivery of food items and goods after hours when the establishment is closed for business.

Last in, first out (LIFO) An inventory method used when an establishment intends to use the most recently delivered product before using any part of that same product previously on hand.

Padding Inflating the inventory for the purpose of reducing the food cost.

Latest price method A method that uses the latest price paid for a product to value an inventory; this is the most widely used pricing method in the restaurant and foodservice industry.

Perpetual inventory A theoretical count based on goods received and issued, which exists on paper only.

Physical inventory An actual physical count and valuation of all items on hand.

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Key Terms continued:

Reduced oxygen packaged (ROP) bulk food Food contained in a package in which (a) oxygen has been removed, (b) oxygen has been displaced with another gas or combination of gases, or (c) something else has been done to reduce the oxygen content to a level below that which is normally found in air; also called reduced oxygen packed bulk food.

Short weight The amount a shipment actually weighs subtracted from the weight given on its label.

Requisition A form listing the items and quantities needed from the storeroom.

Slack-out seafood A type of fraud in which frozen seafood is thawed to appear fresh.

Stores Items that are considered part of the inventory until issued for use in an establishment and are not included in food cost until they are issued.

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

Key Terms continued:

Temperature danger zone Food kept out at a temperature of 41°F to 135°F (5°C to 57°C) for a total of more than four hours is unsafe and must be discarded.

Transfer A form used to track items going from one foodservice unit to another.

Time and temperature control Policies and procedures that monitor the amount of time and the ongoing temperature of food products in the flow of food.

Uniform Commercial Code (UCC) Sets of guidelines established to harmonize business transactions law across states.

Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

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Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

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Chapter 6 Controlling Food Costs in Receiving, Storing, and Issuing

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